Jon's Soapbox
Liquid Natual Gas Exports from USA
(posted 12/2/22) - So here in the US our spot market pricing for Natural Gas currently runs in the $6 per million BTU. But in Germany it was running about 9 times that recently. As one might guess this pricing differential is making someone a lot of money. But who exactly? Certainly not Russia, since Germany has been cut off mostly from their gas pipelines.
The number one exporter of Liquid Natural Gas in the world is currently the good ol' US of A. But before you claim US profiteering it might be worth looking at the energy markets which process bids for LNG, and the degassification / gassification / pipeline entities that are the pinch points for moving product.
The EU countries have largely been dinging the Biden administration for not actively pushing down pricing for LNG deliveries (by tanker) to European points of entry. The official US response has been that it is the spot energy markets in Europe that are bidding up the prices, not price gouging by US suppliers.
I tried to get a sense of who is actually making the 'extra' profit on LNG deliveries to Europe and I've tentatively come to the conclusion it is in fact 'the invisible hand of the market.' To wit, too many people are vying for too little product so the bid price keeps rising beyond the ask. Who actually gets the 'extra' bid price differential? It appears to be the Euro-market makers (Shell Oil for example). It is within the power of governments to tax windfall profits but it is a slippery slope and rarely put into effect.
I've included some PDF references that set the stage for this classic supply-demand debacle and might be good for just understanding how domestic NG and international LNG spot markets (vs contracts/futures markets) operate to produce such geographical divergence in prices.
Here's a discussion pointing out 2022 spot price divergence attributing it to US bottlenecks in liquification and to Asian contracts limiting supply. Link is here.
Here is a link to a discussion of the World market demands and supplies for LNG in 2022.
This links to a potential price indexing scheme being considered by EU administrators who hope to control spot price deviations going forward. There are also counter-arguments against making changes to the current private market makers role.
I find this all very interesting -- but someone makes extra money off all this supply / demand imbalance. It appears that the Eurpean (and Asian) energy market makers (ie, Big Oil) are the beneficiarys.