On LNG Exports, Short-sighted Opposition to Free Trade
Posted January 11, 2013
Here’s one of the main things wrong with arguments some are making against the export of U.S. liquefied natural gas (LNG): They substitute narrow interests and agendas for the proved economic benefits of free trade to the entire United States – long demonstrated in the sale of countless other U.S. commodities to overseas buyers.
Fundamentally, the free trade of U.S. products overseas means cash flowing into this country instead of out. Meanwhile, securing customers in foreign markets helps American producers expand their businesses, create jobs and add value to our economy.
Still, anti-trade arguments are being heard in connection with LNG exports – claims that exports will hurt U.S. manufacturers and consumers – despite a recent study conducted for the Energy Department that showed significant gains for the U.S. economy from selling LNG overseas. API President and CEO Jack Gerard said efforts to restrict LNG exports would have negative effects:
“Short-sighted efforts by a few industrial users to restrict exports in an apparent attempt to control prices would deprive American families of the wider benefits of lower costs and increased job creation. America’s newfound abundance of natural gas resources is a boon to all domestic manufacturing through lower energy costs, lower costs on raw materials and reduced heating bills. Restricting exports of energy as a ‘strategic resource’ makes no more sense than unnecessarily restricting the export of chemicals, agriculture products or cars, and such a backward move could violate international trade rules.”
Indeed, under every scenario analyzed by NERA Economic Consulting the U.S. economy would grow – GDP rising between $5 billion and $47 billion by 2020, depending on the scenario. “Every scenario shows improvement in GDP over the No-Exports cases,” the study said.
Unfortunately, some are using faulty assumptions to argue against LNG exports. They project unrealistically high domestic natural gas demand over the next two decades – fear mongering natural gas shortages in this country if exports occur – while minimizing the economic benefits from a growing LNG export industry, in terms of job creation, tax revenues and increases in domestic natural gas production. Bill Cooper, president of the Center for Liquefied Natural Gas, in the Oil and Gas Financial Journal last month:
"LNG exports will not undermine American manufacturing, and here’s why. First of all, claims that exporting LNG provides only a 'one-time value' add, are not true. Liquefying natural gas requires many highly-skilled workers to convert raw natural gas into a liquefied state. The resulting product – LNG – is thus a product in its own right. Secondly, the pipes, turbines, and other materials necessary to construct and operate a liquefaction facility must be manufactured, purchased, and installed. … In addition, all of these products require steel and other raw materials. This means a single LNG facility has a long manufacturing value chain, with significant economic gains – including jobs – at each step along the way."
The right choice is to trust free trade – the economic benefit of selling an American commodity to legitimate markets for that commodity – as we do with wheat, automobiles and other goods. Cal Dooley, president and CEO of the American Chemistry Council, whose members use natural gas to make a number of products:
“We oppose controls on exports of natural gas just as we oppose market-distorting policies … (that pick) winners and losers in the energy marketplace. We are encouraged by recent domestic shale gas discoveries, which are driving a renaissance in our industry. After years of high and volatile natural gas prices, the new economics of shale gas create a competitive advantage for U.S. chemical manufacturers, which can lead to greater investment, job creation and industry growth. That said, we put our confidence in the free market to determine natural gas supply and demand. We would oppose legislation that attempts to restrict exports of natural gas.”
Economics/energy blogger Mark J. Perry at the American Enterprise Institute writes that sound, free-trade dynamics must be allowed to work in the case of LNG:
"… the natural, market-based solution is for U.S. gas producers to sell their very marketable product overseas to eager buyers in Asia and Europe. That’s the way the market works, and that’s the beauty of the global economy – both buyers and sellers get access to foreign markets, resulting in lower prices for consumers and higher prices for producers, with overall net gains and a higher standard of living."
"Our vast resources have allowed us to become the world’s biggest producer of natural gas. Misguided economic theories and ill-considered policies could have disastrous consequences, disrupting the benefits to the wider economy, the trend of bringing manufacturers back home, and imperiling the billions of revenue energy investments bring to our government."
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and five grandchildren.
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