Wednesday, May 02, 2012

Embracing the Shale Revolution: Let's Export

America's Shale Gale

From my editorial in today's The Hill:

If there is one conclusion that should be drawn from the boom in U.S. natural gas production, it is that supplies are so abundant that it makes economic sense to export some of our gas to countries overseas. No one could have imagined that possibility even a few years ago when the United States was actually importing natural gas, with much of it arriving on LNG tanker ships.

Today America is almost completely self-sufficient in natural gas. In fact, we produce more gas than we can use, and soon we will not have enough room to store the surplus gas.  Even now, some of the gas produced as a byproduct of oil drilling must be burned off or “flared” as a waste product until customers can be found to buy it. 

Yet there are those in Congress who oppose plans to export natural gas because they are concerned that U.S. consumers and businesses would wind up having to pay higher prices for gas. Proposed legislation has been introduced to ban gas exports. Such fears are overblown. Natural gas reserves are so abundant we would be foolish not to export some of the gas. There is plenty of gas in the United States to meet domestic demand and support exports at the same time.

Exports will encourage increased domestic natural gas production – a boon for states looking for investments and jobs from the oil and gas industry. The shale revolution is transforming the world energy landscape and reshaping our energy future. It’s time to embrace its full economic potential by allowing exports of America’s abundant natural gas. 

16 Comments:

At 5/02/2012 10:44 AM, Blogger Hell_Is_Like_Newark said...

Does exporting food cause are food prices to become higher?

 
At 5/02/2012 10:55 AM, Blogger Jon Murphy said...

Does exporting food cause are food prices to become higher?

Well, the idea is if the world price of a good is higher than the domestic, then companies will try to get the world market price, thus raising the price of the domestic market.

However, that's only half the story. The other half is it reduces the world price of the good. It sets a new equilibrium.

Let's take food, for example, since you brought it up.

Let's assume you have two nations in autarky (they don't trade with each other). In Nation A, the price of food is $2. In Nation B, the price of food is $6. The two nations open trade with one another. Nation A's companies are selling food to Nation B. Companies in A see prices rise based on the increase in demand from B. B's companies, not wanting to see their customer base vanish, lower prices to compete. After a while, the new equilibrium of $4 appears. So, the world price of food has fallen, reducing hunger worldwide. True, the folks in A now pay a higher price for food, but the trade with B has brought cheaper goods to their country and/or more jobs is the bustling food industry.

Trade is not a one-way street.

 
At 5/02/2012 11:04 AM, Blogger juandos said...

"Does exporting food cause are food prices to become higher?"...

Apparently only when the government is involved...

 
At 5/02/2012 11:09 AM, Blogger Jeff P said...

To some extent prices are bound to rise anyway, the current price is not sustainable for new investment. That said, it is commone sense that the more we increase demand, the more we increase price.

My main concern though is the impact on our long term supply. We are starting replace coal with nat gas, building chemical plants to use nat gas, and replace diesel with nat gas.

If we are exporting so much gas in addition, we may run out of gas a lot sooner than people expect. Until we know for sure, we should keep our natural gas for use in higher value added activities and help the US gain a competitive advantage in chemicals and other manufacturing.

 
At 5/02/2012 11:16 AM, Blogger Larry G said...

Is the US the only place in the world to discover "new" gas from shale and fracking?

I guess I would have assumed (perhaps wrongly) that around the world on all continents there is probably shale oil and gas.

Is there a current world price for nat gas?

 
At 5/02/2012 11:41 AM, Blogger Rufus II said...

This is plumb silly. First off, we import nat gas from Canada every day.

Second, at present you need a waiver to export oil, and gas produced on Federal Leases. The reason, of course, is those leases are many times pretty inexpensive.

Third, we're putting less than half as much gas in storage as we were this time last year. If this continues we'll not only have ample storage, we'll be wondering along about January if we have enough gas to get through the winter.

 
At 5/02/2012 11:45 AM, Blogger Benjamin said...

U.S. Gas Export Limit of 10% Would Be ‘Smart,’ Dow CEO Says
By Jack Kaskey - Apr 26, 2012 11:29 AM PT

Dow Chemical Co. (DOW) Chief Executive Officer Andrew Liveris said it would be “smart” for the U.S. to limit natural-gas exports to 10 percent of output because expansion plans in his industry are rooted in low gas prices.
Exporting more than 15 percent of the country’s gas production would tighten markets too much and lead to higher prices, Liveris said today in a telephone interview. Excessive exports of liquefied natural gas, or LNG, could “kill” chemical investments like the company’s $4 billion expansion in Texas and Louisiana, he said last week.

 
At 5/02/2012 11:48 AM, Blogger Larry G said...

so... exporting too much gas will cost US jobs?

shzaaaammmmm !

 
At 5/02/2012 11:57 AM, Blogger VangelV said...

U.S. Gas Export Limit of 10% Would Be ‘Smart,’ Dow CEO Says
By Jack Kaskey - Apr 26, 2012 11:29 AM PT


How does selling something that costs you $7.50 for $3.00 keep you in business? The only way for shale gas producers to have a chance of surviving is if they could find a market for their product. But given the economics it will not work. Expect bankruptcies to take down the industry the same way the housing collapse took down the home builders.

But do not worry. Mark will always find a story that will tell you how much better things are getting.

 
At 5/02/2012 12:19 PM, Blogger Moe said...

I'll embrace it once it takes an embraceable form.

 
At 5/02/2012 12:34 PM, Blogger Jon Murphy said...

I guess I would have assumed (perhaps wrongly) that around the world on all continents there is probably shale oil and gas.

There are. Poland, Ukraine, England, all have good shale deposits. What helps us is the size of our deposits.

 
At 5/02/2012 12:37 PM, Blogger Rufus II said...

They've found the "Shale" in Poland, but, so far, they haven't found the "oil."

 
At 5/02/2012 2:30 PM, Blogger VangelV said...

There are. Poland, Ukraine, England, all have good shale deposits. What helps us is the size of our deposits.

No. What helps you is the willingness of people to gamble on something that has yet to produce real returns. So far shale gas has wound up destroying capital for investors.

 
At 5/02/2012 4:03 PM, Blogger Jon Murphy said...

Is the US the only place in the world to discover "new" gas from shale and fracking?

I guess I would have assumed (perhaps wrongly) that around the world on all continents there is probably shale oil and gas.


One other point I forgot to make, Larry:

A major advantage the US has at this point is we are already tapping into our shale. Most other countries are in the early stages.

 
At 5/02/2012 4:09 PM, Blogger Larry G said...

" A major advantage the US has at this point is we are already tapping into our shale. Most other countries are in the early stages"

that's pretty much what I was thinking.

we're into advanced technologies.. but the world is a big, big place and it's hard to believe that we have the only and biggest stocks of nat gas.

but maybe so....

 
At 5/16/2012 3:43 AM, Blogger EDUCATIONAL COSULTANT said...

Nice blog And also helpful for more suggestion see these also:-
Exporters India
Agriculture products

 

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