Recently, the chairman of the joint chiefs was asked at a congressional hearing to identify the biggest threats to the USA in the current world. His top two choices were Russia and China, in that order. Also on the list were North Korea and ISIS. There is one move that the USA could take today which would help improve our position in dealing with Russia, China and ISIS. It doesn't involve military action or any sort of confrontation with any of these potential threats to America. Instead, it is a simple move that would both weaken those who threaten the USA and strengthen this country. What is required is for the federal government to start strongly promoting the export of American natural gas to Europe and elsewhere around the world.
A few facts are needed to see the results of such a move.
1. Right now, the price of natural gas in the USA is much lower than it is in Europe and east Asia.
2. The USA has enormous reserves of natural gas, more than any other country in the world. America is also the world's biggest producer of natural gas.
3. A majority of the gas used in Europe comes from Russia, a fact that puts the Europeans at the mercy of Moscow. The Russians have not hesitated in the past to use their natural gas as a political weapon. When the first fights broke out between Russia and Ukraine, Moscow cut off the flow of gas to Ukraine and threatened to do the same for the rest of Europe.
4. Technology now exists that would allow shipment of natural gas from North America to Europe or east Asia by means of ocean going tanker ships. These ships require construction of special ports for loading and unloading at both ends of the voyage.
5. With a concerted effort, the USA could be supplying up to one third of Europe's gas requirements in three years. Getting that gas supply route going, however, requires a clear push by Washington to get ports built on our side of the Atlantic and to get the natural gas produced to sell in that effort. At the moment, regulations of the federal government and some of the states are slowing down the process to the point that these regulations could prevent the completion of the endeavor.
Now imagine that three years have passed and America is supplying one-third of Europe's gas needs. Think what this will do.
A. The price of gas in Europe will have fallen. This will reduce the revenue that the Russians get for the sale of their gas. In addition, the quantity of gas that the Russians sell will also fall, so the reduction in revenue will be substantial. That lowered revenue will mean that the Russians will have less cash to support their military adventures.
B. The countries of Europe will have alternative supplies to the Russian natural gas. This will take away Russia's ability to intimidate the other European countries with the threat of withholding gas deliveries.
C. Hundreds of thousands or perhaps millions of Americans will be employed in the production and export of natural gas. This will strengthen America's economy and help us deal with all threats. At the same time, America's balance of payments will be greatly strengthened by the addition of the enormous exports of natural gas.
D. China will also be importing American natural gas. This will make the Chinese less likely to cause a conflict with America that might result in the supply of gas to China being cut off.
E. Natural gas will replace oil in various areas around the world as the low cost American supplies become available. This will reduce the flow of petrodollars to the Middle East and it will also reduce the ability of extremists in that area to carry out some of their worst plans.
F. On top of everything else, the additional economic activity coming from the production of natural gas in the USA will result in higher government revenues and a reduction of needs in the social welfare area. That will reduce the federal deficit.
Put all this together and one finds that export of natural gas will be a major boost to the USA in the world.
One last note: some argue against gas exports because they say that such a move will extinguish a major competitive advantage for American industry. These people, however, don't understand how the numbers work. Because the cost of transport of natural gas over the oceans is substantial, it will not make economic sense to export gas unless the price in the country to which the exports are going is at least $6.00 higher than the USA price. This will keep the American competitive advantage in place.
A few facts are needed to see the results of such a move.
1. Right now, the price of natural gas in the USA is much lower than it is in Europe and east Asia.
2. The USA has enormous reserves of natural gas, more than any other country in the world. America is also the world's biggest producer of natural gas.
3. A majority of the gas used in Europe comes from Russia, a fact that puts the Europeans at the mercy of Moscow. The Russians have not hesitated in the past to use their natural gas as a political weapon. When the first fights broke out between Russia and Ukraine, Moscow cut off the flow of gas to Ukraine and threatened to do the same for the rest of Europe.
4. Technology now exists that would allow shipment of natural gas from North America to Europe or east Asia by means of ocean going tanker ships. These ships require construction of special ports for loading and unloading at both ends of the voyage.
5. With a concerted effort, the USA could be supplying up to one third of Europe's gas requirements in three years. Getting that gas supply route going, however, requires a clear push by Washington to get ports built on our side of the Atlantic and to get the natural gas produced to sell in that effort. At the moment, regulations of the federal government and some of the states are slowing down the process to the point that these regulations could prevent the completion of the endeavor.
Now imagine that three years have passed and America is supplying one-third of Europe's gas needs. Think what this will do.
A. The price of gas in Europe will have fallen. This will reduce the revenue that the Russians get for the sale of their gas. In addition, the quantity of gas that the Russians sell will also fall, so the reduction in revenue will be substantial. That lowered revenue will mean that the Russians will have less cash to support their military adventures.
B. The countries of Europe will have alternative supplies to the Russian natural gas. This will take away Russia's ability to intimidate the other European countries with the threat of withholding gas deliveries.
C. Hundreds of thousands or perhaps millions of Americans will be employed in the production and export of natural gas. This will strengthen America's economy and help us deal with all threats. At the same time, America's balance of payments will be greatly strengthened by the addition of the enormous exports of natural gas.
D. China will also be importing American natural gas. This will make the Chinese less likely to cause a conflict with America that might result in the supply of gas to China being cut off.
E. Natural gas will replace oil in various areas around the world as the low cost American supplies become available. This will reduce the flow of petrodollars to the Middle East and it will also reduce the ability of extremists in that area to carry out some of their worst plans.
F. On top of everything else, the additional economic activity coming from the production of natural gas in the USA will result in higher government revenues and a reduction of needs in the social welfare area. That will reduce the federal deficit.
Put all this together and one finds that export of natural gas will be a major boost to the USA in the world.
One last note: some argue against gas exports because they say that such a move will extinguish a major competitive advantage for American industry. These people, however, don't understand how the numbers work. Because the cost of transport of natural gas over the oceans is substantial, it will not make economic sense to export gas unless the price in the country to which the exports are going is at least $6.00 higher than the USA price. This will keep the American competitive advantage in place.
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