EnergyFactor By ExxonMobil | Pespectives has a new home

Honest debate on exports requires adherence to facts

Last week, I mentioned that a small gaggle of companies was petitioning the federal government to limit the ability of other companies to export their products – in this case liquefied natural gas (LNG). This small group – which calls itself America’s Energy Advantage (AEA) – is playing a weak hand, given what we know about the economic benefits realized by those nations that embrace free trade.

AEA’s anti-exports position is not helped by the “facts” the group is marshaling to defend its position that free trade for energy products will cause economic harm.

Take, for instance, AEA’s claim that “a report from the U.S. Department of Energy says unlimited LNG exports will enrich natural gas producers at the expense of all consumers.”

There’s just one problem: The report says exactly the opposite.

The AEA webpage doesn’t link to the report, prepared by NERA Economic Consulting at the direction of the U.S. Department of Energy (DOE), so I will. And I want to draw your attention to page 55, in which the report’s findings about the benefits to consumers are made crystal clear:

    • “All export scenarios are welfare-improving for U.S. consumers.”
    • “Consumers, in aggregate, are better off as a result of opening up LNG exports.”
    • “In fact, the U.S. consumers are better off in all of the export volume scenarios that were analyzed.”

Then there’s AEA’s attempt to play the price card.

Unfortunately for AEA — but fortunately for U.S. consumers — expert after expert has shown that the economic benefits to the country from LNG exports are significant and outweigh any potential domestic natural gas price increases. The DOE-commissioned report finds that “natural gas price changes attributable to LNG exports remain in a relatively narrow range across the entire range of [possible] scenarios.”

“The bottom line,” according to Rice University’s Baker Institute, is that “certification of LNG exports will not likely produce a large domestic price impact.”

Why? The U.S. Energy Information Administration offers one clue: “The availability of large quantities of shale gas should enable the United States to consume a predominantly domestic supply of gas for many years and produce more natural gas than it consumes” (emphasis mine).

There is an additional explanation, which the Brookings Institution notes: “Natural gas producers will likely anticipate future demand from LNG exports and will increase production accordingly, limiting price spikes.”

Give Brookings and others credit for recognizing that our economy is dynamic, not static, and that both consumers and producers react to market changes and other signals on a continuous and ongoing basis.

These expert views should carry weight. So should the trade associations of which several AEA companies are members. To that point, the American Chemistry Council, the National Association of Manufacturers and the Chamber of Commerce have weighed in with forceful declarations supporting free trade.

Facts are powerful things – and they should drive our public dialogue about energy issues and trade.

For this very reason, the public and policymakers should carefully verify the claims coming from America’s Energy Advantage and compare them to the long list of well-respected economists and industry groups who affirm the benefits that will flow to America’s economy and workers if we allow free trade in natural gas.

  • Worth a deeper look...