Rising LNG Prices and Louisiana's Critical Role in the Global Market

Liquefied natural gas (LNG) prices are set to rise sharply as demand outpaces supply heading into 2025. After record-low prices in 2023 prompted companies to cut production, the market is now bracing for a rebound in demand that production increases may struggle to match. This imbalance is expected to push prices to their highest levels in three years.

Thomas Jorden, CEO of Coterra Energy, attributes this price surge to growing LNG exports, increased electricity generation demand, and the potential for harsher winter weather. The Energy Information Administration (EIA) predicts domestic gas prices will rise by 33% from 2024 to 2025, largely due to the increasing global demand for LNG. Bank of America analysts also emphasize that the expanding LNG market is a key driver of this trend.

Louisiana, a central player in the natural gas industry, is particularly impacted. In 2023, the state handled 61% of U.S. LNG exports and relied on natural gas for 76% of its electricity generation. Seven of the state’s ten highest-output power plants are fueled by natural gas, highlighting its importance to both local energy needs and the global export market.

To address the imbalance, new facilities like the expanded Venture Global Plaquemines terminal aim to increase supply. However, these solutions won’t take effect immediately, as facilities need time to complete testing and ramp up production.

The expansion of LNG export infrastructure along Louisiana’s coast has sparked debate over its environmental and safety impacts. Earlier this year, the Biden administration paused approvals for new LNG terminals, citing climate concerns and domestic price risks. However, with the incoming Trump administration signaling plans to reverse this pause, the industry is poised for rapid growth.

As the 2024-2025 winter season approaches, market conditions remain uncertain. While a mild winter could ease pressure on supply, harsher weather might exacerbate the tight balance and drive prices even higher. Analysts forecast prices could range from $1.50 to $9.00 per million British thermal units (MMBtu) over the next two years, depending on weather, production levels, and export demand. For Louisiana, this volatile market underscores the need to balance economic growth with environmental and consumer protections.