With one decision, policymakers in Washington could grow our economy by nearly $50 billion over the next seven years. The question before them: whether to continue blocking the export of liquefied natural gas (LNG).
The United States is experiencing an energy boom. Because of improved technology, vast reserves of natural gas once inaccessible are becoming available. The same is true of oil.
Yet there is a fundamental difference between the market for gas and the market for oil. Oil is a truly global market: a barrel of crude costs about the same throughout the world. Natural gas, however, is local, and prices vary according to local supply. The only way to export gas overseas is to liquefy it first.
That's where the dispute starts.
Several natural gas firms are currently awaiting approval from the Energy Department to export natural gas. Some energy-intensive industries want Congress to step in and block such exports. They like a cheap, abundant supply of natural gas at home to boost their bottom line. So they're lobbying heavily to game the system and prevent energy producers from going into the export business.
That would be a huge mistake. Liquefied natural gas (LNG) exports will benefit the entire U.S. economy, and there will still be plenty of gas available for homegrown consumption at historically low prices.
Once an importer of natural gas, America is now awash in it. Our supply of recoverable shale gas is thought to be over 2.2 trillion cubic feet, and by some estimates, could meet energy demands for the next century.
These vast new reserves have pushed gas prices here down to a 10-year low. Natural gas in the United States costs as little as a fifth of what others are paying. In Japan, for example, gas runs up to $17 per million BTUs. In America, that same amount goes for just $3.70.
Global demand for natural gas has been increasing rapidly. According to the International Energy Agency, demand will continue to climb by 50 percent over the next 20 years, mostly from fast-growing Asian economies. India and China rely heavily on energy imports.
The United States should capitalize on the comparative advantage it has over other countries with natural gas. In fact, respected economic consulting firm NERA recently analyzed LNG exports for the Energy Department and found that across every market scenario, increased exports would benefit the U.S. economy.
So far, one export terminal by Cheniere Energy in Louisiana has been approved, and 15 more are under consideration. According to the report, these projects could produce $10 billion to $30 billion in annual export revenue.
Despite abundant evidence to the contrary, however, critics claim natural gas exports will hurt our economy. Massachusetts Congressman Ed Markey -- an outspoken critic of the oil and gas industries -- has introduced legislation in Congress to halt exports. Senator Ron Wyden of Oregon is pushing for a "time-out" on LNG export projects. And several big American consumers of natural gas have joined the anti-export crusade, arguing that selling LNG abroad will hurt American consumers and hamper economic growth.
This simply isn't the case. NERA researchers found that "benefits from export expansion more than outweigh the losses."
NERA's report acknowledges natural gas prices could edge up from all-time lows -- but would still remain below prices at the time of the 2008 economic downturn. The consulting firm Deloitte projects that over 20 years, allowing exports would cause an increase of just 1.7 percent.
In reality, the corporate push for an export ban is about protecting the windfall from lower prices some companies have been enjoying. They're hooked on cheap natural gas.
What's good for one industry isn't necessarily good for our entire economy. Exporting domestic natural gas when it makes business sense to do so is the right thing for the country. Washington needs to say no to an export ban.
Margo Thorning is Senior Vice President and Chief Economist for The American Council for Capital Formation (ACCF).