Unleashing American LNG and the implications to electricity pricing

Prior to Inauguration Day, President Trump had strongly signaled that his administration intended to support accelerated growth of the domestic liquified natural gas (LNG) export industry. Within hours of entering the White House, Trump began to make good on that promise.

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The price of electricity is closely correlated to the price of natural gas.? In vertically integrated markets where utilities still own generation assets, those price impacts are not felt until later.? By contrast, in competitive wholesale markets, those changes are often visible, since the generating assets dispatched on the margin are typically gas-fired units.? These plants frequently set the market price.

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It is likely that the Trump Administration’s plan to unleash American LNG will apply pressure on future natural gas prices.?? Power prices are likely to remain highly correlated to natural gas prices. On a seasonal basis, we can expect to see volatilities resulting from severe weather or geopolitical issues such as the Ukraine Conflict.? However, in the longer term, the supply and demand equation will be driven by the same fundamentals that have recently governed the gas patch.

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I can be reached at 732 202-2926 ext. 2002;?(973) 332-2678 or [email protected].