Business, Economics and Jobs

Obama's EU free trade agreement would mean higher heating costs for Americans


A Consol Energy horizontal gas drilling rig explores the Marcellus Shale outside the town of Waynesburg, PA on Apr. 13, 2012.


Mladen Antonov

Last week, President Obama mentioned signing a free trade agreement with the European Union in his state of the union address.

As with anything, the benefits of such an agreement comes with its costs.

Morgan Stanley commodities analyst Adam Longson believes this is the path to higher natural gas prices.

Longson writes in a note today that opening up a new market would be a boon for natural gas producers as prices rise with the new demand.

This means higher costs for consumers who rely on natural gas (currently at $3.25/mmBtu) for things like heating and cooking.

It would also change the trajectory of some pipeline projects:

At today’s European prices, US natural gas could rise as high as $5.70/mmBtu before closing the trans-Atlantic LNG export arb (i.e. the exchange rate setttlement — ed). We believe a new FTA has the potential to alter the timeline and destination for some LNG exports projects. We view East Coast projects, like Dominion’s Cove Point, as the greatest beneficiaries.

Longson says there's also the potential for expanded oil exports. However, the impact on US light sweet crude would not be as dramatic.

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