If Europe cannot get off Russian natural gas, can the United States stop importing from Putin?
There are some false narratives being talked about in the news, on social media, and at the water cooler in people’s offices. Those narratives include how important wind and solar in the electrical grid in New England, and how pipelines are bad. Do you turn on the light switch and expect the lights to come on? Well, we are blessed in the United States to have reliable electrical systems and have become accustomed to it as a regular part of life.
Many of my investors and followers have been asking; “Why is natural gas so high, and why is my electric bill even higher?” Well depending on what part of the country they live in tells me how to answer the question.
There are exceptions, and yes, I was in Texas when the ERCOT system failed, and we did not have power. People panicked, and the problem was grid systems management. But our price of kWh is a lot cheaper than on either coast. It is because we have pipelines, the Permian and Haynesville oil and gas fields in our part of the country. On both coasts they import oil and LNG and that includes Russia, Iran, Trinidad, and others. None of them have the same ESG standards that we are held to in the United States.
And while some conversations came up, people were confused on the amount of renewable energy being supplied to the power grid. People think that the billions we have spent in wind and solar farms provide 50% of the electricity that they use.
Well, the EIA has charts that are updated on daily, weekly and even down to the hour in some cases. The hourly generation for today in New England should be an eye opener for some people.
In the graph above, notice that natural gas is the largest source of electricity used in New England, and this is a good representation of the average day. Hydro is the largest renewable, nuclear is stable and wind and solar are almost negligible on the grand scheme. Well, why does natural gas cost so much more in the northeast, when they have natural gas fields right down the road?
The EIA does not break out how the natural gas gets into the pipeline. It is imported LNG and is 0ver 400% more expensive than the same gas we buy in Texas. There are several reasons why they are relying on imports, and they revolve around who they elected. All of the pipelines required to provide low-cost electricity have not been approved for the last 15 years. It is just like the current administration canceling the Keystone XL pipeline.
Personally, I would rather buy oil from our neighbors in Canada and also use our domestically produced natural gas rather than shipping LNG tankers from countries that would like to see the United States fail.
The Bottom Line
I am glad to be living in the United States, and proud to be from Texas. Even though Texans still question ERCOT’s management capabilities, at least our natural gas is home grown. And 400% less expensive.
So, if pipelines cannot be approved, can’t we just buy LNG from U.S. exporters in the gulf coast region? Well, we cannot because of the Jones Act. The Jones act is a 1920 piece of legislation designed to rebuild the shipping industry after WW I. It requires shipping between U.S. ports be owned and operated by U.S. citizens or permanent residents.
There are emergency exemptions in the bill that would allow the tankers from the U.S. Gulf of Mexico to ship to New England. Our elected officials just need to approve the emergency exemptions for immediate price relief for everyone. But it won’t happen.
What really needs to happen is to have the Jones Act repealed and reasonable, enforceable, regulations put into place. Yes, I just said the naughty word “Regulations”. But if both coasts will import oil and LNG from countries that do not have our best interests in mind, we will need some way to ensure that we can get them off Russian, Iranian and Saudi Arabia imports.
Until then, I am going to stay in Texas and enjoy my lower electricity prices.
As always check with your CPA if alternative investments are good for your portfolio
Please reach out to our team at any time for answers to your questions.
Jay R. Young, CEO, King Operating
ForbesBooks Author of “The Upside of Investing in Oil and Gas"