The importance of US LNG for economic growth and the global energy transition
Daniel Yergin is vice chairman of S&P Global, and author of The Prize and The New Map.
Madeline Jowdy is head of Global LNG Consulting at S&P Global.
Both are among co-authors of A Major New U.S. Export Industry at a Crossroads. conducted with the US Chamber of Commerce. This essay is part of the Global Energy Agenda.
The emergence of US liquefied natural gas (LNG) is a remarkable story. In less than a decade, the United States has gone from zero exports to being the world’s largest exporter. Moreover, US LNG is at the nexus of the global energy transition, providing affordable and freely traded gas in a global market of some fifty importing countries. This flow promotes security of supply for regions such as Europe and East Asia, supports trade balances with China and India, and serves as a substitute for higher carbon-intensive energy sources in Southeast Asia and elsewhere.
The geopolitical importance and strategic urgency of the industry were demonstrated when Vladimir Putin cut pipeline gas to Europe in an effort to undermine the European economy and shatter the coalition supporting Ukraine. He miscalculated, failing to recognize the potential of US LNG to play a significant role in filling the gap. US LNG replaced 40 percent of the missing Russian pipeline gas. And the Trump administration is looking to US LNG exports to help rebalance trade with other countries.
The critical role of US LNG is significant both for the domestic economy and on the international stage. For the continued growth of US LNG exports, it is essential that the United States demonstrate, day in and day out, that it is a supplier on which other countries can rely. As US exports are projected to double in the coming decade, the influence of US LNG is expected to grow. However, despite a more favorable policy climate with the new administration, further success is not guaranteed due to substantial federal and state regulatory, political, and environmental challenges facing the industry, which will need to be addressed.
As the US LNG sector re-emerges after a year of stagnation caused by the Biden administration’s pause on LNG export authorizations, it is important to recognize the industry’s overall contribution to US GDP, economic influence, and global LNG trade innovation. In our new study Major New US Industry at a Crossroads: A US LNG Impact Study, conducted with the US Chamber of Commerce, we found that the US LNG industry is valued at $34 billion and has contributed more than $400 billion to US GDP since 2016, when the first LNG cargoes were shipped from Sabine Pass, Louisiana.1Major New US Industry at a Crossroads: A US LNG Impact Study – Phase 1, S&P Global, December 17, 2024, https://www.spglobal.com/en/research-insights/special-reports/major-new-us-idustry-at-a-crossroads-us-lng-impact-study-phase-1. The industry has created an average of 273,000 skilled jobs annually since 2016. Its impact penetrates deep into the heartland where gas is produced and transported, and supports supply chain and manufacturing communities in the Northeast, Midwest, and Southeast. What really brings home the industry’s impact is its comparison with other US industries. The value of LNG exports is more than that of soya beans and double those of Hollywood and entertainment exports. It is currently half that of semiconductors, but within a few years, could equal the value of all semiconductor exports.
What has made this unprecedented growth possible is the vast resource base developed during the US shale revolution, compounded by entrepreneurial energy, infrastructure, and industrial skill. Despite a 13 billion cubic feet per day (Bcf/d) growth in LNG feedgas requirements since 2016, domestic wholesale gas prices have continued their downward trend, with only temporary interruptions due to rapid post-COVID growth and geopolitical events such as Russia’s full-scale invasion of Ukraine in 2022.
While US LNG exports account for only 12 percent of the domestic gas market, they supply nearly a quarter of global LNG supplies, making the United States the world’s largest LNG supplier. This outsized role in the international gas market is supported by the flexibility and reliability of US LNG, which is traded with fewer restrictions on destinations, volumes, or pricing compared to much of the global LNG market. Additionally, US LNG has significantly contributed to emissions reductions in countries that have replaced more carbon-intensive coal and fuel oil with LNG.
In terms of trade, US LNG helps offset trade deficits with both Europe and China. In Europe, US LNG is viewed as a reliable and strategic supply mechanism, while in China, it helps mitigate the United States’ largest single trade deficit. US LNG exports to Japan, South Korea, and Taiwan also support energy security for these key allies.
Growth projections for US LNG, as analyzed by S&P Global, align with a global energy system transitioning to lower carbon-intensive modes of production and consumption. With more favorable conditions under the new administration, US LNG exports are forecast to double by 2030, with projects currently under construction accounting for approximately 60 percent of that projected growth.
With this anticipated growth, our LNG study projects that US LNG industry is poised to contribute approximately $1.3 trillion to GDP by 2040 and create an annual average of 500,000 jobs. On the global front, the US share of the LNG market is expected to exceed one quarter by 2040, supporting a large and liquid gas market that might not exist otherwise.2Major New US Industry at a Crossroads
However, there is a big “if”: if domestic regulatory, legal, and environmental barriers persist, the United States risks losing over 100,000 jobs annually and more than $250 billion in GDP. Moreover, it appears that 85 percent of the resulting energy gap in the rest of the world would be filled by fossil fuels sourced from outside of the United States. This jeopardizes US geopolitical influence and its reputation as a reliable and affordable energy supplier to allies and trading partners.
As the global energy transition progresses, US LNG will have a crucial role in reducing carbon emissions. The transition from coal to natural gas in the US power sector has already driven a 40 percent reduction in carbon emissions since 2000. In the medium term, US LNG will be a vital substitute for higher carbon-intensive coal and oil products, especially in the developing world. Long term, it will support reliable and resilient energy systems as renewable energy sources become more prevalent.
This is not a one-way street; the United States needs the commitment of its allies and other global trading partners to secure long-term supplies of US LNG and avoid an extended halt in development. This nascent industry was advanced over the last decade in part by financial commitments by Japan and other allies. Future growth will likely rely on a diverse array of European and Asian partners, compensating for lost Russian pipeline gas and LNG, while benefiting from this important new export industry that enables the United States to deliver a clean, reliable supply of natural gas to the global economy.
All essays
Explore the program
The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.