Technological advances in natural gas drilling have opened up vast new resources, leading to a surge in domestic natural gas production in recent years. As a result, the U.S. is awash in natural gas, and prices have plummeted. Meanwhile, in Asia, prices have skyrocketed. Japan, the largest consumer of liquefied natural gas (LNG) in the world, is in desperate need of energy due to its decision to shut down nearly all of its nuclear reactors.
Low prices for natural gas in the U.S., and high prices in Asia, have sparked calls to allow American drillers to export LNG. Thus far, the debate surrounding LNG exports has focused on the economic impacts. Proponents believe LNG exports will be a boon to the economy, while opponents raise concerns over effects on consumer prices.
What the debate is missing is an analysis on the geopolitics of allowing LNG exports. This paper examines the geopolitical benefits of removing restrictions on LNG exports to two key regions – Europe and Asia.
Permitting new LNG export capacity will provide more liquidity to the global LNG market, helping to reduce prices and provide alternative supplies for some of America’s closest allies. More LNG export capacity will also erode the practice of oil-indexation in Europe and Asia. This will reduce the ability of bad actors to use energy supplies as a political tool.
Allowing American LNG to reach world markets will enhance the energy security of our allies, providing geopolitical benefits to the U.S.