US Gas Prices Are Higher, Sure, But The Rise And Impact Is Nothing Like Europe’s

With Russia tightening the flow of natural gas into Europe, gas prices in the bloc have skyrocketed, threatening consumer spending power and industry profit margins. US consumers and industries aren’t getting away unscathed either: steepened demand for Liquefied Natural Gas (LNG) in Europe has been pushing up the price of US gas as well. But the rise and the consequences for the US are far milder.

US gas prices, both natural gas and LNG, typically are determined by what’s called the Henry Hub benchmark (gray line). And as you can see from the chart, its price has increased almost five-fold since 2020. Sure, it looks like nothing compared to Europe’s Title Transfer Facility (TTF) benchmark gas rate (orange line), which has seen a 25-fold increase. But it does point to the creeping inflationary impact that Europe’s energy crisis is having on other parts of the world.

More interesting though, is the historically high divergence in gas prices between both regions. The wider the divergence in energy costs and the longer it is expected to persist, the more likely it is that investors will shift new investments from Europe to the US, where costs are lower.

This also helps explain why – despite talk of a US recession and continued interest rate hikes – US stock markets have held up better so far than those in other developed countries. The question is always a relative one: and for now, Europe looks to be the more challenged of the two. As we highlighted here, US gas, LNG, and chemical producers are also most likely to benefit from this continued divergence in gas prices…