Arctic Oil/Gas Neg

Diversification Link

Diversifying energy supplies will directly reduce natural gas prices and dependence

Scientists and Policy Group at Lawrence, PhD, Ryan “Easing the Natural Gas Crisis: Reducing Natural Gas Prices Through Electricity Supply Diversification Testimony Prepared for a Hearing on Power Generation Resource Incentives & Diversity Standards” Senate Committee on Energy and Natural Resources, 3-5-2005, http://eetd.lbl.gov/ea/ems/reports/Senate-Testimony.pdf

With the recent run-up in natural gas prices, and the expected continuation of volatile and high prices for at least the mid-term future, a growing number of voices are calling for increased diversification of electricity supplies. Such diversification holds the prospect of directly reducing our dependence on a fuel whose costs are highly uncertain, thereby hedging the risk of natural gas price volatility and escalation. In addition, as I will describe in a moment, by reducing natural gas demand, increased diversification away from gas-fired generation can indirectly suppress natural gas prices. Our report highlights the impact of increased deployment of renewable energy and energy efficiency on natural gas prices and consumer natural gas bills. A growing number of modeling studies conducted by government, non-profit, and private sector entities are showing that renewable energy and energy efficiency could significantly reduce natural gas prices and bills. Our report summarizes these recent modeling studies and reviews the reasonableness of their findings in light of economic theory and other analyses. (Though our report focuses on renewable energy and energy efficiency, other non-natural-gas resources would likely have a similar effect). We find that, by displacing natural-gas-fired electricity generation, increased levels of renewable energy and energy efficiency will reduce demand for natural gas and thus put downward pressure on gas prices. These price reductions hold the prospect of providing consumers with significant natural gas bill savings. In fact, although we did not analyze in detail the electricity price impacts reported in the studies, the studies often show that any predicted increase in the price of electricity caused by greater use of renewable energy or energy efficiency is largely or completely offset by the predicted natural gas price savings. We conclude that policies to encourage fuel diversification within the electricity sector should consider the potentially beneficial cross-sector impact of that diversification on natural gas prices and bills.

US Demand Spills Over

natural gas is integrated – demand changes in one country will cause ripples throughout the global market

Et al, Amy M. Jaffe, Mark H. Hayes and David G. Victor, Fellow for Energy Studies at Rice Universit. Natural Gas and Geopolitics: From 1970 to 2040, “Conclusions,” pg. 469-470

This book has considered the implications of a major shift from a world of regionally isolated natural gas markets to a new more interdependent, increasingly global, marketplace for gas. The driving forces for this shift to a global gas market include the increasing preference for gas as a fuel, technological advances that are reducing the cost of producing and delivering gas to markets, and liberalization of gas markets. The rising importance of gas as a primary energy source brings with it concerns about gas pricing and security of gas supply. Globalization of the natural gas trade will have significant ramifications for consumers and gas producers alike. Just as policy-makers in large consuming countries have focused on the macroeconomic effects of variable oil prices, similar concerns are already evident about natural gas prices as the fuel begins to play a larger role in world economies. Producing countries will also have to worry about income effects of global natural gas pricing trends. Results from the study's economic modeling suggest that the shift to a global market will render each major consuming or producing area vulnerable to events in any region. The timing of major gas export projects coming online, as well as discontinuities in supply or demand, will ripple throughout a global market. For example, as shown in the scenario runs of the model presented in chapter 12, in a world of fully integrated natural gas markets, gas users in Japan will have a vested interest in stability of South American gas reaching the US West coast; those in the United States will have concern about natural gas policy in Africa and Russia, and the European Union will be compelled to monitor the political situation in gas-producing regions as remote as the Russian Far East and Venezuela. Major consuming countries will have to learn to adjust to the interdependencies of a global gas market. In the past, policy-makers in large gas-importing countries have focused on key supply relationships such as the large pipelines from Algeria and the Soviet Union that fed Europe or the multitude of pipelines that sent gas from Bolivia to Brazil and from Argentina to Chile (see chapters 3, 5, and 6, respectively). Sustained attention from governments will continue to be critical to creating an attractive environment for these massive capital investments. However, a narrow focus on one-off trading relationships is unlikely to prove an effective means to providing supply security in a future where a much more fungible global market will set prices in all major markets and determine the movement of gas supplies.

Market volatile – single cuntry changes spillover

Glen, vice president and principal with LukensEnergy Group Inc., an independent management consulting firm in Houston, Natural Gas Electricity, “LNG Imports: Where and When Will They Arrive,” May, vol. 20, no. 10, from Wiley InterScience

Somewhat paradoxically, increased LNG imports are also likely to increase gas price volatility. This increase will occur for two reasons. First, the LNG supply chain is much longer and, therefore, more vulnerable to disruptions, than North American gas production. Foreign strikes, industrial accidents, shipping or docking problems due to weather, and port closures due to accidents or terrorist threats will all disrupt LNG supplies and cause corresponding changes in gas prices. Second, world gas markets will become increasingly liquid over the next decade, and changes in gas supply or demand conditions anywhere in the world will increasingly affect gas prices in the United States. In much the same way that the world oil market is integrated, gas markets will become increasingly global and more volatile.