Russia’s decision to indefinitely close the Nord Stream pipeline is causing price fluctuations in European energy markets. This is particularly difficult for the continent because, unlike oil, natural gas is challenging to transport over long distances. To liquefy gas, it must be chilled to -260 degrees Fahrenheit and put into a tanker, which is expensive. This means that gas markets are more regional than global.
Fortunately, Americans are unlikely to experience the significant price increases that have already hit Europe, where some areas have seen wholesale gas price increases of 400% or more. The United States is the world’s largest natural gas producer, and although domestic supplies are running below the five-year average, they are still more than adequate. The supplies are American-owned, so there is no reliance on Russia, the world’s second-largest natural gas producer, and the country has control over its energy independence.
What does it all mean for gas prices in the U.S.?
Current prices are roughly double last year’s levels, and the deepening European natural gas crisis will continue to impact U.S. consumers.
Europe requires natural gas and will import as much compressed natural gas, known as Liquified Natural Gas (LNG), as possible. Although the U.S. is a significant source of LNG due to its abundant natural gas reserves, it takes years to build LNG export facilities. Existing U.S. LNG export levels are at maximum capacity.
This means that U.S. gas prices will not directly follow European gas prices into the stratosphere, no matter how high the demand for LNG becomes. However, U.S. gas prices will likely remain high and may even increase as winter’s cold weather sets in.
How do Fuel Prices Affect Small Businesses?
Over the past two years, small businesses have struggled due to the pandemic, with shutdowns and closures, supply chain issues, and labor shortages.
However, higher pump prices could have an impact on the overall economy, including small businesses. When more of people’s income is spent filling up their tanks, they will cut back on spending in other areas. Consumers may find that they have less disposable income for the goods and services they would normally purchase, or they may drive less often.
Small businesses that use vehicles for daily operations, such as construction, transportation, maintenance, and deliveries, will be the most severely affected.
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