PetroChina Company Limited (ADR) (PTR), Halliburton Company (HAL): Three Ways the U.S. Energy Boom Will Change the World

3. Countries will adapt the American gas market model
Before the U.S. starts to export oil, it will have a much larger excess supply of natural gas. The U.S. has been deliberating the merits of exporting LNG for some time now, but some recent signs signal that the government will give the OK for natural gas exports. If this were to happen, it would pit two global pricing models against each other.

In parts of Europe and Asia, natural gas prices are based on long-term contracts that have a minimum price indexed to oil based on a BTU equivalency. This arrangement makes natural gas prices artificially high in comparison with the U.S., where natural gas prices are based on spot prices and are independent from oil prices. In Europe, Russian gas companies and Norway’s Statoil ASA(ADR) (NYSE:STO) combined supply more than 40% of the continent’s gas under these lucrative contracts.

If the U.S. were to start exporting natural gas to these markets, our pricing model would allow us to sell at a pretty hefty discount to current gas contract prices. We would have the potential to disrupt the way these markets currently price natural gas and would force them to go away from their oil-indexed contracts. This model is already starting to take place. Today, 50% of all natural gas in Europe is sold based on a spot price model, compared with only 20% less than a decade ago.

What a Fool believes
The world’s energy supply is caught in a delicate balancing act. Small disruptions in supply from the smallest countries can reverberate throughout the entire market. Having the U.S. take on a larger share of the global supply will have a deep effect on the market in many other ways not mentioned here. Ultimately, though, the energy sector is not a binary-outcome industry, and there are some things that will never change. Will it bring an end to OPEC’s dominance? Absolutely not. Will the U.S. completely overhaul its foreign policy based U.S. energy independence? Unlikely. But making the U.S. energy-independent will certainly shift momentum in those directions.

The article 3 Ways the U.S. Energy Boom Will Change the World originally appeared on Fool.com and is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter, @TylerCroweFool. The Motley Fool recommends Halliburton and Statoil.

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