Friday, June 29, 2012

With Our Abundance of Natural Gas, Let's Export

The EIA reported today that U.S. natural gas production set new monthly record highs in April for gross withdrawals and marketed production, on a 12-month moving average basis (to smooth out monthly variations), see chart above. Thanks to fracking technology and the shale revolution, America now has such an abundance of natural gas, that it makes economic sense for producers to export gas overseas to Europe and Japan, where prices are typically 5-6 times higher than in the U.S.

With the EIA announcement that domestic natural gas reached a new record high, it was timely that Reps. Bill Johnson (R-Marietta) and Tim Ryan (D-Youngstown) sent a bipartisan letter today, cosigned by 21 Members of Congress, to the Secretary of Energy, Steven Chu, calling for policies that would allow U.S. companies to export natural gas and capture a greater share of the global market for natural gas.

Rep. Johnson said, “Right now, Eastern Ohio is seeing the benefits of natural gas development in the Marcellus and Utica shale plays. But it’s time to realize the full potential of this abundant natural resource, and one way to do that is to start exporting it onto the global marketplace. In fact, according to the U.S. International Trade Association, America could see tens of thousands of new jobs created by allowing this abundant natural resource to be exported. Eastern Ohio has the supply, the technological know-how, and a workforce that’s ready to make this happen."

Johnson added, “Allowing American workers to increase our share of the global market for natural gas is an important part of a true ‘all of the above’ approach to energy development that will make America more energy independent, lower the price of energy, and create much-needed jobs. With unemployment above 8% for the past 40 months, it’s important to develop these abundant natural resources to once again bring exceptionalism back to America.”

Rep. Ryan said, “Natural gas has become a key element in the economic turnaround in my district and throughout Ohio, Pennsylvania and West Virginia. We need to support the businesses that are creating quality jobs by allowing them to compete in the global market, and I hope that Secretary Chu will speed up the approval process in a responsible way to permit producers of LNG to export their products to consumers around the world."

44 Comments:

At 6/30/2012 6:27 AM, Blogger Larry G said...

so a question. If we export it, does that mean the domestic price will then "float" to be whatever the world price ends up being?

How would that be good for US consumers?

 
At 6/30/2012 7:02 AM, Blogger Jon Murphy said...

Great question, Larry.

Prices will rise towards the world price. Considering the current price is unprofitably low, this was going to happen one way or the other.

However, that does not mean that prices will jump up to world prices. Considering that our natural gas is produced domestically, our prices will likely remain considerably lower than the world price (similarly to how our oil prices are significantly lower).

From my understanding (and anyone who can provide better information, please correct me), exporting natural gas is difficult. It needs to be converted into LNG and then transported, which we don't have a huge capacity for. So, the initial impact would likely be low.

To answer your question about consumers: consumers would see higher prices. LNG would likely trade around $4-$6 if exports are allowed. Considering this is still half what it was at its peak in 2008, the consumer benefit is still considerable.

 
At 6/30/2012 7:52 AM, Blogger Larry G said...

Jon - so the more we develop LNG infrastructure, the more we can export and the higher the price, right?

So this is really similar to us developing more oil resources but because it is exportable (or will be for the Keystone, etc), then ultimately what it means is that consumers in this country will pay higher prices.

The "up side" would seem to be more jobs for those involved in extracting, refining and exporting.

but it's not exactly win-win for all parties. There are winners and losers.

And of course, is contingent on just how long the increased bounty of nat gas lasts and then the price goes even higher.

I'm not arguing against this, mind you, only pointing out that some win and some lose and all of it depends on how sustainable (or not) the increased supplies of nat gas are to start with.

Should US consumers have any say on this or is it purely the purview of those who want to export?

Why would the US have policies to inhibit this to start with? Why do they have to write to the Energy guy to get him to change rules?

probably more questions here than can be easily answered....eh?

 
At 6/30/2012 8:21 AM, Blogger Henry H said...

We also have to subtract the clost of the LNG infrastructure, transportation, and foreign import fees and taxes.

On another note, US natural gas pipeline exports to Mexico are at a 7-year high. What is the future for natural gas production in Mexico? What's the expected net profit of LNG exports to Japan compared to pipeline expors to Mexico?

http://www.forexpros.com/analysis/natural-gas:-where-endless-money-went-to-die-127219

 
At 6/30/2012 11:14 AM, Blogger sethstorm said...

Only to the point where export pressures do not affect US prices. Once the point has been reached, do no more - for that presents a problem of national security by letting the world control the US.

 
At 6/30/2012 1:26 PM, Blogger Ron H. said...

"Should US consumers have any say on this or is it purely the purview of those who want to export?"

Unless you are in favor of government price controls, what a private entity does with something they own should be entirely up to them.

"Why would the US have policies to inhibit this to start with? Why do they have to write to the Energy guy to get him to change rules?"

Good question. And the answer is that they shouldn't.

"probably more questions here than can be easily answered....eh?"

Not at all.

 
At 6/30/2012 3:24 PM, Blogger Jon Murphy said...

Seth-
I thought the evil foreigners controlled us us when the imported to us. Which is it?

 
At 6/30/2012 4:55 PM, Blogger Ron H. said...

Larry:

You seem to be struggling with the idea of commodities and products having different prices at different physical locations, but it's really simple. The difference represents all the costs of getting whatever it is, in this case natural gas, from the ground to the end user.

A domestic consumer of gas produced in the US benefits from relatively low costs of bringing it to their door, mostly in pipelines. A foreign user must pay additional costs including those for liquification and transportation.

Every link in that chain must be profitable or it won't happen.

The world price you refer to is the lowest price someone without their own domestic sources must pay for imported gas from anywhere in the world. This might be from the US - or it might not, but the current abundance and resultant low price of gas in the US makes it possible for producers to consider incurring the additional costs of exporting.

If demand increases due to exports, prices will rise for everyone as supply becomes scarcer, thus signalling producers to make more.

This is a classic supply and demand issue, nothing more.

Restricting exports won't force producers to continue producing gas at a ridiculously low price, so that's not a good policy.

 
At 6/30/2012 5:07 PM, Blogger Ron H. said...

"I thought the evil foreigners controlled us us when the imported to us. Which is it?"

It is both. No matter what we do, any interaction with evil foreigners allows them to grab us by the balls.

This seems to be their only interest, and they do little else but wait for the opportunity to "smite" us as sethstorm is fond of saying.

A lot of smiting goes on in sethstorm's world.

 
At 6/30/2012 5:10 PM, Blogger Larry G said...

well, I'm no advocating restricting exports.

I'm basically pointing out that opening up a domestic commodity market to be exported is not necessarily a good thing for consumers even though the new technology extraction techniques have been cited as a boon to consumers and job creating.

Don't those two current advantages go away once it is exported and jumps in price?

Consumers will end up paying much more and the industries cited as beneficiaries of cheap nat gas will no longer be beneficiaries ....job creators.

I'm not advocating a course of action - only agreement on the NEGATIVE effect of exporting (as well as the benefits).

 
At 6/30/2012 7:10 PM, Blogger Ron H. said...

"I'm basically pointing out that opening up a domestic commodity market to be exported is not necessarily a good thing for consumers even though the new technology extraction techniques have been cited as a boon to consumers and job creating."

1. New technology is always a good thing as it lowers costs to producers.

2. The current low price of gas is the only thing that allows anyone to consider competing with existing world suppliers for customers worldwide who currently import gas.

3. The current low price will not likely last no matter what, as it appears to be below the production cost for many producers.

4. There will be no "jump" in price as supply and demand are not "jumping".

Prices will rise in any case, whether anyone exports or not, in which case exported gas will also cost more, Us producers will therefore be less competitive on the world market, exports will decrease, supplies will begin to exceed demand, prices will decrease, US producers will become more competitive on the world market, exports will rise, etc., etc., etc. It's known as supply and demand.

"Don't those two current advantages go away once it is exported and jumps in price?"

Advantages over what?

What you call "opening up" is merely the possibility of US producers competing on the world market due to competitive costs. It's not some throwing open of the gates, allowing evil foreigners to get their grubby hands on your personal gas supply.

"Consumers will end up paying much more and the industries cited as beneficiaries of cheap nat gas will no longer be beneficiaries ....job creators."

How much is "much"?

The benefit of low gas prices is that it lowers costs to users, therefore allowing them to lower their prices, which benefits everyone. Additional jobs is only incidental to that.

"I'm not advocating a course of action - only agreement on the NEGATIVE effect of exporting (as well as the benefits)."

You are advocating agreement? I missed that part.

 
At 6/30/2012 7:24 PM, Blogger Larry G said...

" "Don't those two current advantages go away once it is exported and jumps in price?"

Advantages over what?"

the two advances of lower prices for consumers so their heat and electricity costs less that allows them to spend on other things.

the opposite of what we say when energy prices increase and reduce consumers's ability to buy other stuff.

the second advantage - the creation of jobs due to lower energy prices.

If Nat Gas is low in price, it's said that US manufacturers will be able to create products for less, sell more as a result and hire more people.

If prices increase, won't these claimed advantages of lower priced nat gas - go away?

re: advocating agreement

badly stated.

I'm asking if you agree that the advantages of lower priced nat gas go away when it gets exported for higher prices which, in turn, increases the domestic price also?

Mark Perry has spent countless blog posts extolling the virtues of lower priced nat gas.

right?

if we export and that increases the domestic price, don't those claimed advantages reduce or go away?

 
At 6/30/2012 8:13 PM, Blogger Ron H. said...

"if Nat Gas is low in price, it's said that US manufacturers will be able to create products for less, sell more as a result and hire more people."

That's correct. Lower prices for *anything* is always a good thing for consumers.

"If prices increase, won't these claimed advantages of lower priced nat gas - go away?"

Yes, that's also correct. Higher prices are *always a bad thing for consumers.

"I'm asking if you agree that the advantages of lower priced nat gas go away when it gets exported for higher prices which, in turn, increases the domestic price also?"

Exporting does not cause higher prices. Lower prices allow exporting.

"Mark Perry has spent countless blog posts extolling the virtues of lower priced nat gas.

right?
"

Absolutely. That he has. No one who reads this blog is unaware of Mark Perry's opinion of lower gas prices.

"if we export and that increases the domestic price, don't those claimed advantages reduce or go away?"

Exporting by itself doesn't increase domestic prices, so the correct answer to the question as it is written is no.

If you are concerned with the US Energy Dept's bizarre notion that it should tell private businesses who they can and cannot do business with, and that there is some horrible distortion in the market such that world demand and US supply have been prevented from adjusting to each other like a normal market would, then you should come right out and put the blame where it belongs, and that is on your hero in the White House.

Do you think there will be a sudden burst of pent up supply into that vacuum of pent up demand that will send the price skyrocketing with a clap like thunder?

 
At 7/01/2012 4:17 AM, Blogger Larry G said...

thank you.

I'm not in favor of any particular action.

Saying that Nat Gas is "too cheap" sort of directly contradicts all the claimed benefits of "cheap" nat gas especially a higher standard of living for those who spend less of their income on it because it is cheaper and the job creation benefits of cheaper nat gas.

Yet, we sell the idea of opening up more land to resource extraction and more pipelines like Keystone (not nat gas) on the premise that it will benefit consumers and LOWER Prices.

The opposite seems to be true if you are able to export.

Consumers and job creators are harmed when you do this - right?

Again, I'm not advocating that we restrict it - only that we acknowledge that exporting is not going to help consumers and companies in the US.

It may well help those who are in bthe business of selling nat gas and it may well increase jobs for the folks engaged in exporting.

If, in the process, we end up selling our nat gas overseas and eventually deplete our reserves, then we'll have to import it ourselves or switch back to coal or other fuels.

Either way, it appears that the price of energy, and it's impacts on people's pocketbooks and companies whose products and jobs are linked to the cost of energy will be adversely affected.

so, in general, developing domestic gas and oil resources - that will end up being exported - is not a particular benefit to consumers nor domestic companies.

just trying to get the complete story here... nothing more.

 
At 7/01/2012 5:29 AM, Blogger Jon Murphy said...

Larry-
Prices will rise when we begin exporting, although I am hesitant to use the term "harm" (partly because I don't want to fully admit you are right :-P ). There are many benefits to exporting, but seeing as that is not your argument, no point on dwelling on it.

 
At 7/01/2012 6:04 AM, Blogger Larry G said...

Jon - thanks for considering...

"harm" may be the wrong word, I agree.

but it seems to me if on the front end of the gas book, we heavily promote the benefits of cheap energy to help people and companies

... that we should also be willing to admit - that actions (like exporting) that tend to increase the cost of energy to consumers and companies - is not a "benefit".

the problem I have here is that we seem to promote the abundance of nat gas as a benefit to consumers and companies AND to those who export it.

It's not necessarily a zero-sum-game, but there ARE winners and losers created when you export.

I note that the Keystone Pipeline has been promoted as a benefit to domestic consumers but it's much more similar to the nat gas issue in that the Canadian oil is "stranded" much like Nat Gas is - until the infrastructure can be built to export it at which point the price will float to whatever the world price is.

That's ultimately NOT a benefit to domestic consumers and companies even though it's promoted that way.

Again, I'm not advocating that we restrict - only that folks who promote the idea be honest enough to admit that exporting it does not benefit consumers and companies if prices go up.

So the bigger question to me is - if nat gas is a finite, and ultimately scarce domestic resource - does it really benefit the country to export it - if say - 10 years from now we have tapped it out?

On that issue - note also that when we promote the nat gas "boom", we also talk about how many years worth of it we have - as if it will be not exported but only used domestically.

So we're saying that we have a 50-100 year supply of nat gas but that figure is premised on the idea that it will be used only domestically.

If we export it, how many years "supply" will we have?

If we have a hypothetical 50 year supply (if only used domestically) of nat gas and we sell it all within 10 years to other countries, where does that leave us with our future energy needs?

Again, I'm not advocating anything here, just asking questions.

and I appreciate you JOn for your willingness to dialogue on a polite basis.... much appreciated.

 
At 7/01/2012 6:32 AM, Blogger Jon Murphy said...

I always enjoy talking with you, Larry. You always make good points, as opposed to spewing drivel.

Regarding supply and exports:
The supply numbers have a number of assumptions built in. That number can go up or down.

Regarding exports :
Exports are only production that is not consumed locally. In other words, exports represent excess production. Assuming no new natgas is discovered, as the supply drops, so will exports. Companies often have more incentive to fill domestic demand first (usually lower costs and higher margins).

So, yes, we are selling our future supply, but that assumes natgas use remains ubiquitous. Who knows, in 50 years, solar may be the better choice.

 
At 7/01/2012 11:00 AM, Blogger sethstorm said...


Ron H. said at 6/30/2012 1:26 PM...


Since the producer has disproportionate influence over the market, the purview is not limited.

Either the US can choose to be driven by the whims of foreign despots or it can chart its own course. By adopting the approach of having exports occur only when the world cannot affect its price, both exporters and citizens alike can be pleased.

Such a restriction must be available as a means to check foreign influence over products such as natural gas.

 
At 7/01/2012 12:15 PM, Blogger Ron H. said...

"Saying that Nat Gas is "too cheap" sort of directly contradicts all the claimed benefits of "cheap" nat gas especially a higher standard of living for those who spend less of their income on it because it is cheaper and the job creation benefits of cheaper nat gas."

As I wrote lower prices are *always* better for consumers. Free gas would be even better than cheap gas, but there's a problem with that. No one will produce it free. A recent poll of gas exploration company workers found that, as incredible as it sounds, 100% of them agreed with the statement "I will not work without getting paid".

That leads me to believe that unless the product they help produce can be sold at something above $0.00, workers won't get paid, and will stop coming to work. Go figure.

The term "too cheap" refers to prices that are below the cost of production, meaning companies selling gas "too cheap" won't be doing it for long.

Currently more gas is produced in the US than is needed, so the price has dropped to reflect this imbalance of supply and demand.

You remember our discussion of the immutable law of supply and demand, right?

Exporting gas would relieve this imbalance, and allow prices to rise to a level at which producers can make a profit, and thus continue to produce gas. Otherwise, fewer producers will remain in business, and the lower production will correct the oversupply. Either way prices will rise, but it won't likely be the sudden "jump" you seem to be concerned about.

 
At 7/01/2012 12:21 PM, Blogger juandos said...

"so the more we develop LNG infrastructure, the more we can export and the higher the price, right?"...

Not necessarily larry g...

LNG ships are complex and take some serious lead time to construct...

BTW so far the US has NOT priced itself out of the LNG ship construction business...

Anyway back to domestic natural gas pricing and how it 'probably' won't take any large leaps in the future even if we export...

Reason # 1) Apache Corp Make the World's Largest Shale Gas Discovery in British Columbia
Tue, 19 June 2012 00:16

Reason # 2) World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States
April 2011

When these many & large shale gas plays go online they'll force a downward pressure on prices world wide...

 
At 7/01/2012 12:28 PM, Blogger Larry G said...

well, we're not talking about anyone working for nothing.


We're talking about the argument that opening up nat gas exploration will BENEFIT consumers and job creators

AND we also link that same argument to the idea that increased energy prices HURT consumers and HURTs job creation.

and yet we say that exporting ia ALSO a good thing.

I do not think you can have it both ways.

If increasing the price of energy hurts consumers and job creators, then the reason for the increase does not change the bottom line effect.

Further, when you sell off resources that are finite and deplete - you are likely accelerating increasing scarcity with concomitant impacts to supply/demand/costs.

Once more. I'm not advocating policies to restrict this.

All I'm after is some level of agreement on the impacts (both beneficial and not) of a policy of exporting nat gas.

What do consumers and job creators gain if nat gas is exported and as a result of exporting the price goes up?

What are the other up-sides to increased prices for nat gas?

 
At 7/01/2012 1:01 PM, Blogger Ron H. said...

"the problem I have here is that we seem to promote the abundance of nat gas as a benefit to consumers and companies AND to those who export it."

That's because it IS a benefit to all those entities.

As for estimated supplies, your buddy in the White House believes there is a 100 year domestic supply of natural gas, so it must be true, otherwise he wouldn't say it, right?

If there is a 100 year supply, running out soon doesn't seem like something any of us should be worried about.

"... that we should also be willing to admit - that actions (like exporting) that tend to increase the cost of energy to consumers and companies - is not a "benefit".

Higher prices may be necessary if producers are to continue producing natural gas, therefore higher prices ARE a benefit to consumers in that they will continue to have gas available to them. At a price that is "too cheap" there wouldn't be any gas produced. Remember, those greedy workers insist on paychecks.

Larry, here's the thing: Lower prices are *always* better for consumers, but at some low price the things consumers want just won't be produced, so there is a limit.

Currently there is more production of gas than is used, so the price is at a level where some producers can't stay in business. Marginal producers will exit the business until a balance of supply and demand is reached, at a price that allows producers to make a profit.

Exporting some of the excess production at this time would help achieve this balance. It will happen one way or another, which means prices will rise one way or another.

It's all supply and demand, and the signal is price. Immutable law.

 
At 7/01/2012 1:09 PM, Blogger Larry G said...

"Exporting some of the excess production at this time would help achieve this balance. It will happen one way or another, which means prices will rise one way or another."

what keeps it from become way more than "excess"?

parity with world prices?

"It's all supply and demand, and the signal is price. Immutable law. "

agree.

so you AGREE that higher energy prices hurt consumers and job creation in industries that use energy?

right?

 
At 7/01/2012 1:12 PM, Blogger Ron H. said...

As if on cue, in walks sethstorm to provide an example of spewing drivel:

"Since the producer has disproportionate influence over the market, the purview is not limited."

If your head wasn't so firmly stuck in your ass you would see what's quite apparent to most people, and that's the obvious fact that producers have almost no influence over the market or they would be getting higher prices for their product.

 
At 7/01/2012 1:39 PM, Blogger Ron H. said...

"what keeps it from become way more than "excess"?

parity with world prices?
"

The answer is directly below.

"It's all supply and demand, and the signal is price. Immutable law. "

"agree."

If you agree - and by the way I'm ecstatic to hear that you finally do - then why are you still asking a question that has been answered by something you say you agree with?

Companies don't continue to produce at a loss.

There is a minimum market price below which companies cannot provide any product including natgas.

One of the reasons is because workers shake down their employers for protection money in the form of paychecks. Otherwise I'm sure gas producers would be happy to give away their product for free, in the interest of providing maximum benefit to consumers.

It doesn't "hurt" consumers to pay the price necessary to provide a product to them on a continuing basis. That means the provider must be profitable.

You can see varying opinions at this very blog on whether current prices are too low to make that possible.

If gas prices are in fact too low, the number of producers will shrink until those who remain are profitable, which may well be at a higher price.

 
At 7/01/2012 1:49 PM, Blogger Larry G said...

" If you agree - and by the way I'm ecstatic to hear that you finally do - then why are you still asking a question that has been answered by something you say you agree with?"

the geographic size of the "market" affects the price.

a "stranded" commodity will have a different supply/demand price "signal" than a commodity that can be sold unfettered for the highest world price.

And when that happens, the domestic price is affected - such that it's marginal costs to produce it don't change but it's value/price increases in parity with the world price.

This helps the producers of the commodity but it may well work against domestic users who might enjoy lower prices (produced at a profitable margin) than if the commodity was pegged at a world price.

this is why most countries have nationalized their oil/gas resources, right?

to establish how much "excess" could be exported to assure that their own citizens are not priced out of the market by higher foreign country bidders and that they maintain a sustainable domestic supply.

don't most countries control how much of their natural resources can be exported?

 
At 7/01/2012 1:51 PM, Blogger Ron H. said...

"We're talking about the argument that opening up nat gas exploration will BENEFIT consumers and job creators"

No, Larry, we're talking about your concern that gas prices will "jump" if gas is exported.

Some people tear their hair over the "trade deficit", and think exports should equal imports. they consider increasing exports to be a good thing. What do YOU think Larry?

 
At 7/01/2012 2:00 PM, Blogger Larry G said...

"We're talking about the argument that opening up nat gas exploration will BENEFIT consumers and job creators"

No, Larry, we're talking about your concern that gas prices will "jump" if gas is exported."

Nope. I'm alluding to the dozens of blog posts that Nat Gas "bonanza" is "helping" consumers and providing jobs and what happens to that benefit if exporting it increases prices.

"Some people tear their hair over the "trade deficit", and think exports should equal imports. they consider increasing exports to be a good thing. What do YOU think Larry?"

I have no concerns over "trade deficits" myself.Why do you ask?

but I am asking about the idea of that development of energy resources is a good thing because it reduces domestic energy costs, helps consumers and creates jobs.

Again, I'm not opposed to the development of the resources nor even exporting them - just the truth about the impacts.

 
At 7/01/2012 2:36 PM, Blogger Ron H. said...

"the geographic size of the "market" affects the price.

a "stranded" commodity will have a different supply/demand price "signal" than a commodity that can be sold unfettered for the highest world price.

And when that happens, the domestic price is affected - such that it's marginal costs to produce it don't change but it's value/price increases in parity with the world price.
"

Well, that answers my question, but not in the way I had hoped. When you said you agreed, I just assumed that also meant you understood. My mistake.

One of my first responses to you on this thread was this:

"You seem to be struggling with the idea of commodities and products having different prices at different physical locations, but it's really simple. The difference represents all the costs of getting whatever it is, in this case natural gas, from the ground to the end user."

Do you remember?

I suppose I should have also included the rather obvious point that government interference in the market, things like restricting exports, will also affect prices.

"this is why most countries have nationalized their oil/gas resources, right?"

I have no way of knowing, so you would have to ask them, but I suspect it has little to do with benefiting consumers.

"to establish how much "excess" could be exported to assure that their own citizens are not priced out of the market by higher foreign country bidders and that they maintain a sustainable domestic supply."

The central planning you describe can't possibly produce a better outcome than the market which uses price as a signal.

"don't most countries control how much of their natural resources can be exported?"

I don't know that either, you would have to ask them, but there are no good economic argument for doing so, only political ones.

 
At 7/01/2012 2:56 PM, Blogger Larry G said...

Well, that answers my question, but not in the way I had hoped. When you said you agreed, I just assumed that also meant you understood. My mistake."

too bad.. you have a bad way of doing things at times,

"One of my first responses to you on this thread was this:


"You seem to be struggling with the idea of commodities and products having different prices at different physical locations, but it's really simple. The difference represents all the costs of getting whatever it is, in this case natural gas, from the ground to the end user." "

Do you remember?"

yup.. I remember the non-stop back-handed insults for sure.

the costs of getting the gas from the ground are a cost of doing business and as long as they make a profit they will do it - and they continue to do as MP points out.

"I suppose I should have also included the rather obvious point that government interference in the market, things like restricting exports, will also affect prices."

well that's your own ideology but it has little to do with the facts and realities.

Those countries that nationalize also control domestic prices which I realize you disagree with but that's a reality despite your opposition.

"this is why most countries have nationalized their oil/gas resources, right?"

I have no way of knowing, so you would have to ask them, but I suspect it has little to do with benefiting consumers."

oh I think it probably does have something to do with the national interest which includes the prices paid for energy by their citizens.


"to establish how much "excess" could be exported to assure that their own citizens are not priced out of the market by higher foreign country bidders and that they maintain a sustainable domestic supply."

The central planning you describe can't possibly produce a better outcome than the market which uses price as a signal."

it depends on your view of what are better "outcomes" VS what others who might institute such policies think.

you have a view. it's not one that is shared by most countries who nationalize their oil/gas.


"don't most countries control how much of their natural resources can be exported?"

I don't know that either, you would have to ask them, but there are no good economic argument for doing so, only political ones. "

that may be (or not) but those countries believe that the price consumers pay for energy and the jobs that get created from lower priced energy is a trade-off to how high profits might be over marginal costs.

That's the "plan" we follow in this country over electricity prices.

We allow a guaranteed profit over and above production costs but we do not allow the highest possible prices. Most countries in the world, do this and put limits on how much profit can be made on things like electricity.

that's the reality right?

in a totally unrestricted nat gas market that _could_ (given enough infrastructure) export as much nat gas as the world market would bear, it would likely drive domestic nat gas prices back up to what they used to be - or even higher.

That would effectively reduce the buying power of consumers as well as kill job creation - two things that have been cited by opponents of Obama's energy policies as "bad" for the country.

Yet exporting nat gas would likely have a similar effect of increasing energy prices, eating up consumers money and making it more expensive to produce goods, create jobs.

I understand your view and I even acknowledge how supply/demand SHOULD WORK but you my friend - evade... admitting the truth about increased energy prices caused by pegging domestic commodities to world prices.

 
At 7/01/2012 2:56 PM, Blogger Ron H. said...

"I have no concerns over "trade deficits" myself.Why do you ask?"

You are suggesting that exports may be a bad thing, while others believe exports are a good thing because they fear a trade imbalance.

If you aren't concerned, I'm pleasantly surprised, as there are so many things you seem to be unreasonably fearful of. I just thought there might be a conflict in your thinking on the subject of exports.

"again, I'm not opposed to the development of the resources nor even exporting them - just the truth about the impacts."

All your questions and concerns - on this subject only, of course - have been addressed on this thread by myself and others. Maybe rereading will clear up your confusion.

 
At 7/01/2012 3:37 PM, Blogger Larry G said...

You are suggesting that exports may be a bad thing, while others believe exports are a good thing because they fear a trade imbalance. "

Nope. What I said was that there are winners and losers and that we've so far only concentrated on the winners while ignoring the losers.

"If you aren't concerned, I'm pleasantly surprised, as there are so many things you seem to be unreasonably fearful of. I just thought there might be a conflict in your thinking on the subject of exports."

nope. a trade "deficit" can be anything .... but mostly a IMHO, concocted perspective.


"again, I'm not opposed to the development of the resources nor even exporting them - just the truth about the impacts."

All your questions and concerns - on this subject only, of course - have been addressed on this thread by myself and others. Maybe rereading will clear up your confusion.

on this subject ONLY - yes.

I've purposely tried to keep it narrow so the idea that exports that arise from previously stranded energy markets can have downsides - as well as upsides can be fairly addressed.

the upside of it seems to be more jobs and more wealth for those who directly benefit from the increased prices that exporting would bring.

the downside seems to be higher energy prices for consumers and the loss of jobs in industries that are sensitive to the price of energy.

I was asking.. if there were others cost/benefits...did not need yet another insult-laden lecture on the theory of supply/demand.

 
At 7/01/2012 3:46 PM, Blogger Ron H. said...

"you have a view. it's not one that is shared by most countries who nationalize their oil/gas."

Thank God for that, eh? Ask any Venezuelan you know how they are benefiting from nationalized oil and gas. South Korea? There's a long list. Nationalizing resources equals people suffering. Find an exception if you can.

"well that's your own ideology but it has little to do with the facts and realities."

That IS the reality, Larry, check it out for yourself. Isn't it you that is worried about a difference between US domestic prices and world prices? What could possibly account for that if not government regulation?

It's just amazing that anyone believes that some group of bureaucrats with various incentives, no matter how smart they are, can do a better job for millions of individuals than those millions of individual actors can do for themselves, making decisions based on price signals.

"it depends on your view of what are better "outcomes" VS what others who might institute such policies think."

Well obviously, but it's not just me Larry, It's easy for anyone to find examples of free markets outperforming central planning in every case where the well being of individuals is the primary consideration.

East vs. West Germany after WW2 is a perfect example. North vs. South Korea is another.

 
At 7/01/2012 3:49 PM, Blogger Ron H. said...

"too bad.. you have a bad way of doing things at times,"

Yes, you're right. I frequently overestimate your ability to comprehend what you read.

 
At 7/01/2012 3:58 PM, Blogger Ron H. said...

"nope. a trade "deficit" can be anything .... but mostly a IMHO, concocted perspective."

Most people (and I believe all economists) refer to a trade deficit as more goods and services imported than exported on a national level, although it's only part of a larger equation that always balances, so by itself it's unimportant.

 
At 7/01/2012 4:05 PM, Blogger Larry G said...

"you have a view. it's not one that is shared by most countries who nationalize their oil/gas."

Thank God for that, eh? Ask any Venezuelan you know how they are benefiting from nationalized oil and gas. South Korea? There's a long list. Nationalizing resources equals people suffering. Find an exception if you can."

there are quite a few countries who think the opposite that it helps their people better afford energy.


"well that's your own ideology but it has little to do with the facts and realities."

That IS the reality, Larry, check it out for yourself. Isn't it you that is worried about a difference between US domestic prices and world prices? What could possibly account for that if not government regulation?"

no. the REALITY is that many if not most countries control their oil and gas and they feel it's a benefit to their citizens. they insure that the cost of developing it, plus a reasonable profit but not unlimited profits are better for their citizens.

that's a reality.

you disagree with their policies. that's a viewpoint - not a reality.

"It's just amazing that anyone believes that some group of bureaucrats with various incentives, no matter how smart they are, can do a better job for millions of individuals than those millions of individual actors can do for themselves, making decisions based on price signals."

I do not necessarily agree. I say it is the way it is in the vast majority of countries in the world by folks who consider themselves as smart or smarter than you.


"it depends on your view of what are better "outcomes" VS what others who might institute such policies think."

Well obviously, but it's not just me Larry, It's easy for anyone to find examples of free markets outperforming central planning in every case where the well being of individuals is the primary consideration.

well you have your cohorts but the reality is those views are not the policies implemented.

East vs. West Germany after WW2 is a perfect example. North vs. South Korea is another.

true. what about:

Canada, Mexico, Argentina, Russia ?

Again, I'm not advocating it. I'm saying that even countries that have not nationalized, still control exports to protect their own citizens from having to pay more for energy.

It's a subsidy but probably similar to how we subsidize crops ....and ethanol, sugar, etc.

 
At 7/01/2012 4:36 PM, Blogger Ron H. said...

"on this subject ONLY - yes."

Then why the eff do you keep asking the same question if it's been answered?

"I've purposely tried to keep it narrow so the idea that exports that arise from previously stranded energy markets can have downsides - as well as upsides can be fairly addressed."

The term "stranded energy markets" has no meaning in a discussion of economics or anywhere else that I know of.

If you mean stranded gas, you should say so, but we haven't discussed stranded gas.

"the upside of it seems to be more jobs and more wealth for those who directly benefit from the increased prices that exporting would bring."

That is the crux of your problem. There is no direct link between gas exports and domestic prices, and the notion that prices will rise, while probably correct, is not a given, as a great deal of gas related activity seems to be occurring worldwide.

"the downside seems to be higher energy prices for consumers and the loss of jobs in industries that are sensitive to the price of energy."

The effects of higher gas prices is marginal, as the effects of lower gas prices has been.

You previously referred to citizens being "priced out of the market" by higher prices, but that's a ridiculous notion when applied to the US. Natural gas has always been one of the cheapest sources of energy available to consumers even at prices much higher than they are today, or are likely to be tomorrow. Your alarm is unwarranted.

"I was asking.. if there were others cost/benefits...did not need yet another insult-laden lecture on the theory of supply/demand."

You said you agreed with this statement:

""It's all supply and demand, and the signal is price. Immutable law. "

But you continue to ask questions that have already been answered, and which indicate that you don't understand what you said you agree with.

What hope is there?

 
At 7/01/2012 4:46 PM, Blogger Ron H. said...

"Nope. What I said was that there are winners and losers and that we've so far only concentrated on the winners while ignoring the losers."

We have done nothing of the sort. We have discussed your refusal to accept the idea that exporting natural gas doesn't automatically cause higher domestic prices.

You continue to connect exporting gas with higher domestic prices as if there were no other possible result, when in fact there is no direct link.

You invite ridicule by your insistence on pretending you don't understand what others have written. I've explained that to you before.

 
At 7/01/2012 5:34 PM, Blogger Ron H. said...

"there are quite a few countries who think the opposite that it helps their people better afford energy."

Countries don't think, Larry, people think.

Can you point to a country where central planning has produced a better outcome for citizens?

You are ignoring a lot of economics and human nature when you suggest that central control of energy resources produces better outcomes.

"Canada, Mexico, Argentina, Russia ?"

What about them? Other than Canada you have selected countries that are relatively poor. Mexico is basically a third world country, and Russia is ..well Russia is Russia - the poster child for failed central planning. I would be embarrassed to hold up those 2 as examples of successful government planning in terms of citizen well being, and as you must know since you read this blog, Canada is planning a pipeline to the Pacific to export oil to China and other far off lands since your buddy in the White House wasn't interested in it. Do you have some reason to include Canada on that list?

What else you got? You need to do better than those.

By the way, you can usually tell which country's treat citizens better by the direction of migration.

North to South Korea, East to West Germany, Cuba To US where emmigrants are willing to risk being eaten alive by sharks rather than spend another day in their homeland , Mexico to US, in fact from almost everywhere to US. Guatemala to Mexico , and of course refugees from Haiti are
willing to travel 500 miles by small boat to reach Florida rather than 50 miles to Castro's paradise.

Just something to keep in mind when you discuss the merits of authoritarian government. People flee them whan they can. The fact that some shoot citizens for attempting to leave should tell you something also.

That big wall in Berlin wasn't built to keep westerners out.

"I'm saying that even countries that have not nationalized, still control exports to protect their own citizens from having to pay more for energy.

It's a subsidy but probably similar to how we subsidize crops ....and ethanol, sugar, etc.
"

Do you understand that a subsidy is paid by individual taxpayers?

And no, the users of subsidized energy aren't necessarily the same people who pay the taxes, nor is it in any way proportional. What kind of a lame-brained policy is that?

 
At 7/01/2012 5:48 PM, Blogger Ron H. said...

" I say it is the way it is in the vast majority of countries in the world by folks who consider themselves as smart or smarter than you."

That is not an argument.

"no. the REALITY is that many if not most countries control their oil and gas and they feel it's a benefit to their citizens. they insure that the cost of developing it, plus a reasonable profit but not unlimited profits are better for their citizens."

LOL

Everyone can't get a better than average price, Larry, Most countries can't get a better than world price.

Who are the few unfortunates paying the huge difference that makes world price higher?

Learn some economics, Larry, and some math. You are embarrassing yourself - again.

"no. the REALITY is that many if not most countries control their oil and gas and they feel it's a benefit to their citizens. they insure that the cost of developing it, plus a reasonable profit but not unlimited profits are better for their citizens."

Bureaucrats can determine what a reasonable amount of profit is? Wow!

"that's a reality."

You don't know reality Larry, we've already determined that. You just pull strange ideas out of your ass and call them reality.

 
At 7/01/2012 5:55 PM, Blogger Ron H. said...

"well you have your cohorts but the reality is those views are not the policies implemented."

You haven't provided any good examples of central planning producing better outcomes for individual citizens. I've provided several examples of the opposite being true.

Your responses are starting to veer off course, Larry. Are you going to respond to the topic or is it time to go?

 
At 7/01/2012 8:26 PM, Blogger mongander said...

Sounds like we have a lot of good candidates to be appointed Commissar of the Central Planning Committee. The position comes with a Black Sea dacha. I nominate Larry G.

 
At 7/02/2012 9:07 AM, Blogger Larry G said...

" You haven't provided any good examples of central planning producing better outcomes for individual citizens. I've provided several examples of the opposite being true.

Your responses are starting to veer off course, Larry. Are you going to respond to the topic or is it time to go? "

I never claimed that the outcomes were better.

I have pointed out that whether you believe it or not - that others around the world believe it and implement it as policy.

I point out that this is the reality vs your viewpoints.

I've also asked you multiple times if increasing energy prices are harmful to consumers and job creation - no matter for the reason for increased prices - and one of those reasons could be allowing export of domestic energy resources to then result in a floating of the price from a stranded domestic level to a world-price level.

Who benefits from that ?

who is harmed by it?

I ask these questions and you continue on your ideological path that ignore this and evades discussing if exports that result in higher domestic prices is harmful to some interests.

re: "central planning"

it's the real world guys.

you don't like it - but your answers to questions about it is that you basically think it is wrong and then refuse to deal with the reasons that cause it - and those reasons are - that govt tries to protect consumers and job creators from (in their minds) unwarranted price increases that benefit some - at the expense of others.

 
At 7/02/2012 3:00 PM, Blogger Ron H. said...

"you don't like it - but your answers to questions about it is that you basically think it is wrong and then refuse to deal with the reasons that cause it - and those reasons are - that govt tries to protect consumers and job creators from (in their minds) unwarranted price increases that benefit some - at the expense of others."

Although your suggestion that those in government work in the interest of consumers and not in the interest of those who pay to get them re-elected is naive at best, the reason for government interference in markets isn't the point - nor is it even very important - as the consequences of such interference is almost always negative, by any measure you wish to apply, no matter how well-meaning the intent.

It is almost universally accepted that freer markets in which people pursue their own interests and goals by serving others, provide more prosperity and an overall higher standard of living when compared to a system of central planning.

I have given you examples, and you easily find more evidence to support this claim if you wish. Here's a well known and frequently cited Index of Economic Freedom that you can compare to this Prosperity Index to see for yourself that less central planning and more reported prosperity correlate really well.

You have offered nothing to refute my claim other than silly assertions that people must prefer central planning where it does exists, or it wouldn't exist there, as if people worldwide had a great deal of influence on how they are governed.

"I've also asked you multiple times if increasing energy prices are harmful to consumers and job creation - no matter for the reason for increased prices - and one of those reasons could be allowing export of domestic energy resources to then result in a floating of the price from a stranded domestic level to a world-price level."

This latest statement contains the same undefined and non-economic terms, misconceptions, and incorrect framing of the questions you started with on this thread, indicating that the responses you've gotten haven't changed your understanding of the issue in the least, even though you ask questions as if you are interested.

The only reasonable conclusion is that you really aren't interested in any other view of the issue, and chose to maintain the uninformed view you started with.

A comparison would be to the poorly framed question "Have you stopped beating your spouse?"

A person who had never beaten their spouse could correctly answer "No", but further clarification would be helpful.

You exhibit a lack of interest in the clarification but insist on a simple answer to the question.

All your questions and concerns have been addresses, and there is nothing more necessary.

 

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