At a recent legislative roundtable on natural gas exports, the chairman of the Senate Committee on Energy & Natural Resources, Oregon’s Ron Wyden, opened with a statement that left me scratching my head. The senator, who previously has expressed opposition to letting markets determine the appropriate levels of investment and trade in natural gas, said:
Safe, reliable energy has long been regarded strategically as vital to our national security. In my home state we are crazy in love with our blueberries, but we have never said that blueberries are a key part of America’s national security arsenal. So energy is different. In addition, right now the future of America’s natural gas is uniquely intertwined with America’s overall economic future. To make things and grow things in America, our country needs affordable energy. (emphasis mine)
I respectfully disagree with Chairman Wyden that when it comes to free trade, energy is different. It is not. Energy is fundamental to our economy, but that doesn’t make it independent of economics.
Energy certainly is more important than blueberries … or most any other commodity that is traded globally. It is more important in terms of national security and economic security. On that we all agree.
Responding equally to market forces
But those realities don’t change the fact that energy products are no different in how they respond to the basic and organic market forces of supply and demand.
Simply put, government efforts to manipulate oil and natural gas markets – in this case by limiting natural gas exports – will carry economic consequences.
Interventions in energy markets have been tried before for a host of reasons, including energy and economic security. They never help consumers. Consider:
- Price controls on oil and gasoline in the 1970s only exacerbated serious problems, leading to supply shortages that forced consumers to wait hours in long lines at filling stations.
- In 2001, price controls on retail electricity rates in California helped lead to rolling blackouts.
- More recently, Washington’s efforts to mandate the use of ethanol in the nation’s automotive fuel supply have created economic consequences and inefficiencies across the economy.
Exports serving strategic aims
Finally, I’ll point out that the numerous studies about the economy-wide benefits of American natural gas exports have taken into account the question of energy supplies and prices. They repeatedly have found that ample and growing natural gas supply is waiting for markets and that prices are unlikely to rise significantly with increased exports, thus demonstrating the readiness of markets to provide the reliable energy supplies Sen. Wyden aims to guarantee.
Those studies also highlight that exports will actually stimulate production of additional gas supplies, and in the process stimulate the economy with multi-billion-dollar investments, growth in GDP and revenues to governments and hundreds of thousands of new jobs.
Perhaps that’s why a strong majority of economists polled by the University of Chicago’s Booth School of Business recently agreed with the statement, “Restricting U.S. exports of liquefied natural gas would have adverse effects on the U.S. economy.”
And it hints at why former Secretary of State Hillary Clinton and former National Security Advisor Tom Donilon both have expounded recently on the national security benefits – to the United States and to its allies – of expanded global trade in all products, including energy.
Their advice is worth its weight in blueberries.