This interview has been lightly edited for length and clarity.
Tim McDonnell: Your outlook on US LNG exports is quite different from the DOE’s. What’s behind that disagreement?
Daniel Yergin: I have a lot of respect for Secretary Granholm and the DOE. But we just have come to very different conclusions. We see US LNG being very important to supply both Europe and Asia. And the economic benefits are really tremendous. What really surprised me is the scale of this business. Take the two most contentious issues in US-Chinese trade, semiconductors and soybeans. The value of LNG is half the value of all our semiconductor exports, more than soybeans, and my favorite is that it’s twice the value of Hollywood and television exports. So this is a very significant business, and the benefits go across the country. And the US gains enormous political significance, because Europeans and Asians really want to be able to count on the United States as a reliable supplier.
And you don’t see that global demand changing anytime soon.
The energy transition is very uneven. This year Europe will have only added about 4% to its solar capacity. So maybe [DOE is] making different assumptions about the speed of the energy transition. But I think you need to look at what’s actually happening. Europe is not going to rush to import Russian gas. Without US LNG, the coalition supporting Ukraine could not have held together and we might be looking at a different outcome today in Ukraine. The US doesn’t exist in a vacuum. We came to the conclusion that if US LNG exports are curtailed, 85% of that curtailment will be replaced by fossil fuel sources from other countries, some of whom might write thank-you notes to the United States for opening up the market to them.
What about the risk that higher gas exports raise domestic gas prices? You don’t seem as concerned about that as the DOE.
LNG exports have grown a lot, but the volumes of gas production have been three times as great as the LNG supply. The US has very abundant natural gas resources, and when we analyze the impact on the domestic gas price, the impact was negligible, like 1%. The US has a tremendous economic advantage from having cheap gas. Our residential gas prices are half that of Europe. And when we look at the resource base, we think we’re going to continue to have cheap gas for a very long time.
Carbon emissions aren’t really addressed in this report, but what’s your sense at this stage of how US gas exports could help or harm net global emissions?
We want to do a comprehensive study on emissions, but the main reason US emissions have gone down is because gas has replaced coal in US electric generation. So gas is a very effective way to replace coal. One of the main drivers of LNG exports is to Southeast Asia, to replace coal [in the power sector there]. Last year, coal consumption reached its highest level ever, and this year, we think it will once again reach its highest level ever.
But you think there’s more room for coal-to-gas switching in Asia.
Big time. The fact that global coal demand is going up tells you that it’s being burned somewhere, and a lot of that is in Asia.
What do you expect to see from the Trump administration on LNG, and do you think this new DOE report will complicate that?
I think we’ll see a pretty decisive change. Trump was a big proponent of LNG, and I think in general, their message is going to be about rolling back regulations, which I think will be supportive of LNG exports. But clearly the Biden administration, on its way out, wanted to put down a marker. How it proceeds is going to be thrashed out in federal courts.
And in the meantime, do you still see a lot of eagerness from Wall Street to finance new LNG projects?
Absolutely. If the exports double, which is slated to happen, this will be equivalent to all US semiconductor exports. One of the things that’s just not understood is how it’s quite remarkable to have an industry that only began in February 2016 to become one of our major export industries, and to have this level of global influence.
