Every once in awhile, one of those economic policy dogfights comes along that involves huge sums of money and pits one powerful industry against another. The K Street lobbying machine goes into overdrive, dueling studies are commissioned, the think tanks start churning out policy briefs and rival committee hearings are scheduled on Capitol Hill. As a journalist, my rule has been to never let such a donnybrook go to waste.
The latest example is the battle over natural gas exports, as reported by Steven Mufson elsewhere on this page. The “fracking” revolution that makes it possible to extract great wealth from the country’s rich veins of shale deposits now holds the promise of turning the United States into the Saudi Arabia of natural gas. The gas gusher has already driven down domestic gas prices to all-time lows, with power companies rushing to convert coal-burning plants to gas while energy-intensive industries lay plans to move production back home from overseas. Proceeds from the sale of drilling rights have already created a new generation of Jed Clampetts, and natural gas boomtowns are springing up from the Appalachians to the Rockies. What once was a politician’s fantasy — “energy independence” — now appears within reach.
Steven Pearlstein is a Pulitzer Prize-winning business and economics columnist at The Washington Post.
Indeed, so much gas is flowing into the U.S. market that a huge gap has developed between the low price here and the high prices being paid in markets such as Europe and Japan. The gap is so large that, even allowing for the considerable cost of liquefying the gas, transporting it in ships and re-gassifying it at the other end, there is still an outsized profit to be made from exporting our cheap and plentiful supply.
Unlike other goods, however, exports of natural gas require a permit from the Department of Energy, which by law is required to consider a broad range of national economic, security and environmental interests in deciding whether to issue a permit. The natural gas industry touts a long list of benefits that will flow from exports, among them more jobs, higher incomes, increased investment, additional state and federal revenue and a lower trade deficit.
Not so fast say the electric power companies and chemical companies and other big users of natural gas. Permitting a large amount of the nation’s gas supply to be exported will raise the domestic price by as much as 30 percent — and with it the price of products and services — jeopardizing jobs, income, investment, tax revenues and export sales.
The question, in other words, isn’t whether there will be a windfall to be earned from the newfound abundance of natural gas. The real question is: Who will get to grab that windfall — the energy industry or its customers?
I don’t know about you, but I’m having a hard time deciding which team to root for in this contest. While free trade tends to benefit the whole economy over the long run, increasing the overall size of the economic pie, there are times when it can also have a pronounced effect on how the pie is divided. This would seem to be one of those times.