Guest Contributor William Krist with Dani Litovsky: LNG – to export or not to export, that is the question

The United States is rapidly moving from being dependent on imported fossil fuels to becoming a major world producer.  We’re sitting on vast supplies of natural gas, and recent technological innovations have made it possible to tap previously unattainable resources.  So what should we do with these new-found riches?  Producers of natural gas, by and large, want to be able to sell where they can get the best price, and often that will mean selling overseas.  But consumers oppose exporting our natural gas, arguing that keeping these supplies to ourselves will keep the price here in the U.S. lower than the world price, and that this will give them a competitive advantage.  They believe this will add more value to the economy and trade account than exporting LNG.  And some environmentalists oppose exports because they believe this would raise the price of natural gas and thereby encourage more production.

From an economic perspective, allowing exports would lead to some increase in domestic prices, but the price of natural gas in the U.S. is far lower than in many other markets, for example, $2.66 per thousand cubic feet on average in the U.S. in 2012 compared to some $10 in the U.K. Somewhat higher prices in the U.S. because of exports would encourage greater U.S. production, but prices in the U.S. would still be lower than in most markets because of transportation costs, and this would continue to give manufacturers that use natural gas a cost advantage.  From an environmental perspective, natural gas is less polluting than other fossil fuels.  Until renewable energy such as wind and solar can meet the world’s energy needs – a prospect that is likely to be at least a decade away – encouraging the use of natural gas probably has a positive environmental impact.

From a trade policy perspective, restricting exports would likely run afoul of World Trade Organization (WTO) rules, and it would weaken our complaints about other countries’ export of vital minerals, which many believe is an attempt by China to gain a competitive advantage at its trade partners’ expense.

The economic impact of allowing natural gas exports is likely to be small, as is the environmental impact.  So perhaps this debate is more like “much ado about nothing.”

(Click here for a paper that sets out these issues in more detail.)

William K. Krist is a Senior Policy Scholar at the Woodrow Wilson Center.  He is a former Senior Vice President of the American Electronics Association.  He has written extensively on trade, development, and the environment.

The Future of U.S. – E.U. Energy Cooperation

The following is an event summary from a program held by the European Studies Program and the  Program on America and the Global Economy at the Woodrow Wilson Center.

Chief of staff at the Office of the Special Envoy for Eurasian Energy at the U.S. Department of State, Vincent J. O’brien, stated that “stakes for an energy secure future have never been higher than they are today.” Cooperation is needed on securing new resources of natural gas, diversifying energy sources and creating a more integrated European energy market. Given that the U.S.–EU trade relationship is the largest in the world and that the economies are increasingly becoming interdependent, Europe’s energy security is naturally in the best interest of the U.S. While the dynamics behind Europe’s energy concerns are complex, pipeline politics seem to dominate discussions.

To help combine efforts and formalize ongoing discussions between the U.S. and the EU on these issues, the creation of a U.S.–EU Energy Council was realized in November of 2009. The Council is divided into three main working groups addressing: energy security and new markets to help secure new natural gas resources; standards and policies to harmonize the ongoing work on electric cars, smart grids and other technologies; and technical research and development to cooperate on research for carbon capture and storage, rare earths and renewable technologies.