Home Oil & Gas

An Unhealthy Trade Relationship Between the US and Mexico Could Crash Prices of Natural Gas

natural gas
Image Source: Tod Baker, CC BY-SA 2.0

The much-publicized trade war between the US under the leadership of President Donald Trump and Mexico is believed to crash natural gas prices, considering both countries’ mutual dependency on such a commodity.

According to 2016 records, the US exported around 127.4 billion cubic feet of natural gas per month to its southern neighbor, which is said to be almost twice the amount in 2015. Such a trade relation is regarded by many as very desirable for producers of shale gas that are struggling due to oversupply.

On the other hand, Mexico has helped clear up the oversupply. But still, the country’s demand for gas is could not be satisfied, based on the projections that its demand for the product would reach 6 billion cubic feet each by 2020. This means that it will be able to enjoy cheap fuel in the coming years as a huge consumer of gas, thanks to shale producers in the US.

If the US decides to proceed with building the wall, Mexico could also choose to stop buying natural gas from the US. This will lead to an urgent search for new sources of natural gas, increased electricity prices, and instability in the US government, which would not be good for a country that is still experiencing unpopular reforms.

Moreover, if the US declares a trade ban on Mexico, oversupply will return, prices will fall heavily, and gas producers will work as hard as they can once again.

As of the moment, the two countries are still hypothesizing on the move they would make with regards to the critical situation they are in.

SHARE