Mark Muro: Export Natural Gas? Not So Fast

Source: Mark Muro, New Republic, December 6, 2011.

The astonishing boom in American shale gas production continues to change everything–perceptions of fuel abundance and scarcity, projections of the U.S. energy mix, and the price environment for renewables.

Now, the glut of cheap gas is driving another revolution: the pivot of discussion from anxiety about natural gas imports to debates about whether to export the fuel–something that requires approvals from the Department of Energy.

Michael Levi of the Council on Foreign Relations–who isn’t sure where he comes down on the new conundrum–has nicely articulated a number of possible complications to the standard argument that the United States should clearly export what is suddenly cheap here to European and Asian countries where prices are much higher.

Levi worries that exporting gas might increase the volatility of U.S. prices for the fuel. Likewise, he worries that price increases driven by exporting might impact domestic consumers more than they benefit producers and limit how much the United States is able and willing to cut its own greenhouse gas emissions–something it needs to do in order to be able to negotiate emissions cuts in developing nations. At the same time, Levi conversely believes there may be an environmental case for sending gas abroad since there are few cheap opportunities to substitute natural gas for oil in the U.S. and many abroad (though some of us would disagree on the latter point).

At any rate, these points are good, and the question of exporting is definitely layered. However, for all that I would like to add another perspective.

My view flows from the emphasis at the Metropolitan Policy Program on the long-run need to restructure the U.S. economy and move toward higher-value production and export activities.

Along these lines, I would place the overall well-being of higher-order U.S. industrial production at the top of my priority list, and consider the benefits of cheap natural gas to the growth and health of the U.S. economy. To be sure, having companies like Cheniere Energy liquefy and export natural gas to cash in on the spread between low U.S. prices and much higher European and Asian ones would allow U.S. producers to reap a bonanza and help cut into the U.S. trade deficit.

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