Do We Really Need liquified natural gas?

Liquified natural gas (LNG) is often compared to the warmth of your home theater’s interior. After all, what’s so bad about a warmed-up gas coming out of the tap? It seems that all there is to it is a sign on the gas station sign informing you that this particular station can provide up to eight hours of heating if needed and the prices are reasonable. And then there is the price of natural gas that must be paid each time the gas comes out of the storage tank- $4.00 per million British thermal units (BTU) at the current average- and that only lasts for ten years.

Now let’s compare this LPGA to the propane heater that is in your garage and has a storage tank that holds three to four months of heated gas. You figure you will need a heater for the winter to keep the house warm and so figure that you will purchase the largest tank possible. This tank may be full of propane but it is still contributing to the overall LPGA- the heat content per barrel is equivalent to eighteen percent of the natural gas in the cylinder. So you will pay the same amount of money for the natural gas you need to heat your home as for the propane that is currently sitting in the tank.

However, the government wants to change this scenario. The U.S. Department of Energy (DOE) is considering two different ways it can reduce the cost of heating using natural gas. The first way is to liquefy the natural gas- that would allow it to be used as fuel in generators that can produce electricity. The second way is to compress it into liquid form, making it much more available. One way to think of the proposal is that you would pay less for LPGA because it is available in larger volumes. But you may also save money if you are able to get LPGA from another country- you may be able to negotiate a better price with suppliers in other countries for your LPGA.

If you take the idea of the liquefied natural gas price and increase it by one percent, you find that you would need about seven thousand billion cubic feet of natural gas per day to meet the energy demands of the world. Of course, the federal government could not provide this kind of volume. And it would not be practical for most of us to build power generation plants that would provide all the energy we need. It might just be impossible. So how does the proposal on increasing the liquified natural gas price compare to what we have already talked about?

Proponents of increasing the price of LPGA points out the difference between increasing the price and the efficiency of the fuel efficiency. They argue that the efficiency numbers are unreliable because the measurements are not very accurate. In other words, it is a subjective estimate. This might be true. But the question is whether the reliability of the estimates is going to change the cost of developing LPGA plants.

Many energy analysts believe that the current distorted incentives that the oil companies have offered to keep the prices high are not going to change any time soon. They argue that there are so many distortions in the way that fuel markets are organized that the only way that these distortions can be changed is through subsidies. Incentives like the ethanol subsidy, which is supposed to guarantee gasoline tax relief, or the capped gas production, which is supposed to keep the cost of development of the sector down, will not affect the efficiency levels. But the argument that these incentives are not effective for increasing the efficiency of gas turbines for power generation has some merit. Some of the ways in which the subsidies are given to make it less expensive to develop LPGA farms.

Inefficiencies in the design of the technologies that power the power plants, and the failure of regulators to maintain reliability of the measurements that are used to determine the prices at which the fuel is sold, are some of the other factors that distort the efficiency of the current system. The fact that some of these imperfections do not affect the reliability of the prices means that there is not really a need to look for ways of improving the efficiency of the LPGA turbines. These distortions do not mean that there are not reliable access to natural gas in this country.

Only a fool would look for ways of reducing the reliability of the current system for power generation. But there are certainly ways in which there is a need for the government to support research for the betterment of the efficiency of the natural gas systems that power our country. There are projects in various stages all over the country that are looking at how to reduce the cost of transmission and distribution. There are also grants and subsidies being made available by the federal and state governments. All that is needed is the will to find out new ways of improving the efficiency of power generation in this country.