The current bout of inflation afflicting the U.S. is most notable for its impact on gasoline prices across the country. Consumers are paying nearly 50 percent more to fill up their tanks in 2022 year over year, and consumer attention has fallen on the strained supply of multiple types of distillates, from diesel to jet fuel. A great deal of these costs involve limitations (both market based and political) on production of crude oil and natural gas. Elsewhere in the energy supply chain, however, infrastructure issues are forcing prices higher.
Outdated or damaged gas transportation infrastructure can have an impact on supply and costs, with pipelines specifically delivering upwards of 27.7 trillion cubic feet (Tcf) of natural gas to 77.3 million customers in 2020. That means disruptions to pipeline networks have a direct impact on gas supply and what consumers pay.
The recent accident involving an Energy Transfer transmission pipeline carrying natural gas in west Houston, Texas impacted both directly and indirectly. Accidents like pipeline explosions can cause supplies of natural gas to be further restricted while the pipeline remains out of commission. In Texas specifically, the partial shutdown of the Freeport LNG plant will lead to lower domestic natural gas prices, since supplies destined for export may instead be kept within the country. However, pipeline damages can create additional costs as companies scramble to maintain the flow of gas to businesses and consumers and deal with lost product, repair, and reputational impacts. Consumer prices can also be subject to additional volatility if the needed pipeline infrastructure is not constructed. Particularly in West Texas, the lack of pipeline infrastructure has not kept pace with production and demand for transportation.
Consumers will face multiple factors that impact the price of natural gas. Right now, federal restrictions on production, pipeline accidents, partial processing plant shutdowns, and the upcoming winter months will mean a restricted supply amid annual surges in demand. Heating bills will be elevated due to these factors, on top of inflation. While the investigation into the Energy Transfer pipeline accident is ongoing, consumers can identify gaps in the U.S. pipeline network to adapt to supply fluctuations. Areas of particular note are the northeastern U.S. and portions of the western U.S. These areas will likely see additional transportation costs accompanying supply constraints, as moving energy products by truck or rail is more expensive than by pipeline.
Written by Roy Mathews, Public Policy Associate
The Alliance for Innovation and Infrastructure (Aii) is an independent, national research and educational organization. An innovative think tank, Aii explores the intersection of economics, law, and public policy in the areas of climate, damage prevention, energy, infrastructure, innovation, technology, and transportation.