COMMENTARY: The US LNG Industry Risks Becoming Victim of its Own Success

Summary

Global LNG capacity to grow by 60% by 2030, US to make up half of additions
LNG market expected to enter period of heavy oversupply
At the same time, growing demand for domestic US power generation to boost gas costs

(Reuters) – The breathtaking expansion of U.S. gas exports in the last decade has reshaped global markets, but a looming global oversupply along with rising power prices domestically could leave the industry exposed on both sides of its value chain.

The U.S. has become the world’s top exporter of liquefied natural gas (LNG), thanks to its abundant gas supplies from onshore shale. Energy Secretary Chris Wright expects LNG to overtake oil as the top U.S. export in the coming years.

President Donald Trump’s administration has touted LNG purchases as the best way for countries to reduce their trade deficits, and Europe’s purchases of U.S. LNG are playing a key role in efforts to end the region’s reliance on Russian energy. The super-chilled fuel has therefore become a critical political tool as well as an economic juggernaut.

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But the U.S. LNG industry risks being a victim of its own success.

The rapid build-out of American gas liquefaction capacity in recent years is poised to create a huge global supply glut, possibly comparable to last decade’s surge in U.S. shale oil output, which led to one of the biggest downturns in the sector’s history.

Global LNG capacity is set to increase by a staggering 60% by the end of the decade from 550 bcm in 2024 to 890 bcm in 2030, according to LSEG estimates. U.S. capacity is expected to make up half of that global growth.

Demand growth is unlikely to match that pace. While supply and demand is largely in balance this year, the market is expected to tip into an oversupply of nearly 50 bcm in 2026 and as much as 200 bcm in 2030, based on current LSEG projections.

Such a gap would have a profound impact on the industry.

First, global gas prices will likely decline, particularly in Asia and Europe. This, in turn, could generate new demand from price-sensitive power generators and heavy industry.

For producers, low LNG prices would obviously cut into profit margins. Since U.S. feedstock gas costs are higher than those of Qatar, the world’s second-largest producer, American producers may have to curtail some production, ceding market share.

“There will definitely be an LNG glut, but the depth and length depend on liquefaction project attrition rates and Qatar’s LNG marketing strategy,” said Seb Kennedy, founding editor of analysis platform Energy Flux.

DOMESTIC PRESSURE

The issue in the domestic U.S. gas market is quite different. While an LNG supply glut should weigh on global prices, domestic U.S. gas prices could actually rise in coming years due to slower deployment of renewable power and a spike in energy demand driven by the artificial intelligence boom.

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Trump’s “Big Beautiful” tax bill, signed into law on July 4, slashed around $500 billion worth of tax credits for low-carbon energy projects that were introduced by former President Joe Biden.

The tax credit cuts led research firm Wood Mackenzie to reduce its estimates for solar power deployment by 35% by 2030 compared with forecasts one year ago. Wind capacity additions over the next decade are expected to be almost one-quarter lower than previous estimates.

At the same time, U.S. electricity demand could spike in the coming year, due to the growth of data centres powering the AI industry. They are expected to account for nearly half of U.S. electricity demand growth through the end of the decade, according to the IEA.

If the entire incremental demand indicated by the IEA’s most aggressive AI growth scenario is met by gas-fired power, it would require an additional 100 bcm of supply by 2035, an amount larger than the planned increase in LNG export capacity during this period.

Regardless of which scenario plays out, the growth in electricity demand and lower renewables deployment should increase demand for power, putting data centres in direct competition with LNG plants.

The U.S. Energy Information Administration already forecasts benchmark Henry Hub gas prices will rise from $2.94 per million British thermal units (mmbtu) in 2025 to $3.43 per mmbtu in 2030. The figures could be larger if demand for gas grows aggressively.

POLITICAL PRESSURE

We may already be seeing this upward price pressure play out.

U.S. electricity prices rose on average nationally by 4.5% between January and June 2025 from a year earlier, according to EIA data. Some states saw much larger increases: prices in Maine, Utah and Connecticut all rose by at least 15% over the period. Texas and Louisiana, which host the vast majority of the country’s LNG plants, reported price increases of 3.0% and 7.5%, respectively.

Mounting pressure on gas prices from LNG plants and the power sector might not be a political hot potato yet. But if data centre demand grows, rising domestic gas prices could become an issue ahead of U.S. mid-term elections next year or presidential elections in 2028.

To lower prices, the Trump administration could restrict the volume of gas supplies available for export, prioritizing the country’s AI push.

So even though the U.S. LNG industry is growing rapidly in scale and importance, this dynamic could crash with harsh market realities in the coming years.

Writing by Ron Bousso; Editing by David Gregorio