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  • Markey’s Misguided View of Energy Exports

    Last week, Representative Ed Markey (D–CA) sent a letter to Secretary of Energy Stephen Chu questioning whether exporting natural gas would benefit American businesses and consumers. He wrote, “I am worried that exporting America’s natural gas would raise energy costs for American consumers, reduce the global competitiveness of U.S. businesses, make us more dependent on foreign sources of energy, and slow our transition away from fossil fuels.”

    Natural gas prices have been consistently low in the United States for the past two years but much higher abroad. If the price of natural gas in the United States rises as a result of exporting it, the markets will adjust accordingly, but that should not be a reason to prevent natural gas exports.

    Markey’s narrow view of how the global economy works neglects the fact that both the United States and other countries stand to benefit from free trade. Exporting natural gas would provide a huge boon for our economy, as it would expand market opportunities for American companies and the higher price would incentivize more exploration and production, offsetting some of the price increase. Providing other countries with cheaper energy would not only lower the prices of products we import (because businesses could make the products more cheaply), but it would also promote economic development in those countries so that they import more American goods. Simply put, the gains from free trade far outweigh any losses incurred.

    In the letter, Markey expressed fears that exporting natural gas would not only raise electricity rates for homeowners but would also make it less attractive for companies that use natural gas as a feedstock for fertilizers, chemicals, pharmaceuticals, and other industrial products. Keep in mind: Markey was the co-sponsor of the House cap-and-trade legislation that would have slapped an unnecessary price tag on greenhouse gas emissions, thus taxing carbon-emitting fossil fuel energy, including natural gas. His legislation would have sent electricity rates through the roof and driven up production costs for businesses.

    Recent price trends and production rates for natural gas show just how difficult it is to project how prices will change and how producers will respond. The Wall Street Journal reported that “Despite a 32% drop in prices last year, onshore production rose 10%, and it is expected to rise another 4% this year.” The article continues, “Eventually, the natural-gas market is expected to correct itself, either by forcing companies to further slash gas-development budgets or by luring in new gas customers. But industry observers say that could take many months, or even years.”

    If producers see fit, some of those new customers should be overseas, and natural gas prices will likely rise. But if natural gas prices rise, not only does it incentivize more natural gas production, it creates opportunities for other energy producers to expand their production. Electricity producers (coal, nuclear, wind, or solar) could provide electricity at a lower cost. Distorting the market and restricting free trade reduces prosperity, stifles innovation, and stunts economic growth.

    Posted in Energy [slideshow_deploy]

    5 Responses to Markey’s Misguided View of Energy Exports

    1. Bobbie says:

      Everything Markey, Chu insist as personal fears are all brought on by the impositions of unconstitutional government control and skilled, costly fear mongers. simple solution to calm those fears…
      Step down and let real men handle the job!

      Please get the corrupt, criminal clown class off the road to recovery who look for every reason not to move!

    2. Chad says:

      4. Shale gas uses fracking which isn't the safest thing for our enviornment. If we are gonig to cause enviornmental problems for the people who live around the drilling sites then we shouldn't be selling the gas to foreigners so O&G companies can make a quick buck at their expense! If we are going to drill, frack and pollute, at least our own people (Americans) should reap the benefits of cheap energy.

      In conclusion, if we are allowed to export our natural gas, the price will end up being tied to a global market just like oil is. The price will be driven up – and after speculators get ahold of it it will go even higher. And once the price is high we will have missed our chance for energy independence. What shame that would be. I hope Congress and our President can see the huge benefit by keeping natural gas prices low and make the decesion to not allow us to export it.

    3. Chad says:

      While there may be some benefit for exporting our natural gas (reasons you stated), there is a much bigger benefit to NOT export it. Here are my reasons:

      1. Not exporting will keep prices low based on basic supply and demand principles. The more gas we have here, the lower prices will be.

      2. With natural gas prices low, we can finally start making the shift to natural gas vehicles. Instead of paying $3.50/gallon at the pumps and sending that money overseas, we'd be filling up for $1.50/gallon and paying the money to U.S. companies. This is will enable us free ourselves of our dependence of foreign oil. Furthermore, Natural gas vehicles are better for the enviornment than diesel and gas engines. Its a bonus.

      3. Chemical and Manufacturing companies like Dow Chemical use natural gas as feedstock. A low prices tag for natural gas means more profit margins for them. This will in turn spur hiring and help our economy grow. Its a trend we've already started seeing. Google "Insourcing Manufacturing jobs" for more info.

    4. @Semon_2012 says:

      Nicolas, It appears the Heritage foundation agrees with me. I'm running against Ed Markey and wrote this: http://www.jeffin2012.com/exports_create_jobs_wea

    5. Mike Considine says:

      We spend billions of dollars to subsidize foreign oil from the Middle East through military deployment, but we want to export one of our best chances for energy independence. Becoming energy independent should be our number one national security issue and instead of supplying markets overseas we should be building new markets her in the USA… converting transportation to natural gas by building out the infrastructure needed would be an economic boom and help us become more energy independent.

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