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Walter E. Williams
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Energy Manipulation

Comment

Why is it that natural gas sells in the U.S. for $3.94 per 1,000 cubic feet and in Europe and Japan for $11.60 and $17, respectively? Part of the answer is our huge supply. With high-tech methods of extraction and with discovery of vast gas-rich shale deposits, estimated reserves are about 2.4 quadrillion cubic feet. That translates into more than a 100-year supply of natural gas at current usage rates. What partially explains the high European and Japanese prices is the fact that global natural gas markets are not integrated. Washington has stringent export restrictions on natural gas.

Naturally, the next question is: Why are there natural gas export restrictions? Just follow the money. According to OpenSecrets.org, The Dow Chemical Co. "posted record lobbying expenditures last year, spending nearly $12 million, and is on pace to eclipse that number this year." The company has spent hundreds of thousands of dollars contributing to the political campaigns of congressmen who support export restrictions. Natural gas is a raw material for Dow. It benefits financially from cheap gas prices, which it fears would rise if Congress were to lift export restrictions. Dow argues, "Continuing optimism for U.S. manufacturing is founded on the prospect of an adequate, reliable and reasonably priced supply of natural gas." Of course, Dow and other big users of natural gas get support from environmentalists, who are anti-drilling and anticipate that export restrictions will serve their ends.

Big natural gas users and environmentalists have foreign allies, suggested by the statement of Saudi Prince Alwaleed bin Talal, who told Saudi Arabia's oil minister, Ali al-Naimi, that rising American shale gas production is "an inevitable threat." Nigeria's oil minister, Diezani Alison-Madueke, agrees, saying that U.S. shale oil is a "grave concern." In light of these foreign "concerns" about U.S. energy production, one wonders whether foreign countries have given financial aid to U.S. politicians, environmentalists and other groups that are waging war against domestic oil and natural gas drilling.

It would surely be in their interests to do everything in their power to keep the West dependent on OPEC nations for oil and gas.

Natural gas producers would like to export some of their product to Europe and Japan to take advantage of higher prices. One effect of those exports would be to raise natural gas prices in the U.S. and lower them in the recipient countries. Industrial giants such as Dow, Alcoa, Celanese and Nucor are members of America's Energy Advantage, a lobby group that says it is unpatriotic to allow unlimited natural gas exports. It argues that export restrictions keep natural gas prices low and give U.S. manufacturing companies a raw material advantage, which allows them to produce goods at lower prices.

I'd like to ask Dow, Alcoa and other companies that lobby against natural gas exports whether their argument applies to them. After all, they ship a lot of their domestic product overseas. For example, Alcoa exports tons of aluminum. Export restrictions on aluminum would lower domestic aluminum prices, thereby benefiting the aircraft industry, as well as making other aluminum-using manufacturers more competitive. Unfortunately, I doubt whether Alcoa would see it that way. In general, it is poor economic policy to encourage domestic American industry through costly and inefficient methods such as export restrictions.

But there's another effect of the natural gas export restrictions. The huge supply and resulting low prices have begun to act as a deterrent to future energy exploration and production. According to a Wall Street Journal article by Dr. Thomas Tunstall, research director for the Institute for Economic Development at the University of Texas at San Antonio, titled "Exporting Natural Gas Will Stabilize U.S. Prices" (May 29, 2013), natural gas production at three major shale oil fields in Texas has flattened out at 2012 output levels.

Tunstall concludes, "Over the long haul, market dynamics — which include the ability to export without undue uncertainty or restriction — will best manage global supply and demand curves for natural gas." I agree.

Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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Comments

4 Comments | Post Comment
Sir;... This is bad; very bad indeed... The rich can manipulate government so other rich people do not make nearly so many billions... What a shame, and not a word about the manifold methods the rich use to skew government away from its clearly stated goals and toward principals you, and they, hold dear... Not one of you so called economist have ever refuted the words of Michael De Montaigne that the profit of one man is the loss of another... We have encourged and tolorated the profit made in this nation that has made a fraction of us wealthy beyond all possible need only to see vast numbers suffer with their need as primitives once suffered, and suffer without the compensation of love, and community support...
The rich are criminals at best, plutocrats at worst, psychopaths all the time; and while you pick sides today, you generally defend the lot of them against your own class...No act of nature could account for you...No effort of reason can explain you... Slaves and sycophants are not born, but made by the noxious conditions they grow in that becomes their lives and their culture... You are an example of what the rich would make of all Americans: A people willing to defend their own moral executions, and wanting to punch their own one way tickets to hell eternal...
Thanks.... Sweeney
Comment: #1
Posted by: James A, Sweeney
Wed Aug 14, 2013 5:07 AM
I've always hated the idea of lobbyists swaying votes. I have always believed, and still do, that voters should be in control of their representatives. I'm also a strong believer in free market economics. So, what would happen if "the people" made this decision?

Many Americans support import tariffs and restrictions in order to bolster U.S. jobs and encourage American made products. It's possible that this stance decreases our industrial efficiency and makes us less competitive worldwide. When trade restrictions are finally eased, it will hurt us. Public opinion is at odds with free market thinking and may not be the best thing for the country in this case.

Does this thinking apply to exports as well? Probably. Tariffs and restrictions mean that consumers get cheaper energy. But it also means American products can be made more cheaply, making us more competitive in the world market.

As far as I know, there isn't much in the constitution about foreign trade. So, all things being equal, I say listen to voters rather than corporations. It may not result in the most efficient market, but at least it satisfies my instinct for self government.
Comment: #2
Posted by: mark wells
Wed Aug 14, 2013 5:45 AM
The ironworker nails it again.
Comment: #3
Posted by: morgan
Wed Aug 14, 2013 9:54 AM
Re: morgan... Nailing an ass to the cross of his own hypocracy is no great feat... My failure is in recognizing my own... We put up with this nonsense we see around us, and all we do is squeek once in a while: That's not nice!!!
This government created by the constitution has been in front of the organized theft of this entire country from this people, and will certainly result in the loss of our rights... I will have to wet my whistle before I squeek as loud as I should...
And for the record: Nailing a BA is what got me tossed from the International Ironworkers Union... I didn't know you could break a man's back with a punch in the nose until I tried... It was the best thing I ever did, and too bad that the young man I was trying to save who was the cause of it all never said he was sorry, but just got drunk a few years later, and put a bullet in his brain... I did my job... That is all I know...
Thanks... Sweeney
Comment: #4
Posted by: James A, Sweeney
Wed Aug 14, 2013 6:44 PM
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