The Energy Information Administration (EIA) is projecting that the average natural gas spot prices will roughly double from 2024 to 2026, to an average of $4.30 per million British thermal units (Btu). The EIA expects liquified natural gas (LNG) to be the biggest driver of increased demand that will push natural gas prices higher in 2025 and 2026. The Henry Hub price is expected to average almost $3.60 per million Btu this year and $4.30 per million Btu next year. The forecast increase largely reflects the expectation that production will fall slightly in 2026, while LNG exports continue to increase.
While the EIA expects the effect of increasing gas exports to increase gas prices, that has not been the recent pattern. Natural gas prices have stayed low or gotten lower even as U.S. exports have gone from basically zero to world-leading in the past nine years. Some experts are even warning of a global LNG glut that could lower gas prices. Recently, benchmark U.S. gas prices were trading for less than $3 per million Btu. Generally, $4 per million Btu is considered the threshold between low and high prices.
Challenges to Low Natural Gas Prices
Obstacles to low gas prices and increased gas production include the need for permitting reform, opposition to non-renewable energy projects from environmental groups and some states, and supply chain issues. Oil and gas companies and industry analysts have complained for years about bureaucratic hurdles for energy projects, particularly pipelines. It has been clear for a while that Congress needs to pass legislation on permitting reform that would improve the process for all energy projects.
U.S. LNG Export Demand Will Increase Under Trump Trade Deals
President Trump is making deals with trading partners for more LNG purchases. In the U.S. trade deal with the European Union, the EU “intends to procure” LNG, oil, and nuclear energy products totaling $750 billion over the next three years, or $250 billion a year. According to Trump, South Korea will also purchase $100 billion of LNG or other energy products. In the past year, however, the total amount of LNG exports to all countries from the United States was only about $55 billion, likely making it difficult to meet these commitments at this time.
Other LNG deals are in the works. According to President Trump, Japan and the United States are working on a deal involving Alaskan LNG. The Trump administration is working on a proposed Alaska pipeline to transport natural gas across the state and export it overseas — a $44 billion project. The 810-mile natural gas pipeline would be among the largest in the world, and Japan and South Korea are interested in partnering with the United States and investing in future purchases of LNG from the Alaska facility. The project would provide a shorter shipping distance to Asia than the U.S. Gulf Coast and avoid the Panama Canal, which suffered from delays due to a drought in 2023.
Higher Electricity Demand
Higher electricity demand from data centers and increased electrification will affect natural gas demand. According to E&E News, the Lawrence Berkeley National Laboratory has found that U.S. data center energy use reached 176 terawatt-hours in 2023 — the equivalent of 4.4% of total U.S. electricity consumption. The EIA also reported that computing, which includes energy consumption from data center servers and other equipment, is expected to account for 20% of commercial sector electricity consumption by 2050. Furthermore, increased electrification of automobiles and new buildings will raise demand for electricity and natural gas.
With nearly 40% of the U.S. coal fleet shut down during the past 10 years, natural gas is being used more extensively to provide reliable power. The United States is the largest producer of natural gas and has the world’s fifth-largest gas reserves. The International Energy Agency forecasts natural gas demand growth will accelerate in 2026, sending total demand to an all-time high.
The Big Beautiful Bill is slowing the additions of solar and wind power by phasing out tax credits for those technologies. The Trump administration is also making it harder to site wind and solar power on federal lands. Interior Secretary Doug Burgum is demanding that any renewable projects on federal land receive his approval. An order Burgum issued recently targeted wind and solar projects, suggesting that they are not an appropriate use for federal land. President Trump temporarily halted work on a large wind energy project off the coast of New York — Empire Wind — amid an effort for state officials to approve two new natural gas pipelines.
Trump’s executive orders and declaration of an energy emergency are a temporary fix to keep coal plants operating and to increase natural gas production and demand. Trump’s return to the presidency has spurred optimism among companies that build and operate big gas transmission pipelines. Pipeline companies have received “a record number of proactive inquiries” from potential customers in recent months, showing that there is consumer interest in using natural gas, despite some states banning its use in new buildings. Some companies have announced new or revived pipeline projects, and more will likely seek federal approval over the next 18 months.
However, according to E&E News, experts have cautioned that Trump’s administrative moves could backfire and slow projects if judges determine that his administration let developers avoid or skirt environmental laws. According to some, any progress on permitting is temporary until Congress can pass permanent laws changing the process.
Analysis
Natural gas prices are difficult to forecast, but the EIA expects them to almost double between 2024 and 2026 to $4.30 per million Btu as growth in LNG exports requires more natural gas production. But more gas demand has not always resulted in higher gas prices. Natural gas prices have stayed low or gotten lower as U.S. LNG exports have risen from basically zero to leading the world in the past nine years. Historically, the U.S. energy industry has consistently risen to meet challenges it has faced over the past 15 years. Ingenuity and new technology have kept energy prices low despite increased regulations and negative energy policies. Nevertheless, the gas industry does face challenges that include the need for permitting reform, opposition to non-renewable energy projects from environmental groups in many states, and supply chain issues.
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