Dubious Campaign Against LNG Exports Ignores Net Benefits of Free Trade

A dubious campaign by America’s Energy Advantage seeking to restrict expansion of liquefied natural gas (LNG) exports ignores fundamental economic and market facts. AEA relies on a gross overestimation of U.S. domestic demand for natural gas, estimating it to be more than 50% higher than estimated by the U.S. Department of Energy in the AEO 2012 report. Contrary to America’s Energy Advantage’s assertions, DOE notes that the U.S. has a robust 100-year supply of natural gas at today’s consumption level, which is more than adequate to meet the needs of manufacturers and utilities.

The recent DOE report reinforces other economic findings that under all LNG export scenarios, the U.S. economy benefits even when factoring in the impact of price increases:

 “Across all these scenarios, the U.S. was projected to gain net economic benefits from allowing LNG exports. Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased. In particular, scenarios with unlimited exports always had higher net economic benefits than corresponding cases with limited exports.  In all of these cases, benefits that come from export expansion more than outweigh the losses from reduced capital and wage income to U.S. consumers, and hence LNG exports have net economic benefits in spite of higher domestic natural gas prices. This is exactly the outcome that economic theory describes when barriers to trade are removed.”

It’s important to note that the drop in U.S. natural gas prices in the past three years has caused the number of rigs drilling for gas to fall sharply, for example there were 811 rigs drilling for gas in 2011 but only 439 at the beginning of 2013. At current natural gas price levels, employment and output of the U.S natural gas industry will continue to decline.

Increasing natural gas exports will provide domestic producers with market-based incentives to increase their production and expand trade to support our economic recovery. :

It is unfortunate that industries with a clear agenda are attempting to restrict LNG exports due to possible price impacts.  It is analogous to the cereal industry attempting to curtail grain exports by U.S. farmers in order to hold down grain prices.

We have long since understood the tremendous benefits of free trade, regardless of the commodity or produce being traded.  Expanded trade will yield very large benefits to the U.S economy, ranging from increased jobs and economic growth to increased governmental revenues.  History shows, in contrast, the very harmful consequences of protectionist policies, which attempt to shield the interests of a narrow industrial sector at the expense of the larger economy.

From corn to cars to wheat, exports have proven to be a net positive boost for the U.S. economy and LNG exports shouldn’t be treated differently.


Margo Thorning

Dr. Margo Thorning has frequently testified as an expert witness on capital formation, tax, energy and environmental policies before multiple U.S. congressional committees. She has also traveled coast to coast to present findings to state and local lawmakers, business organizations and the media on the economic impact of climate change policies on local job and economic growth.

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