Over the past five years the United States has become the world’s largest producer of natural gas. But gas producers have struggled to find methods to liquefy natural gas so that it can be exported across the Atlantic. Enter Cheniere Energy, a Houston-based natural gas company that has developed a natural gas export terminal located on the Sabine Pass leading into the Gulf of Mexico. The terminal will give U.S. companies access to markets all over the world.

a. Explain how the development of a natural gas export terminal will affect the market for natural gas in the United States.

b. Assuming natural gas prices are $3.00 per BTU, draw a graph to illustrate the effect of an export terminal on the demand for natural gas in the United States. Explain your findings.

c. Assuming natural gas prices in Europe are $6.00 per BTU, draw a diagram to illustrate how the development of a natural gas terminal in the United States will affect supply and demand in the natural gas market for Europe. Explain your findings.

d. How will the exporting of natural gas from the United States to Europe affect consumers and producers in both places?