The Potential Benefit of the United States Exporting Liquefied Natural Gas for Japan: Forecasting Natural Gas Price Changes

Abstract

This paper estimated the change in price of liquefied natural gas (LNG) in world LNG markets and U.S. domestic markets if the U.S. were to start exporting LNG. We then calculated the estimated effect of such a change in the world price of LNG on the Consumer Price Index of Japan and the U.S. We considered what Japan’s demand for LNG would be if it ended its nuclear energy program. This paper uses the price elasticity of world demand and U.S. demand for LNG to estimate future price changes in five year intervals from 2015 until 2035. We found that the world price of LNG would drop 4-8% at current supply conditions and 6-12% at high natural gas well recovery conditions. We found that the U.S. price of LNG would rise around 10% every five years at current supply conditions and around 20% every five years at high natural gas well recovery conditions. Japan would benefit from the U.S. exporting LNG and the U.S. would also benefit.