If gas prices sting, wait until you see what may happen to utility bills | Opinion
With each visit to the gas pump, Americans are beginning to see the limits of “energy dominance.” Despite the United States being the world’s largest oil producer, prices at the pump are soaring due to the ongoing war in the Middle East.
The price of oil is set on the global market, and what happens in Iran has a direct impact on U.S. consumers. Americans have now paid an extra $10 billion for gasoline since the start of the conflict.
Fortunately, the same price spike has yet to hit U.S. natural gas — the nation’s leading fuel for heating and electricity generation. Remarkably, despite global oil and natural gas supplies being deeply affected by the closure of the Strait of Hormuz, natural gas prices in the U.S. have actually fallen. In fact, they’re at a six-month low. How, you might ask, is that possible?
Unlike oil, natural gas prices remain far more regional, even local. But that’s changing, and it should serve as a warning to Washington.
The United States has become the world’s largest exporter of liquified natural gas, or LNG. However, our export capacity has yet to reach a level where prices at home are shaped by global demand. But with America’s LNG exports set to double by 2030, the influence of higher overseas prices is coming.
Yes, U.S. natural gas producers can and will respond to higher demand. But as we’ve seen with oil, record domestic production can’t guarantee low prices in an interconnected global market.
When the next global energy crisis comes — and history tells us it will — there’s ample reason to believe consumers will feel it in their utility bills. Smart energy policy needs to prepare for that next shock now, and fuel optionality will be key.
The U.S. economy is growing increasingly sensitive to the price of natural gas. While that has been a boon under low prices and soaring production, a potential price spike could be crippling. U.S. electricity prices have already jumped 40% since 2020. In Texas, where natural gas is the primary fuel for electricity generation, a price spike could be particularly painful.
Demand for U.S. natural gas isn’t just soaring from overseas. It’s also coming from a surge in domestic power demand. Data centers with the electricity needs of large cities are relying on natural gas for their power generation. Texas already has more than 300 data centers — and another 142 under construction. That makes it the leading state for data center development.
While the addition of renewable sources of electricity can help balance the supply of power, our irreplaceable price shock absorber remains America’s coal fleet.
Last year, when U.S. natural gas prices rose 26% from historic lows, utilities turned to coal plants to soften the impact on ratepayers.
According to recent economic analysis, increased coal generation helped reduce natural gas demand last year, saving consumers an estimated $30 billion-$40 billion in higher electricity and natural gas costs.
America’s coal fleet provides options that remain essential, but often overlooked, to the strength of our energy supply. We must be careful not to lose it.
Growing and diversifying the nation’s supply of electricity is critical to meeting soaring power demand and addressing ballooning costs. As we build, we should do so on the shoulders of our existing coal capacity, not in place of it.
The very strategy that can help tackle today’s electricity inflation can also fortify our economy against the next global energy shock. We can’t afford not to prepare for it.
Matthew Kandrach is president of Consumer Action for a Strong Economy, a Virginia-based nonprofit organization that advocates for consumer interests through the advancement of free-market principles.
