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And last but not the least, America has started to export natural gas to Mexico via pipeline and will soon start exporting large volumes of Liquid Natural Gas (LNG) to Europe and Asia.

22 Apr 2014

NEW YORK (Commodity Online): The US energy industry is witnessing a transformation with advances in hydraulic fracturing technology causing huge production growth in natural gas by 35% or 17 bcf/d.

Bank of America-Merrill Lynch (BofAML)in a report said that since 2010 onwards, US domestic crude and liquids production has expanded by 2.5 mn barrels per day or 33%. As a result, America became the largest contributor to increase in oil and natural gas supplies in the world in 2010-13 period.

As America has started to move from a mindset of scarcity to a mindset of abundance, exports of energy have taken off. First and foremost, cheap domestic crude oil and natural gas prices have encouraged a huge shit in America's petroleum balances and turned US into the largest refined product exporter in the world. Secondly, a domestic glut in natural gas prices has released a very large amount of thermal coal for export.

And last but not the least, America has started to export natural gas to Mexico via pipeline and will soon start exporting large volumes of Liquid Natural Gas (LNG) to Europe and Asia, BOfAML report said.

America gets gas cheap
The rise in export of energy products is not the only benefit US has gained from shale revolution. It is receiving foreign gas from Canada at an average price of $4.40 per MMBTU as against $15 quoted for Asian spot LNG.

Oil consumers face a similar tailwind with Canadian and Mexican grades coming into the country clocking in an average discount of $18/bbl in the last 12 months relative to Asian benchmark heavy grades. But this discount is perhaps most shockingly visible in Arab Heavy barrels, which have come into the country all the way from the Middle East at an average discount of $7/bbl to Asian prices to compete with Canadian grades, partly because Saudi Aramco has tried to preserve its market share in America.

A combination of heavily discounted imports, surging exports, and structurally lower natural gas prices domestically has lent America's economy a much needed tailwind that, of course, most other industrialized nations do not have. As such, Japan, Europe, or even China have all faced surging oil and natural gas import bills relative to their national incomes, but America has dodged this bullet thanks to its flourishing energy economy. The effect of how energy is carrying America is perhaps most visible when looking at a state-by-state heatmap of the US economy.


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