America’s natural gas abundance – an economic and industrial boon – has also now become a deeply concerning consumer vulnerability. Gas is the leading fuel for electricity generation, heating and manufacturing, and the U.S. has now also become the world’s largest liquified natural gas (LNG) exporter with U.S. LNG export capacity set to double by 2028.
The surge in LNG export capacity is likely to make the U.S. gas market increasingly sensitive to global gas prices. With energy trade a centerpiece of the Trump administration’s trade negotiations, overseas demand for U.S. gas is only growing.
America’s LNG export boom is also now converging with soaring demand for natural gas from the nation’s electricity hungry data centers whose power demand is expected to triple by 2028.
While gas reserves remain abundant, expanding pipeline capacity to accommodate so much new demand is not keeping up. In large parts of the country, gas pipeline capacity is already fully subscribed with supply contracts simply unavailable.
Pressure is building on both natural gas prices and – because of gas’ importance to electricity generation – on power prices. Energy affordability hangs in the balance.
Accelerating Energy-Driven Inflation?
Since 2022, electricity prices have risen faster than inflation. In the past year, electricity costs have jumped 4.5%, fully double the rate of inflation. Rising electricity demand, tightening power supply margins and rising spending on the nation’s aging energy grid are all to blame but so is a significant rise in natural gas prices.
A year ago, the Henry Hub price for natural gas was just $2.07 per million BTU. Today it’s now $3.20 per MMBtu and forecasted to rise significantly higher. The U.S. Energy Information Administration (EIA) expects the Henry Hub spot price to average $3.60 per MMBtu in the second half of 2025 and $4.30 per MMBtu in 2026.
For many Americans, there’s no escaping a natural gas price squeeze. For every dollar increase in natural gas, U.S. consumers pay on average $34 billion more for gas and $20 billion more for electricity, or $54 billion annually. Natural gas prices have already jumped more than $1 in a year. Another $1 jump, as the EIA is forecasting, would put the total annual rise in natural gas-driven consumer costs at over $100 billion.
Price Shock Absorber
The U.S. coal fleet provides an irreplaceable hedge against a sharp rise in gas prices. The fleet, which underpins U.S dispatchable fuel diversity, is the nation’s electricity prices shock absorber.
As gas prices rise the coal fleet can pick up market share, relieving pressure on gas prices, and holding down electricity prices in markets with significant coal capacity. Through the first quarter of the year, U.S. coal consumption was up 18% year-over-year. The EIA expects U.S. coal generation to jump 6% for the year. It’s currently on pace for an even higher rise. If gas prices continue to climb, you can count on it.
With power and natural gas demand soaring, and immense challenges facing renewable capacity and energy infrastructure additions, the coal fleet will be invaluable in tempering mounting energy costs.
It’s startling to imagine just how dire both our reliability and energy affordability trajectory would be if the prior administration’s agenda remained in place.
Fortunately, the Trump administration has made preserving the U.S. coal fleet and expanding U.S. coal production a priority in its energy abundance agenda. Not only does the administration see the fleet’s remarkable value in shoring up the nation’s shaky grid reliability, particularly during periods of peak power demand, but the administration also recognizes the critical importance of dispatchable fuel diversity. That optionality is going to prove essential in the months ahead.
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