The reason why natural-gas exports are still even a “question”
posted at 1:51 pm on January 15, 2013 by Erika Johnsen
The U.S. government is perfectly capable of recognizing the widespread wealth-generating benefits of free trade and allowing exports in certain areas of the economy (just take a closer look at the government’s involvement in the agricultural sector for plenty of examples), but for some strange reason, the current energy-company clamor of applications for obtaining permits to further export liquified natural gas is persistently encountering some fierce resistance.
It’s somewhat ironic (or timely) that on the day after public choice economist James Buchanan died, a classic, textbook example of rent-seeking emerged from a group called “America’s Energy Advantage,” which might be more appropriately called “America’s Self-Interested Energy (Natural Gas) Advantage for Some Big Private Chemical and Steel Companies.” …
Thanks to advanced drilling technologies (hydraulic fracturing and horizontal drilling), and private risk-taking investors, private oil and gas companies tapped into an ocean of shale gas in America that by some estimates is enough to supply our natural gas demand for the next 100 years. …
But here’s where rent-seeking enters the picture. Energy-intensive US manufacturing companies like Dow Chemical, Nucor (the country’s largest steel producer) and Alcoa have benefited significantly from historically low natural gas prices, and want to restrict natural gas exports through the political process, to protect their lower energy prices and higher profits.
In a nutshell, these companies are playing the long-disproved and economy-damaging protectionist card, using up what could otherwise be productive resources in order to lobby the government for political favoritism that will only ‘benefit’ their niche interests.
There’s still some debate about whether or not exporting natural gas will actually be worthwhile in the long term, but the point is, that’s not for the federal government to dictate — if energy companies find it profitable to take their goods to the global market, they should be free to do so. The free-market logic, the potential geopolitical benefits (i.e., breaking Russia’s hold over gas supplies), and while I’m holding out hope that the Obama administration will ultimately decide on at least partially freeing up the industry more, the opportunities for jobs and economic growth are all clearly there — it’s only political, big-government rent-seeking holding us back.