Western European countries haven’t had this much reason to pay attention to the Gulf of Mexico hurricane season since 17th-century treasure galleons sank one after another with reckless abandon.
A severe hurricane season in the Gulf, as is expected this year, is always worrying news for the U.S. oil and gas industry—a big chunk of U.S. federal drilling occurs in offshore Gulf waters, the bulk of U.S. petroleum refining capacity is located along its shores, and big storms mean big disruptions. But now there is a fresh reason to worry about storm-related havoc: The United States, the world’s biggest exporter of liquefied natural gas (LNG), has its gas liquefaction plants overwhelmingly concentrated in hurricane alley.
Both Western Europe, because of Russia’s war in Ukraine, and East Asia, because of rising energy demand, have become increasingly dependent on U.S. cargoes of supercooled natural gas in recent years.
Over the very short term, much of that could be at risk if forecasts of a severe hurricane season come true; even relatively mild storms, like Hurricane Beryl when it made landfall in the United States, can disrupt U.S. LNG operations for weeks. Over the longer term, a big question is what policy a potential future Harris administration would adopt toward U.S. fossil fuel exports, especially natural gas, which became a political lightning rod this year for the Biden administration.
The National Oceanic and Atmospheric Administration, the U.S. government’s main storm forecaster, confidently expects a much-busier-than-usual storm season, with an expected four to seven major hurricanes. (The official storm season runs from June 1 to November 30.) That’s due to a mix of La Niña, record-high ocean temperatures, and a strong West African monsoon.
The problem, said ClearView Energy Partners, an energy consultancy, is that about 90 percent of U.S. LNG capacity is vulnerable to storm-related disruption—or more than 10 billion cubic feet per day of LNG export capability. That is more than the amount used by China or Japan, the biggest LNG importers in the world.
Those potential disruptions, particularly if they come during the hottest part of summer, could be a big problem for Europe and Asia, said Kevin Book, ClearView’s managing director, especially since both regions are dealing with the knock-on effects of other disruptions to energy supplies in the Red Sea and—if hostilities escalate further between Israel and Iran—perhaps soon in the Strait of Hormuz. The volumes disrupted could actually be even higher: LNG plants typically produce above their so-called nameplate capacity, meaning even more supply could be at risk.
For Europe, it would still be a manageable problem, even though U.S. LNG has become the European Union’s second-most important source of the fuel, after only piped gas from Norway. For one thing, Europe has started to kick the natural gas habit since the beginning of Russia’s war on Ukraine, with overall natural gas consumption down about 20 percent since the war began. LNG makes up a big piece of the pie, but that pie is shrinking, and even U.S. export volumes to Europe are waning this year. For another, European gas demand is highest during cold-weather months; summer is a time of low demand and squirreling away supplies for next winter, but stocks are already healthy.
The immediate outlook for U.S. natural gas exports is a much bigger deal for Asia, which has been the overwhelming driver of gas demand growth so far this year and which is gobbling up U.S. cargoes previously headed in the other direction. U.S. LNG exports through the first five months of the year (the latest data available) are up threefold to China and more than 60 percent to Japan, for example, compared with 2022.
Much like the warmer water temperatures that are driving the formation of more hurricanes in the first place, Asia’s summertime spike in gas demand can be chalked up in part to climate change. India, China, and Japan are all grappling with record heat waves that in turn create greater demand for air conditioning and thus for fuel for power generation.
That is one reason any short-term disruption could be problematic: Fewer supplies would send already high prices for LNG even higher, acting as a drag on East Asian growth. And this year’s surge in LNG demand has coincided with a slight contraction in the availability of LNG in the market, an imbalance that won’t be corrected until later this year, at the earliest.
By then, though, buyers of U.S. energy exports may have something else to worry about: the future of Washington as the new energy export powerhouse to the world.
This year, in a bid to assuage climate-driven voters who look askance at any sort of fossil fuel, the Biden administration announced a pause on future permits for U.S. LNG projects. While the move didn’t affect the gusher of U.S. export potential already in the pipeline, it rattled U.S. customers in Asia and Europe almost as much as it offended energy-state Republicans.
The LNG pause, such as it was, was overturned by a court in Louisiana in July, though the Biden administration, and any future administration, still has near-total leeway to determine what projects to greenlight and on what grounds. That has led to renewed scrutiny of Vice President Kamala Harris’s position on energy—and especially on hydraulic fracking (used to produce the gas) and LNG exports—now that she has become the presumptive Democratic presidential nominee.
Harris was against fracking before she was for it, calling for a ban during her brief run for president in 2019 before quickly changing course once on the Biden ticket and supporting the oil field technology that turned the United States into the world’s top producer. (That hasn’t stopped her opponent, former President Donald Trump, from attacking her for her previous views, however.)
Given Harris’s track record as an enthusiastic supporter of the Biden administration’s clean energy transition, promotion of electric vehicles, and LNG pause, not to mention her chastisement of fossil fuel companies while in office in California, there are plenty of hyperbolic worries about her future energy policies.
But many in the oil patch expect the vice president, especially with the need to keep fracking-intensive Pennsylvania in play during this election, to hew closely to the Biden administration’s more nuanced energy approach, which seems to promote green alternatives and clean up fossil fuels at the margin while leaving the industry to continue topping the global tables. Her campaign has said as much, disavowing her previous opposition to fracking.
The United States has turned its world-leading energy heft into an economic driver at home, a geopolitical trump card abroad, and a potential vulnerability. The next hundred days will offer plenty of chances to test the resilience of that newfound position.
