Welcome to Energy Daily, Bloomberg’s guide to the commodities markets powering the global economy. Today, US reporter Ruth Liao and Asia Energy Team Leader Stephen Stapczynski look at how the White House’s “drill, baby, drill” policy may have repercussions for domestic liquefied natural gas.

President Donald Trump’s push to make oil cheap again and rein in inflation may end up triggering unforeseen, and negative, consequences for US LNG exporters.

The reason is that most liquefied natural gas producers abroad price their long-term contracts to a percentage of the benchmark oil price, an industry practice dating to the 1970s. The US, meanwhile, links the vast majority of its shipments to the domestic gas marker known as Henry Hub.

This anomaly worked to the US’ advantage more than a decade ago when its first wave of LNG projects was courting importers. Oil prices were high, and the shale boom meant that American shipments often were cheaper than those from rival exporters such as Nigeria and Papua New Guinea.

But as oil prices drop, that competitive edge evaporates.

Brent prices falling to $50 a barrel — a level touted by the White House — could make most American gas more expensive than what’s being offered elsewhere.

That’s bad news for US developers needing to secure buyers before they can get financing and begin construction. It’s also a hurdle for the Trump administration, which wants importers from the European Union to Japan to sign more contracts for homegrown LNG.

To make matters worse, American projects are grappling with rising construction costs, forcing some to renegotiate higher prices from buyers. These headwinds come as rival Qatar, and other producers in the Middle East, expand output.

Of course, there are still some inherent benefits to US gas beyond the price point. The supply is usually far more flexible than elsewhere, and its location means traders can decide whether to send shipments to Europe, Asia or South America depending on where they can snag a better profit.

The natural gas industry applauded Trump’s decision to remove a Biden-era ban on new export plants and use cargoes to balance US trade with the rest of the world. As soon as today, the administration is prepared to give Venture Global LNG Inc. conditional approval to ship from a planned facility in Louisiana.

Even so, the president’s “drill, baby, drill” mantra may start to get pushback from even his biggest LNG allies.

–Ruth Liao and Stephen Stapczynki, Bloomberg News