Economic impacts of increased U.S. exports of natural gas: An energy system perspective

Abstract

With the recent shale gas boom, the U.S. is expected to have very large natural gas resources. In this respect, the key question is would it be better to rely completely on free market resource allocations which would lead to large exports of natural gas or to limit natural gas exports so that more could be used in the U.S.. After accounting for the cost of liquefying the natural gas and shipping it to foreign markets, the current price difference leaves room for considerable profit to producers from exports. In addition, there is a large domestic demand for natural gas from various sectors such as electricity generation, industrial applications, and the transportation sector etc. A hybrid modeling approach has been carried out using our version of the well-known MARket ALlocation (MARKAL)-Macro model to keep bottom-up model richness with macro effects to incorporate price and gross domestic product (GDP) feedbacks. One of the conclusion of this study is that permitting higher natural gas export levels leads to a small reduction in GDP (0.04%-0.17%). Higher exports also increases U.S. greenhouse gas (GHG) emissions and electricity prices (1.1%-7.2%). We also evaluate the impacts of natural gas exports in the presence of a Clean Energy Standard (CES) for electricity. In this case, the GDP impacts are similar, but the electricity and transport sector impacts are different.