Op-Ed: LNG exports a boon for America
Published in Providence Journal
With one decision, policymakers in Washington could grow our economy by nearly $50 billion over the next seven years. The question before them: whether to continue blocking the export of liquefied natural gas (LNG).
The United States is in the midst of an energy boom. Because of improved technology, vast reserves of natural gas once thought inaccessible are becoming available. The same is true of oil.
Yet there is a fundamental difference between the market for gas and the market for oil. Oil is a truly global market: a barrel of crude costs about the same everywhere in the world. Natural gas, on the other hand, is local, and prices vary around the world according to local supply. The only way to export gas overseas is to liquefy it first.
And that’s where the dispute starts.
Right now, several natural-gas firms are awaiting approval from the Energy Department to export natural gas. Some energy-intensive industries want Congress to step in and block such exports.
They like a cheap, abundant supply of natural gas at home to boost their bottom line. So they’re lobbying heavily to game the system and prevent energy producers from going into the export business.
That would be a huge mistake. Liquefied natural gas (LNG) exports will benefit the entire U.S. economy, and there will still be plenty of gas available for homegrown consumption at historically low prices.
Once an importer of natural gas, America is now awash in it. Our supply of recoverable shale gas is thought to be over 2.2 trillion cubic feet, and by some estimates, could meet energy demands for the next 100 years.
These vast new reserves have pushed gas prices here down sharply. Now at a 10-year low, natural gas in the United States costs as little as a fifth of what others are paying. In Japan, for example, gas runs up to $17 per million BTUs. Here in America that same amount goes for just $3.70.
Global demand for natural gas has been increasing rapidly. According to the International Energy Agency, demand will continue to climb by 50 percent over the next 20 years, mostly from fast-growing Asian economies. India and China rely heavily on energy imports.
In our global economy, countries with a comparative advantage in making a product sell that to foreign markets, and in turn, gain access to goods or services they don’t produce at home. Both the buyer and seller experience overall net gains and higher standards of living.
When natural gas can be extracted, liquefied, exported and sold profitably at a price lower than customers abroad are currently paying, that’s a huge comparative advantage. The United States should be capitalizing on it.
That’s exactly what the respected economic consulting firm NERA found would happen in an analysis prepared at the request of the Energy Department. Across every market scenario they considered, LNG exports boosted the U.S. economy. And in every case, as the level of LNG exports increased, so did the net positive economic outcomes.
So far, one export terminal by Cheniere Energy in Louisiana has already been approved, and 15 more are under consideration. According to the report, these projects could produce $10 billion to $30 billion in annual export revenue.
And yet, despite abundant evidence to the contrary, critics claim natural- gas exports will hurt our economy. Massachusetts Congressman Ed Markey — an outspoken critic of the oil and gas industries — has introduced legislation in Congress to halt exports., Sen. Ron Wyden, of Oregon, is pushing for a ”time-out” on LNG export projects.
And now, several big American consumers of natural gas have joined the anti-export crusade. These manufacturers have launched a new campaign arguing that selling LNG abroad will hurt American consumers and hamper economic growth.
This simply isn’t the case. NERA researchers found that “benefits from
export expansion more than outweigh the losses… LNG exports have net
economic benefits in spite of higher domestic natural gas prices.”
The report acknowledges that natural gas prices could edge up from all-time lows — but would still remain below prices at the time of the 2008 economic downturn. The consulting firm Deloitte projects that over 20 years, allowing exports would cause an increase of just 1.7 percent.
In reality, the corporate push for an export ban is about protecting the windfall from lower prices some companies have been enjoying. They’re hooked on cheap natural gas.
What’s good for one industry isn’t necessarily what is best for our entire economy. Exporting domestic natural gas when it makes business sense to do so is the right thing for the country. Washington needs to say no to an export ban.
Margo Thorning is senior vice president and chief economist for The American Council for Capital Formation.