US Has More Natural Gas Than It Can Use as War Chokes Global Supply

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Gas scarcity has even forced some fertilizer makers to rein back production, said Pablo Galante Escobar, head of liquefied natural gas at commodity trader Vitol. That risks “transferring the energy crisis into a food crisis,” he said at the FT Commodities Global Summit in Switzerland earlier this month.

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Slovakia’s largest fertilizer producer, Duslo AS, said last month that it’s curbing ammonia output after gas prices surged. In India, fertilizer manufacturers including Indian Farmers Fertiliser Cooperative Ltd. are beginning to cut production after Qatari supplies of liquefied natural gas, a key feedstock, were suspended. 

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But for the US, the picture looks much different.

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The divergence between gas prices in America and the rest of the world “could mean the US economy will prove more resilient than expected this year,” Anna Wong, chief US economist at Bloomberg Economics, wrote in a research note. “Natural gas is more important to the manufacturing sector — particularly chemicals, fertilizers, electricity — than crude oil is.”

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US petrochemical producers like Dow Inc. are among the companies benefiting from low-cost industrial gas, an important feedstock for chemicals manufacturing.

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“Supply and feedstock into Asia and Europe are constrained, which is triggering price increases globally,” Dow Chief Operating Officer Karen Carter said on an April 23 earnings call. “It is also leading to increased production in the Americas and is providing Dow the opportunity to capture new business in Europe.”

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Inexpensive gas is also putting downward pressure on the cost of electricity, and lower power prices stand to aid the buildout of data centers, Wong wrote. That could help assuage concern about soaring electricity costs tied to the AI boom — an issue that’s become a key concern for voters heading into the US midterm elections. The fuel is poised to be an asset for the US in its race against China for AI dominance, with data-center developers including Meta Platforms Inc. favoring gas over cleaner alternatives because of its reliability as a power source. 

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“The current market is highlighting a clear divergence — global natural gas prices are rising sharply, while US prices are even lower than when the Iran War began,” Jeremy Knop, chief financial officer of EQT Corp., the second-largest US gas producer by volume, said in an emailed statement. “That’s a direct result of the scale and efficiency of domestic supply.”

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Producer Woes

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For some US gas producers, however, low prices have been a drag on profits. Diamondback Energy Inc., a top Permian explorer, is “consciously moving away from Waha,” as the Permian pricing hub is known, and increasing its exposure to higher-priced markets near planned data centers, gas export facilities and population centers, executives said on an earnings call late last year.

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“Investors want us to realize more than zero on our gas,” Diamondback CEO Kaes Van’t Hof told attendees April 15 at an energy conference in Fort Worth, Texas. “We’re an oil company. Most of our revenue comes from the oil side, but in a good year, gas is 5% of our revenue, and it’s probably headed towards 10% or so.”

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Even drillers outside the Permian are feeling the effects of low gas prices. Though EQT has touted the benefits of cheap US gas, the company announced plans earlier this month to cut quarterly production by 2% as gas prices languish, with domestic stockpiles well above the five-year average.

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“In this environment, we are taking a disciplined approach to production, including modest production curtailments during the low-demand spring season to store supply for maximum deliverability during peak summer power demand,” Knop said.