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3 Ways Brexit Could Impact U.S. Energy Consumers and Businesses

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Yesterday, U.K. voters elected to leave the European Union in a historic and unprecedented decision. 

The referendum will assuredly bear major global financial and diplomatic consequences in the coming months and years. But, what impact will the Brexit vote have on U.S. energy consumers and businesses? 

While it's a rapidly developing issue mired in uncertainty, here are three ways the Brexit vote might affect U.S. energy consumers. 

1. It could potentially slow energy production.

It's been a rough day for oil companies and the banking sector. If Brexit results in a sustained downturn in the markets, it could directly impact the banking sector's ability to lend or do other business with energy producers, resulting in slowed production and higher prices. 

The short-term financial impact of the Brexit vote was already on full display today as oil prices plummeted. The market uncertainty could further hinder oil companies by exacerbating the already historically-low oil prices.

2. It might have little effect on the U.S. natural gas market. 

Some analysts believe that the Brexit vote might actually have little impact on the U.S. natural gas market. While futures are currently trading down, it is believed to be a reflection of cooler temperature forecasts, not the U.K.'s referendum. 

However, the Brexit vote may have a larger impact when it comes to U.S. liquefied natural gas (LNG) exports. With a stronger dollar, LNG exports become more expensive for the rest of the world. In turn, that could directly reduce the export volumes from earlier forecasts. If that's the case, increased supply at home might be beneficial to customers as a component of outside demand would likely be reduced. 

3. It could impact global climate efforts. 

Historically, the U.K. has been a global leader on climate change. In 2008, it became the first country to set a long-term binding law cutting emissions of 80 percent by 2050 and create a voluntary carbon emissions market. However, with the departure of Prime Minister David Cameron, there’s no guarantee that his successor will follow the same path. 

The U.K. signed the landmark Paris agreement as a member of the European Union, so the country's commitment will likely require a recalibration and is now in doubt. If the U.K. changes direction, it could have a tremendous effect on the future of global climate efforts. 

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Posted: June 24, 2016