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.


12 Comments

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  1. Stephen Heitzman says:

    Asking oil and gas producers to not export their product is like asking wheat farmers, automobile manufacturers, heavy equipment manufacturers or aircraft manufacturers to not export their products.

  2. william thomas says:

    The four basic laws of supply and demand are:[1]

    If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
    If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.
    If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price.
    If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher equilibrium price.

  3. KC clarke says:

    Fracking = a disaster for America. Fracking occurs below the aquifer, true but the bore hole does go THROUGH the aquifer and the stuff comes back out of that hole right THROUGH the aquifer again, and it does use millions of gallons of fresh water that remain contaminated and sit in holding ponds leaching the unknown chemical soup back into the soil, fracking has been given a free pass to pollute the air as well as the water with no one to answer to. It is an extremely dirty process ask any resident in the area around a fracked spot! BTW- ask those same people about their re-saleability of their property, ask them what their home and property are worth, a fraction of the true value!

    • Johnson Templeton says:

      Oh geez…another brainless idiot who has never taken a science class in his life. Don’t wory about looking stupid though. No one has taken you seriously for a long time. Not even your own family.

  4. KC clarke says:

    Will Exxon/Mobil have the honesty to publish my comments?

  5. KC clarke says:

    Can any criticism of fracking be posted ? So far NO, to the two posts I have written.

  6. Donna Kling says:

    There is just one problem with this honest debate. In pure economics the price of the more readily available commodity should move from the market with the lower cost to the market with the higher cost therefore lowering the overall price in the total market. This means that the owner of the commodity would increase the demand for their product and sell more units but they would have no preference in which market it sold to because they are all equal. In manipulated economics the price of the low cost commodity is moved to the high priced market at a higher price making the supplier have preference over which market they would prefer to sell to. This in turn will cause the low cost market to have to pay higher pricing in order to gain preference.

    This is not to say that creating the infrastructure to allow for exportation of LNG wouldn’t be beneficial to the economy, but this is a sliver of prosperity to those involved in the LNG market. Lower NG prices across the USA will have a much greater affect on investment and future growth in the US economy.

    • Johnson Templeton says:

      But you are just ASSUMING it is going to increase the cost of natural gas for Americans. There is no need to raise prices. WE have enough and are reaching a point where we can get it out fast enough (without any more interference by governments and idiots lieke KC Clarke) that there is enough to go around. Plus, the cost of exporting, in addition to any tariffs will erase any real gains of charging more. So no real reason not to keep ithere.

  7. Kelly & Colberg says:

    Fracking is not such a big deal, when you consider they have a cement casing around the downhole drill stem

  8. Johnson Templeton says:

    IT is INSANE that people are upset over EXPORTING ANYTHING! Uhhhh…that is how you prosper…you sell to OTHER people! A region…wehther that is a city, state or country will not come out of a recession by selling solely to other citizens of that region. It CAN’T. The money is just changing hands within the community. You MUST produce a good or provide a service to people outside your area.

  9. Stephen Heitzman says:

    Asking oil and gas producers to not export their product is like asking wheat farmers, automobile manufacturers, heavy equipment manufacturers or aircraft manufacturers to not export their products.

  10. william thomas says:

    The four basic laws of supply and demand are:[1]

    If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
    If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.
    If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price.
    If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher equilibrium price.

  11. KC clarke says:

    Fracking = a disaster for America. Fracking occurs below the aquifer, true but the bore hole does go THROUGH the aquifer and the stuff comes back out of that hole right THROUGH the aquifer again, and it does use millions of gallons of fresh water that remain contaminated and sit in holding ponds leaching the unknown chemical soup back into the soil, fracking has been given a free pass to pollute the air as well as the water with no one to answer to. It is an extremely dirty process ask any resident in the area around a fracked spot! BTW- ask those same people about their re-saleability of their property, ask them what their home and property are worth, a fraction of the true value!

    • Johnson Templeton says:

      Oh geez…another brainless idiot who has never taken a science class in his life. Don’t wory about looking stupid though. No one has taken you seriously for a long time. Not even your own family.