Exporting Natural Gas Won’t Reduce America’s Energy Advantage
Russia’s continued display of political aggression in Ukraine has some calling for increased exports of U.S. natural gas. Doing so would send an immediate signal to the world that the United States will use its economic power to support principles of freedom and protect national sovereignty. Increased natural gas
exports would also send signals to futures markets and affect the price of gas now and moving forward. However, not everyone is on board with this seemingly common-sense response to Russian aggression.
Massachusetts Senator Ed Markey claims exporting natural gas will increase prices by $2.50 per thousand cubic feet. His press release stated, “U.S. energy consumers could be facing as much as $62 billion per year in higher energy costs as a direct result of exporting.”
Senator Markey, since 2008, natural gas exports have increased 60 percent, yet the price of natural gas has fallen by 60 percent.
Even with this recent increase in natural gas exports, America has capacity to export much more. That is because American withdrawals of natural gas have grown from 24 trillion cubic feet to 30 trillion cubic feet over the last decade. Natural gas production is projected to continue booming and increase by 56 percent through 2040, according to the Energy Information Administration.
As demand for natural gas has increased, the supply has increased even faster—leading to lower prices. Horizontal drilling and hydraulic fracturing advancements are driving innovation in energy production and these technologies are becoming even more precise and efficient. This is allowing drilling activity in U.S. shale to become much more productive. For example, a Marcellus Shale well completed now will produce over 6 million more cubic feet of natural gas per day than one completed in 2007, an increase of 1,200 percent.
In 2013, about 15 percent of natural gas withdrawals were not marketed. This amounted to 4.5 trillion cubic feet per day, most of which was wasted though a process called flaring where the unmarked gas is simply burned off. Exporting 15 percent of natural gas would not raise prices substantially—and may even lower prices.
Natural gas exports will preserve U.S. manufacturing’s comparative advantage in cheap energy. Natural gas will still be less expensive here than abroad because it is costly to transport. The gas has to be liquefied at an export terminal so it can be shipped across the ocean. This means the United States will remain attractive to multinational firms looking to expand or move production back home. At the same time, both producers and consumers around the world will benefit from U.S. exports, which, even with transportation costs, will be less expensive than what is charged by Russia.
As data show, opposition to natural gas exports is based on an economic misunderstanding. The United States has the economic power to limit Russia’s undue influence on Eastern European countries fighting for democratic principles. Speeding up the approval process for natural gas exports and approving additional export terminals would send an immediate signal to President Vladimir Putin—even if the actual delivery of natural gas is still years away.
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