By Michael J. Economides
In recent weeks, there has been a growing debate over whether to allow American liquid natural gas (LNG) to be exported to the global market. Last week, Dow Chemical, ALCOA and others launched a new campaign, dubbed America’s Energy Advantage, to fight the export of liquid natural gas (LNG) in an attempt to artificially suppress domestic natural gas prices for their own benefit. Unfortunately, what’s good for these few companies is not good for the U.S. economy. Ultimately, LNG exports benefit the entire U.S. economy, and promote economic growth globally.
By increasing demand, exports increase domestic production of shale gas. The economic benefits of shale, to landowners, steelworkers, and communities across the country readily displace the modest increase in domestic natural gas prices that consumers might face. The Department of Energy verified that fact, finding that across all scenarios analyzed, the benefits of exporting LNG far outweighed the costs. Moreover, the DOE study concluded there to be a direct correlation between exports and economic gains: the more LNG that is allowed to be exported, the greater the net benefits to the United States economy in the form of real income. Put another way, DOE found that exports helped everyone on average.
The benefits don’t stop at the water’s edge, however. Deloitte recently studied the global implications of allowing American LNG exports, finding that it would bolster global energy security and American foreign interests. According to the study, exporting LNG would boost the American LNG global market share at the expense of countries such as Russia, decrease the price of natural gas for allies such as those in Europe, and still maintain comparatively low domestic natural gas prices.
Moreover, LNG exports represent an opportunity for the United States to become a real player in the global energy sector. The global marketplace is demanding the supply of LNG, and should the United States fail to fill that growing void, others, such as China and Russia, are more than willing to step up to the plate. The Obama administration would be making a critical strategic mistake by ignoring this opportunity.
The ongoing shale gas boom here in the United States has proven itself to be no flash in the pan; estimates of domestic shale reserves range from 300 trillion cubic feet to as many as 900 tcf. Investment in natural gas extraction projects has poured into regions across the country, from North Dakota to Pennsylvania. However, the domestic market for natural gas will soon be saturated with such high levels of production and low domestic prices. That, in turn, could lead to a decline in the investment in manufacturing and otherwise that has come with the shale gas boom.
Critics of LNG are being terribly short sighted in attempting to enact protectionist policy in regards to LNG. Dow, for one, was one of the original benefactors of importing LNG; its position against LNG exports has shown it to be completely self-serving. Blocking exports to benefit Dow essentially provides the Russians and other gas exporters a huge economic subsidy at the expense of the U.S. economy and its ongoing recovery.
Moreover, the energy industry will not invest in a market without consumer demand. The government must create a regulatory and policy environment that incentivizes private investment. Halting our ability to export LNG is counterproductive to fostering the demand that leads to greater investment in America’s domestic energy resources. Without investments, natural gas related jobs and manufacturing will decrease and reverse any previous economic gains. Blocking exports would make long term natural gas production an unreliable investment.
With such a positive economic, domestic, and international outlook, there is no reason to allow the short-sighted interests of a few companies to dictate our energy future.
The United States has an opportunity to become a real player in the global energy sector – it’s time to embrace it.
Michael Economides is Editor-in-Chief of the Energy Tribune