Elon Musk’s gas strategy shows how the US market is changing

In Star Trek, spaceships are propelled by warp drive. In The Hitchhiker’s Guide to the Galaxy, it is the Infinite Improbability Drive. In the real world, Elon Musk’s Starship uses LNG.

Previous generations of rockets, including the Saturn V that put a man on the moon, have used kerosene and/or liquid hydrogen, along with liquid oxygen. LNG burns more cleanly than kerosene, and is easier to manage than hydrogen, and so has become SpaceX’s favoured option for its new Starship rocket, again along with liquid oxygen.

It is a significant development for North American natural gas markets. Not so much because of the scale of the demand for Starship fuel – which is relatively small today – but for what it indicates about strategies for securing supply.
The first Starship was launched in 2023, and last month it passed another milestone, entering orbit and deploying a payload for the first time. After some well-publicised failures, SpaceX is making progress in tackling the technical challenges it faces.

Musk has big plans for Starship: he has suggested that by 2030 there could be 30 or more launches every day, and he dreams of future versions of the rocket carrying humanity to other planets. But even if those more grandiose ambitions are not realised, Starship can still make an important contribution to space development.

Because of its size, and the intended reusability of both the main spacecraft and the Super Heavy booster used for liftoff, Starship could reduce the cost of delivering objects into orbit by orders of magnitude. 

For now, the volumes of gas needed by the rocket are relatively small. Each launch uses about 1,000 tons of LNG, which is about 48 million cubic feet (mmcf) of gas. SpaceX has asked the Federal Aviation Administration for approval for up to 456 launches a year, equivalent to five every four days. Even if it hits that pace, its total demand would be about 60 mmcf/day, equivalent to only about .07% of total US gas consumption.

However, if Musk’s dream of 30 launches a day is realised, SpaceX’s demand would become significant. At that rate of activity, Starship would account for about 1.7% of US gas consumption. The company would then be using about 11 million tons per year of LNG, in the with the output of some of the large plants along the Gulf coast.

That ambition explains SpaceX’s recent moves to secure its natural gas supplies. The company has filed for approvals to build an eight-mile gas pipeline called Starpipe, which will connect a new liquefaction plant at its Starbase facility in south Texas to the nearby Bay Runner pipeline.

Bay Runner is an extension of the Whistler pipeline, forming a system to bring gas from the Permian basin to the NextDecade’s Rio Grande LNG and other facilities in the Brownsville region.

Separately, SpaceX last month filed for an approval to build another new pipeline, a 32-miles connection to bring gas from the Florida Gas Transmission system to its other launch site at Cape Canaveral on the east coast of Florida.

The company has also been recruiting a gas trader, to build a team to manage its growing demand for gas for both rocket fuel and power generation.

 If SpaceX’s business develops as Musk hopes, its operations in energy markets will become an increasingly critical part of its supply chain.

The Wood Mackenzie view

Although SpaceX’s demand is currently not material for North American gas markets, and will remain that way for the near-term future, its strategy is an indication of a significant shift in the market, Wood Mackenzie analysts say.

SpaceX’s moves to invest in its own pipeline and liquefaction infrastructure, and to develop its trading capabilities, reflect a wider trend.

For most of the past 20 years, the North American natural gas market has been characterised by abundance. Pipeline investment reflected supply-push goals, as producers tried to open up new markets for their gas, says Kristy Kramer, Wood Mackenzie’s head of LNG strategy and market development. In the past couple of years, however, that has been changing. 

The abundant gas resource base is still there. Production has been hitting record highs. But with US gas demand surging, both for LNG exports and for power generation, customers have started to think more actively about securing supply. 

Historically, end users have often been reluctant to fund new pipeline capacity, in part because of uncertainty over the long-term outlook for gas demand. But now, having access to dedicated supply with discounted prices and year-round firm capacity have become top priorities for LNG producers and power generators. Like SpaceX, they have been supporting infrastructure development to meet those objectives.

Wood Mackenzie analysis of new pipeline capacity being added in the US over 2025-31 shows that the majority is being driven either by LNG plants or by power generators needing supplies. 

Similar motives have also been driving deals for upstream assets, such as Japanese buyers’ acquisitions of US gas production. These are different types of deal, but the underlying logic is the same: securing supplies and hedging price exposure in a market that is set to tighten over the next few years.

Elon Musk built his reputation through electric vehicles and batteries, and he has been a strong supporter of solar power. He has not been a pioneer in natural gas in the same way: he is keeping up with where the sector is going, not ahead of it. But his next moves in the industry are going to be well worth watching.

Iran claims hits on two VLCCs as attacks on Gulf shipping escalate

Iran said two Very Large Crude Carriers were on fire in the Gulf after hitting mines. Iran’s official Islamic Republic News Agency said the tankers, each with capacity to carry 2 million barrels of oil, had hit mines while attempting to pass through the Strait of Hormuz with their Automatic Identification System transponders switched off.

As of Sunday evening, the UK Maritime Trade Operations Center (UKMTO) did not have a record of either incident. It has recorded 11 other attacks on shipping in the Gulf region over the past week.

Vice-President JD Vance said that the US needed to maintain its presence in the Gulf to prevent worse disruption to global energy supplies. "If we just… left, and we let the Iranians control shipping out of the Strait of Hormuz, what that would mean is you would pay a lot more for gasoline,” he told a town hall hosted by CBS News. The vice-president added that gasoline prices would fall “when this conflict is over”.

Brent crude rose close to US$110 a barrel last week, its highest level since May.

In brief

A former officer in the Ukrainian army has gone on trial in Germany over the sabotage to the Nord Stream gas pipeline system in 2022. The bombings, which damaged three of the system’s four lines, remained mysterious for years. But in July Serhii Kuznetsov, who was a Ukrainian special forces officer at the time of the attacks, was charged with intentionally damaging civilian infrastructure, a war crime. His lawyer argued in court this week that the case should be dismissed because the pipeline was a legitimate military target. “Is it unlawful to destroy an aggressor's infrastructure without harming any human beings?” he asked the court.

Microsoft has withdrawn from a plan to build a new AI data centre in England, after being warned that the project could not secure a power supply until the 2030s. Microsoft had been working with Nscale to develop a GBP 2 billion data centre in Loughton, Essex.

But it emerged last month that UK Power Networks, which operates the local electricity distribution system, had warned Nscale that it could not provide an adequate grid connection until the early to mid-2030s. Nscale said it remained committed to the Loughton project despite Microsoft’s withdrawal, adding that the “unfortunate London-wide grid issue” would not have any impact on its other developments. Nscale and Microsoft are still working together on projects in Norway, Portugal and the US.

Other views

Are we at an inflection point for a new wave of EV growth? – Simon Flowers, Gavin Thompson and Milan Thakore

South Asia LNG demand growth derailed as Middle East conflict exposes critical supply vulnerabilities

Four emissions trading scheme changes with implications for E&P firms – Stefania Albarosa and others

Six key questions about US energy storage in 2026 answered – Gaby Ackermann Logan and others

Global CO2 transport industry set to reach USD 211 billion by 2060

Reducing oil imports reflects a major power's energy responsibility – Economic Daily

Quote of the week

“To put it very simply: The ban on combustion engines is now history.”

Germany’s Chancellor Friedrich Merz welcomed an agreement with his French counterpart President Emmanuel Macron to relax climate regulations for the EU’s car industry. The revisions will make it easier for European manufacturers to continue to sell internal combustion engine cars after 2035.

Car manufacturers in Europe have been under pressure from surging sales of Chinese EVs.

Chart of the week

This comes from Wood Mackenzie’s latest US Energy Storage Market Monitor. The big headline is that installations hit another record in Q2 2026, in terms of megawatt hours of capacity. Longer duration storage is growing rapidly, driven by higher penetration of intermittent solar and wind generation, falling battery costs, data centre growth, and policy incentives.

Download the full report for more details.

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