The U.S. now enjoys abundant energy supplies at lower prices, largely due to fracking, which uses hydraulic pressure to extract oil and gas from rock. Fracking is widely criticized for polluting groundwater, triggering earthquakes and delaying the switch to renewable energy sources. But without question, it has boosted America's energy supplies enormously.
Prices have come down as production has soared. Total U.S. oil and gas output has
roughly tripled from 2007 to 2014. In parts of New Jersey, which gets much of its gas from the Marcellus Shale deposit, "energy costs for residential and smaller businesses on average
have fallen 30 percent."
With all this natural gas on hand, the question arises: Should we keep the gas here for domestic use, or should we export it?
If we accept conventional economic thinking, we should export the gas. The logic is that trade benefits both the country doing the exporting and the country doing the importing. The importing country gets to save money when buying something it needs, so it benefits. The exporting country gets to sell something it has in abundance for more money, so it benefits. This standard logic is used to justify reducing tariffs, quotas and other trade barriers around the world.
This conventional thinking has spurred a move to build new ports on America's coastline to facilitate natural gas exports. An economic consulting firm was enlisted to
forecast the economic impact of this trade. It projected that exports would boost U.S. gross domestic product by about $20 billion by 2020.
But wait a minute. It's not just the total growth in GDP that matters; it also matters who benefits from the growth. How does large-scale export of natural gas affect jobs, incomes and the profits of the millions of businesses that depend on energy, as nearly all do?
A broad swath of the U.S. economy benefits from lower energy prices. Low prices help U.S. businesses in both direct and indirect ways. The direct benefits are obvious: With cheaper energy, it costs less to heat offices and power factories. But the indirect benefits are just as important: When employees pay less to heat and light their homes, businesses face less pressure to raise pay. When consumers enjoy lower home energy costs they have more discretionary spending power. Lower energy costs also lead to lower transportation costs, which helps small businesses to grow. The price advantage that American business enjoys as a result of abundant natural gas is something we can exploit domestically rather than give away.
Another report, prepared by Synapse Energy Economics, re-analyzed the data. It found that that the economic benefits of natural gas exports are highly concentrated but the costs are widely spread. With greater exports, producers and shippers win, but the rest of the economy suffers a loss in revenue, profits, jobs and competitive advantage. In effect, exporting natural gas is a wealth redistribution scheme. It exports wealth from a broad range of people, places and businesses, and imports it to the natural gas industry.
A political fight is underway between those who feel the federal government should actively support this wealth transfer and those who think it should stand aside. A bill in the Senate, the "LNG Permitting Certainty and Transparency Act" is under consideration in the Senate Energy and Natural Resources Committee. If passed, the bill would ease the permitting of new natural gas export facilities, and accelerate exports. In parallel, the Senate Small Business and Entrepreneurship Committee is considering the impact of higher energy prices specifically on small businesses.
But none of the above deals with the cost of climate change, a result of our continued use of natural gas and other fossil fuels. Climate change costs include hardening our shorelines, rebuilding storm-damaged infrastructure and realigning food production to cope with changing temperatures and rainfall. These costs are difficult to forecast, but they are no less real as they hit businesses in the form of higher taxes or lower national productivity.
There is room for reasonable people to disagree over the short-term impact of fracked gas on climate change. Fracked gas emits less carbon dioxide for the amount of energy it contains, so a shift from coal to gas is helpful. On the other hand, fracking releases methane, which is a potent climate-changing gas. But regardless of debate over short-term effects, the long term outlook is clear: We need to move toward renewable fuels as part of a coordinated worldwide program to protect the climate.
Energy exports sound good, but in this case they're not. Keeping energy inexpensive in the U.S. makes the domestic economy more competitive and helps a wide range of industries, places and people. Meanwhile, we should accelerate our shift away from fossil fuels as part of program of diplomacy to gets other countries to cut their carbon emissions in parallel. Those are the economics that really matter.
David Brodwin is a co-founder and board member of American Sustainable Business Council. This article appeared in U.S. News & World Report July 16, 2015.