Tuesday, December 18, 2012

Lines drawn on maps are entirely insignificant...

I am forever baffled by how complicated things can seem when subjected to 200 page analyses by thinkers whose academic prowess gives credence to 200 page analyses.

Case in point being NERA Economic Consulting's 200+ page report titled Macroeconomic Impacts of LNG (liquefied natural gas) Exports from the United States. I haven't read the report. I probably will at some point, but only because, oddly, I find that sort of thing entertaining.

As a practical matter, applying a modicum of commonsense renders such a report merely entertainment for a few odd blokes like yours truly.

The question being, is it good economics to allow American natural gas producers to sell their commodity on the international market? Well, I don't suspect you'd find a single economist who'd tell you it's bad economics to allow Coca Cola, Intel, Apple, Kraft, Caterpillar, etc., to export their wares onto the international market. Why is natural gas any different? Frankly, it's not.

So there, the previous four sentences save us probably a hundred pages of reading. I'll devote the rest to trying to convince you that, in a free market, we'll benefit from natural gas production whether we produce it here and sell it abroad, or whether it's produced abroad and sold here.

The Earth stores vast supplies of natural gas. And, presuming it can be extracted safely, it can go a very long way toward resolving our present-day issues related to energy. From a purely economic standpoint, when it's extracted on U.S. soil and sold abroad, natural gas producers will see profits, and we'll see employment and economic growth. Our foreign customers' energy costs will decline, which will free up capital with which to invest and spend (domestically and on other imports from around the world, including the U.S.)---in essence creating profits, employment and economic growth in myriad industries within their countries.

If the tables were turned, if the vast reserves were to be found under the soil of say Great Britain---and Great Britain producers were free to sell their commodity on the open market---it would see profit and employment growth concentrated in its energy sector. While the U.S. would benefit from lower cost energy, thus freeing up capital to invest and spend---in essence creating profits, employment and economic growth in myriad U.S industries. And U.S. exporters of other stuff would capture those dollars we spend on foreign-produced stuff. For example: we'd buy gas from Great Britain with U.S. dollars, Great Britain would buy and invest in U.S. stuff---or buy from other nations who want U.S. stuff---with those dollars.

You see folks, in a world of free trade, lines drawn on maps are entirely insignificant.

Of all the issues we presently wrestle with, I can think of none more serious than protectionism. In the case of natural gas, industries that use it---chemicals and fertilizer for example---are lobbying hard to restrict exports. I assure you, there's no legitimate national argument for protecting any industry at the expense of others. Let no politician, labor leader or CEO convince you otherwise...

1 comment:

  1. [...] side might encourage the creation of solutions; at the least it will encourage better thinking. Discussing the now-brewing hysteria over allowing natural-gas producers in the United States to expo... “in a world of free trade, lines drawn on maps are entirely insignificant.” My own [...]