A reader suggests this is the case. Well, if there was an integrated natural gas market, maybe. (To anticipate the answer to the question: Duh, NO).
A first glance at actual data (i.e., linking up with reality) is useful. I plot US natural gas prices (Henry Hub) and TTF Dutch natural gas prices, as of today, for the past 10 years.
I’m hard pressed to see a high correlation between the two (even if HH is in $, and TTF Dutch is in euros), partly because of the spike in February 2021 prices for the US (thanks, ERCOT!).
I could download the data from somewhere and run some regressions – but I know from my previous work (going back to the days of the Cheney task force on energy policy development – see the Report) that the natural gas market has been historically fragmented, and despite the development of LNG transportation, barriers remain.
A recent study confirms my impression (not peer reviewed, but the methodology seems reasonable to me.) From Loureiro et al. (2022):
…[T]his study conducts growth convergence testing and clustering analysis on a panel comprised of four established gas price benchmarks and two emerging ones that expand up to the pre-Covid-19 period. The most significant finding is that no gas price convergence can be found outside Europe. This is despite the existence of episodes of partial convergence that are identified in the literature, and replicated and explained here. Importantly, the results strongly reject the postulate that increased LNG flows serve as a price-levelling arbitrage mechanism.
Once one sees the relative magnitudes of flows, one can see why price equalization would be unlikely.
The authors do two tests, one involving a panel, and one involving bivariate estimates of the law of one price for natural gas prices, using a Kalman filter. I’ll rely on the latter (mostly because I understand what’s going on there). Very simply, convergence to law of one price (LOOP) implies a coefficient (allowed to vary over time) moving toward one.
Source: Loureiro (2022).
And for shorter sample:
Source: Loureiro (2022).
A unit coefficient indicates LOOP. Notice you can always reject a unit coefficient for Henry Hub with pretty much anybody else, but certainly for TTF Dutch, which is the relevant issue for our question of whether pumping more natural gas in America would’ve mattered for European natural gas prices.
Bottom line: stay away from simple minded nostrums like “if only we’d pumped a lot more natural gas in America, Russia wouldn’t be able to pressure Europe”; more basically, spend 30 seconds doing some research before pontificating.
Bruce Hall often gets all huffy and puffy when we do not take his babble more seriously. Of course he might actually try to write an honest and coherent comment some day, some time. But I guess he is just not capable of doing so.
Your 3rd chart shows that the US makes a lot more natural gas than Russia. Qatar is also a major player. Isn’t Australia beginning to produce more as well? Of course here is the key rub:
‘if there was an integrated natural gas market, maybe.’
I get the sense that Bruce Hall has no clue the role of transportation costs. Then again – he generally has no clue on anything.
I thought one of the counters to Russian aggression in Ukraine in a previous post was to bolster the rest of Europe against the Russian coercion/blackmail threat of limiting natural gas by starting to ship vast amount of LNG to Europe to break their dependence on Russia. It would seem that might require increasing U.S. output during a time when Biden is attempting to use every trick in his arsenal to limit output.
Meanwhile, without firing a shot, Putin has declared two Ukrainian states to now be independent nations which, of course, opens the way for a mutual defense pact. I thought that was pretty sly and sneaky until I heard that Estonia and Finland have mutually agreed to recognize the state of Leningrad in which St. Petersburg is located as an independent nation and are prepared to signed a mutual defense pact with that new nation. Meanwhile, Mexico now recognizes California, Arizona, and New Mexico as independent nations and is prepared to sign an open borders treaty with those new nations. Texas is considering unilaterally becoming an independent state and forming a new oil cartel with Mexico.
Biden will speak to the UN about transgender rights in Russia and China. Politics has normalized and pgl will become Biden’s new advisor on TV violence and the role of day trading in our national economy.
Bruce Hall: In your previous comments, you noted *production* of natural gas, no remarks at all on the logistical aspects of shipping natural gas around the world. I would argue to a first approximation, pumping out more natural gas in the US has very little impact in the short run or even medium run on the degree of leverage Russia has over Europe because of Russian supply of natural gas. In other words, there is almost nothing about US drilling that has to do with this issue.
By the way, you never answered my query – is everything hunky dory with race relations/systemic racism in the US, or is everything BLM noted just media driven hysteria? I would *really* like to get your views down, on the record.
Thanks in advance for your time and consideration.
The issue for Brucey is that there has been another shooting at a protest in Portland, with one anti-police violence protester dead and several others wounded. He has to make noises complaining about Black Lives Matter, but he can’t afford to be specific because of the circumstances. An angry anti-BLM nut did the shooting, so Brucey has to throw shade on BLM.
Macroduck: Yup. If we’re (i.e., including Bruce Hall) talking violence, just gotta ask – how many BLM folks in that group storming the Capitol on 1/6/2021. Pretty sure the guy hauling the Confederate battle flag wasn’t a BLM guy.
You know by now they have an answer for everything, right?? You know if you are face-to-face IRL with these complete nutjobs like Bruce, QAnon, And MAGA and 1/6 “patriot” cults ad nauseam what they will say don’t you?? “The guy wearing the Confederate flag is ANTIFA, trying to make us look bad”/
Of course logistics is an issue.
The hypothetical was raised, what if Russia cuts of natural gas to Europe? The comment (not mine) was that the U.S. would increase shipments of LGN to Europe. Suddenly that’s my solution?
Switching gears… to “systemic racism”.
Does that mean equal output regardless of input? Does that mean forced numerical representation regardless of qualifications? Does that mean equal success regardless of individual attitudes? Does that mean Asian Americans have to “dial it back”? When color of skin becomes the primary factor in choosing who attains the highest office in government or business, then we need some self-examination.
But how about “systemic racism” that puts a higher proportion of Blacks in Jail than any other group? Should violent crimes have a limit above which they cannot be prosecuted because of “over-representation” in prisons? I think NYC DA tried that. Does that mean that Black students who drop out of school because they have parents or a parent that doesn’t give a crap about their education are victims of “systemic racism”. Or how about those young Black women who have a series of “baby daddies” who are totally absent? Is that “systemic racism”?
“If the Grand Dragon of the Ku Klux Klan wanted to sabotage black academic excellence, he could not find a more effective means to do so than the government school system in most cities.” — Walter Williams; 5/6/10
“Politically, there are few ideas more potent than the notion that all your problems are caused by other people and their unfairness to you. That notion was the royal road to unbridled power for Hitler, Lenin, Mao, and Pol Pot – which is to say, millions of human beings paid with their lives for believing it.” — Thomas Sowell; 11/19/01
You may have guessed why I chose quotes from those gentlemen.
Bruce Hall: You implied that because of the “anti-fossil fuel” position of the administration, Russia had leverage, to wit:
Now your point that we might need to up production – well Figure 1 in the article shows 950 bcm production in the US, with 25.6 bcm going from US to Europe in 2019. I don’t think production is a constraint – it’s moving the stuff.
i read analysis that should lng cargoes be diverted from extant long term contracts the north europe lng terminals are already booked pretty close to capacity.
and pipeline connection from lng/pipelines in the mediterranean are limited.
short term hope for continued mild weather as europe inventories are low.
but in near term run in cargoes and manage queues. build inventory as possible.
btw i worked defense fuels supply inventories in the 80’s to mid nineties.
we did some transportation modeling…. went in to regional purchasing/supply/distribution/inventory plans.
Yes, indeed I wrote those and they still stand. The U.S. would have to increase production in order to export enough to offset Europe’s loss of Russian natural gas. That doesn’t mean that it will be a simple task.
And it certainly doesn’t mean that Europe would have the capability of receiving and using LNG in the quantities necessary to offset Russian exported NG. It’s one thing to distribute pressurized NG. It’s another to convert LNG to pressurized NG.
I believe it was pgl that suggested LNG as the alternative.
Bruce Hall: Look at the numbers; the perceived incremental LNG capacity (shipwise, facility-wise) for sending LNG to Europe is small, so the drain on US production is small – so need to ramp up production incrementally due to Europe is small…
I said LNG was a substitute? No idiot. LNG is natural gas but ready for shipping. As I noted earlier..you have no clue what you are babbling about
Bruce Hall: Well, have no idea who Walter Williams is. Thomas Sowell I do know of – much to my sorrow.
But I now understand you — blacks are over-represented in the prison system *solely* because they commit more crimes per capita, and there is zero, zilch, nada, that comes from a policing and judicial system that tends to disproportionately arrest and convict — so nothing to be done about it.
Thank you for clarifying and confirming.
Walter Williams is even more rightwing than Thomas Sowell. Sort of the Justice Clarence Thomas of our profession. Or to put it another way – Trump’s one black friend. I guess Bruce Hall learned his racist views from Uncle Tom.
For the record, you may not have caught it, but Walter Williams is no longer an “is.” He died not too long ago. I believe that Sowell continues to be among the living.
Menzie, Earnest (not smart-aleck) question. Would it surprise you to know Sowell’s doctoral adviser was George Stigler. I’m more on your side here (probably somewhere between you and Hall on the racial issue, to be transparent). It caught my eye and wondered if it made you raise your eyebrow at all.
You may find this hard to believe, but as lazy/horrible a grade school student as I was, I spent tons of time at my nearby college library studying in my latter grade school years I would often read magazines and some books when I should have been doing my junior high and high school studies. I loved Forbes back then, (roughly 1984–1990) can you guess who had semi- regular editorials in Forbes magazine back “around” those years??
I think Menzie knew this was kind of a rhetorical question, but for anyone else wondering– Thomas Sowell used to write commentary for Forbes around that time. Not regular, but uh, in TV terms Sowell was kind of a “recurring character” for commentary in Forbes. As was Caspar Weinberger and a few other commentators of pretty low repute. I’ll spare you for today, I read it for Malcom Forbes commentary and their business profiles. Despite their politics it was a good magazine at that time. Sure widened my horizons at that age (though you could argue that wasn’t saying a whole lot)
“Of course logistics is an issue.”
As I thought – you have no clue what this issue even is. Come on Bruce – do you even know why US natural gas has to be liquified (as in LNG) before it is shipped to Europe? Of course you don;t just as you advocated just in time inventories of semiconductors,
I was sort of kidding that your mommy retrieved your KKK outfit from the cleaners today but damn – you are indeed one flaming racist. I guess that you explains why you want to work for Trump.
Bruce Hall It’s pretty clear that you don’t understand what the term “systemic racism” even means. It’s equally clear that you’re too old and stuck in your ways to bother reading some scholarly books on the topic.
I know, I know! You quoted them because they are colored PURPLE! And this is Purple History Month!
Wasn’t Alice Walker’s classic called Color Purple? Great novel and interesting movie covering issues Bruce Hall could never understand.
Would Pumping More Natural Gas in America Have Countered Russian Pressure?
[ What a splendid analysis. ]
Does that mean equal output regardless of input?
[ Yes, the very question serves as a justification for systemic racism. Remarkably saddening, but these sorts of misleading lines have evidently been saved especially for this celebratory month. ]
I bet Bruce Hall resents the fact we honor MLK’s birthday and has decided to use February to read over and over Gone With the Wind and shoot out “The South Shall Rise Again”.
Putin has been clear – he wants to restore the old Soviet Union. Not because of high oil prices or anything to do with natural gas but because he is a power hungry fool even more than Trump ever was. Look – the old Soviet Union overran Eastern Europe after WWII even as oil prices were incredibly low because Truman struck a deal with Saudi Arabia which made the US oil sector very unprofitable. But Bruce Hall is stupid enough to think we promoted shale oil more that Putin would back down.
I do declare – this is the dumbest line of reasoning I have ever seen.
“ Putin has been clear – he wants to restore the old Soviet Union.” pgl will believe any propaganda as long as it’s was manufactured in a US stink tank.
Putin just gave his pet poodle a bone
Actually, while he declared the end of the USSR to be the greatest socio-political disaster of the 20th century, it looks more like he would like to recreate tsarist Russia, if not going all the way back to the Kyivan Rus, although they did not control as much territory as tsarist Russia, which, after all, ruled what is now Finland as well as portions of what is now Poland, not to mention the Baltic states (although not western Ukraine, which was under Austro-Hungarian rule).
In the frenzied speech he has just given after announcing recognition of the Donbas republics, he blamed Lenin and the Bolsheviks for “creating” Ukraine as an enrtity, one of the Soviet socialist republics, which paved the way for it to become an independent state when the USSR broke up. So, maybe reviving Soviet state not what he really wants, although he seems to want a whole lot of things, not all of which are mutually consistent.
Lenin was a far better leader than most of the tsars. Now the clowns who followed him were horrific. Russia has never had any sense of democracy.
A further matter on which Putin just plain lied on this matter is indeed this claim that Lenin created Ukraine. In fact there was briefly a Ukrainian independent state declared in 1917, before Lenin set up the Ukrainian SSR as part of the USSR. It did not manage to last very long, with Poland conquering its western part, which had been under Austrian rule, and Soviet Russia conquering the central and eastern parts, which would become the Ukrainian SSR under their rule.
But there was an independent Ukrainian state prior to Lenin. This is simply another one of Putin’s lies.
Thread on lng/ng on twitter retweeted by john kemp
Lets see what a Brookings foreign policy expert thinks of Bruce’s suggestion. Hmm. Here’s a relevant quote:
“The ability to bring replacement gas into Europe lessens the impact of Russian President Vladimir Putin’s natural gas weapon. For this reason, we’ve seen U.S. President Joe Biden work to find LNG for Europe beyond what the United States can supply, meeting with Qatari Emir Sheikh Tamim bin Hamad Al Thani and convincing Japan to divert some LNG to Europe.”
Too bad the U.S. didn’t produce more natural gas–would have made Biden’s efforts easier.
Rick Stryker: Yes, of course that’s true. I wouldn’t and didn’t disagree. But the question is in the short term is the amount that we could supply to Europe constrained by how much we can pump out right now given the restrictions the Biden administration has put into place for further exploration and exploitation of natural gas supplies (which would result in elevated production *in the future*).
As you know, incentives depend on current supply as well as future expectations of supply. How can Biden ask the Europeans and other countries to support the U.S. position in the face of threatened Russian NG sanctions when Biden can’t credibly promise to increase supply of U.S. LNG exports in the future, since his policies are reducing those potential exports? After all, Biden’s FERC just imposed substantial new environmental restrictions on the construction of pipelines that are necessary to feed the LNG export facilities on the Gulf Coast. The Marcelus/Utica shale deposits are huge but that won’t do the Europeans any good if the U.S. can’t build the pipelines to LGN export facilities. Meanwhile, the Europeans and other countries see that Putin is very aggressively building pipelines and export facilities and he will not be considering GHG emissions when approving those projects. Because of his environmental policies, Biden is forced to negotiate with our allies from a position of weakness. Our allies must consider that Russia is holding the cards on NG and the U.S. NG policy is not moving tactically or strategically to be in a position to help them any time soon.
Rick Stryker: Sorry, does that FERC announcement indicate the pipelines won’t be constructed, or that they might be more costly than otherwise? As good economists, shouldn’t we be internalizing externalities. Or do you disagree with the proposition?
It does seem to me that capacity is increasing, per EIA.
the Gulf Coast LNG plants already have dedicated feedgas pipelines. they get gas before US consumers do. the new FERC regulations he refers to we just initiated last week. up until then, FERC has been a rubber stamp…
I think it’s reasonable to assume that some pipelines that would have been constructed will not be now or will be seriously delayed.
First, we know that pipelines have been abandoned when the regulatory costs are too high. That happens in the Northeast not because of FERC but rather because of the state regulators. For example, the PennEast Pipeline project into NJ was recently cancelled even though they won their SCOTUS case. Too much delay. They originally intended to be operational in 2019, then 2022, then ….. The Northeast Supply Enhancement into NY and NJ was also cancelled as well as Atlantic Coast into NC and VA. The reason that LGN export facilities are located primarily in the Gulf Coast and not in the Northeast is because of state regulators, who stop the facilities and the pipelines. In the past FERC was not the problem, but it will be now, along with the state regulators.
It’s also important to look at the details of the regulation, which requires measurement and possible mitigation of both upstream and downstream emissions. These emissions are not observable but rather must be estimated by models. Nobody really knows what they are, a further difficulty and uncertainty for anyone who wants to build a pipeline.
There are also the legal questions. To my reading, what FERC did is clearly illegal, violating the SCOTUS major questions doctrine. FERC will be sued, just as Obama’s reg agencies were sued under his Clean Power Plan. I expect that SCOTUS or some lower court will eventually stay the policy but until then some pipeline builders will sit on the sidelines while waiting for legal clarity.
rjs in the comment below misunderstands the problem. Yes, the current 5 Gulf Coast LGN export facilities all have pipelines. But there are another 5 that are approved and under construction. They all need pipelines. There are another 12 Gulf Coast LGN export facilities that have been approved but construction has not yet started. They are likely to be delayed pending the outcome of the lawsuits.
Yes, I agree that we should be internalizing externalities. However, we have a more complex dilemma in that natural gas is also being used as a foreign policy weapon and so we have to balance climate change considerations against foreign policy goals.
“Too bad the U.S. didn’t produce more natural gas–would have made Biden’s efforts easier.”
I realize that Bruce Hall is too stupid to get that converting US natural gas into LNG and then shipping it has high transportation costs. But I would have hoped THE RICK would get this simple point. It appears you are as dumb as Bruce Hall in this regard.
What is your point? Of course there are shipping costs to ship LGN to Europe–everybody knows that.
I did not say shipping costs exist. I said these costs are enormous. Look – I get you like to play big shot attorney but come on man – I spoke in clear and simple English. I guess that is a foreign language to you.
if the European’s increase their production of renewables, such as wind, solar and wave, they can eliminate the impact any external nation has on their well being. we should not be encouraging the europeans to simply re-source their natural gas from Russia to the Middle East. we should be encouraging them to create domestic energy production, and eliminate external dependence. moving the energy source to the Middle East is simply punting the problem.
we are already exporting the maximum amount of natural gas that we can based on our liquefaction capacity. cargoes intended for Asia have already been diverted to Europe… there’s nothing else we can do.
Thanks for the succinct rebuttal to that long winded rant from THE RICK
Of course there is more that we can do. We have giant NG shale reserves. We should be removing regulatory barriers to build more pipeline, lowering fuel costs for Americans. And we should be speeding up the development and construction of the already-approved LGN export facilities.
What we shouldn’t be doing is having FERC put out illegal and non-implementable climate policies that will slow down and in some cases kill pipeline projects, especially when we have a strategic enemy who is planning to use NG supplies as a weapon of influence.
You really are stupid. We were never be able to build a pipeline across the Atlantic Ocean. That is why we go through the ENORMOUS cost of liquification so it can shipped. And I thought Bruce Hall was the dumbest person. No – you are even dumber.
Europe’s energy strategy has been ill-fated for some time. This crisis could be expected if one knows the Russians.
The issue is not US natural gas production, but rather a fatally flawed European energy policy based on non-dispatchable, high cost renewables and excessive dependence on Russian reliability and integrity.
Alternatives to Russian gas have been proposed over the years. Europe should have a gas pipeline at a minimum from the Pars Field in the Persian Gulf and crossing the Leviathan and Aphrodite fields in Israel and Cyprus, respectively. The Russians nixed these sorts of initiatives, and one could see it all ending badly, which it has.
Even more stunning is Germany’s liquidation of its nuclear baseload capacity, which can only be described as suicidal.
It is not US gas production which is at issue, but a decades of incredibly ill-advised power policy in Europe.
I’d add that no country is more exposed here than Hungary, which gets 50% of its gas from Russia and whose main power plant is of Russian design, as is the planned expansion.
“Even more stunning is Germany’s liquidation of its nuclear baseload capacity, which can only be described as suicidal.”
Building nuclear power plants have no downsides? Three Mile Island? What happened in Russia and Japan? Now that is suicidal. Oh wait – Princeton Steve claims to know how to build a nuclear power plant that poses no such risk. He does think he is a genius at everything!!!
Nothing bad happened at TMI. No deaths, minimal discharges.
Chernobyl was a Russian plant. So it Hungary’s Paks atomic plant. Does that make me nervous? Yes, but not because it’s nuclear, but because it’s Russian.
Fukushima was about thinking too far inside the box. An argument against nuclear, if you like, but the failing had nothing to do with the nuclear core, per se, but rather a failure to design the plant to appropriate specs considering it was in a tsunami area. The idiots put the diesel generators in the basement. One attributable death to radiation poisoning there; the World Health Organisation and Tokyo University have shown that no discernible increase in the rate of cancer deaths is expected due to the Fukushima incident.
That’s a stellar track record by any reasonable measure.
The National Academy of Sciences estimates 112,000 deaths are attributable annually to current plus planned coal-fired power plants. Not building planned plants would avoid at least 844,000 premature deaths over the life of these plants.
The US has about one gas-related death per year.
On the whole, nuclear looks pretty good, outstanding if climate change has any meaning to you.
Steven, nuclear is too sensitive to natural hazards to be considered viable in its current form. there is much work done on new reactor with different fuels, and these may serve a role in the future. but current nuclear systems are much too complex and subject to natural hazards for which we have failed to fully understand the risk. earthquakes, tsunami and hurricanes of significant nature seem to follow a probability distribution that is different from those used in the design codes. Fukushima, for instance, put generators in the basement because the possibility of flooding events were considered nil. obviously wrong. but nuclear plants do not have the luxury of getting anything wrong. we were very lucky the outcome was not worse. same can be said for three mile island.
and let me point out a big issue which has been ignored. long term storage of spent fuel has not been resolved. this is a SIGNIFICANT issue, and until this is resolved nobody should consider the use of new plants.
future energy policy that relies on nuclear or Russian provided natural gas and oil is simply foolish. as I noted previously, wind and solar may shut for down for a day. but a Russian event could shut down nat gas for months (or years). and a nuclear event could render an entire region uninhabitable. anybody who remotely advocates for the use of nuclear or Russian sources simply has an agenda in mind, and not the long term safety and security of Europe.
The sum total of spent nuclear fuel and related items amounts to about 100,000 m3 since 1968 in total. That’s the equivalent of about four football fields stacked six feet high. In other words, nothing. Put it in Nevada. We have loads of radioactive terrain there already.
Steven, i think you need to educate yourself on the issues related to transporting and storing spent fuel rods. They have been trying to use nevada as a main storage site since at least the 1980s with no success. Perhaps you would be more amenable to storing it near your home in princeton?
Gee Steve – last I checked Germany was not part of New York or Pennsylvania. So what if the US has a better safety record than everyone else? Or did you forget you were babbling about energy needs in Europe?
“I’d add that no country is more exposed here than Hungary, which gets 50% of its gas from Russia and whose main power plant is of Russian design, as is the planned expansion.”
And one of Princeton Steve’s resume highlights happens to be as an energy advisor to Hungary. Go figure!
Bolton is on the TV yelling that Biden has not imposed sanctions soon enough. Hohum. But I will give him some credit for admitting President Trump undermined our foreign policy towards Russia.
I’ve had a strong dislike for Bolton for a long time, going back years. The one thing about the man that goes in the plus dept. and pretty much shocked me the day I found out and still stupefies me to this day, is how a jacka$$ and man if median intelligence, could “hire” or install on his staff a woman as sharp-minded and as classy as Fiona Hill. This middle-aged goofball (me) says….. Wonders of this world never cease.