The Big New Push to Export America’s Gas Bounty

This is an interesting New York Times article about Excelerate Energy, an American natural gas company, that is hoping to create a large export terminal and contribute to the United State’s entrance into the global market as a seller of natural gas. This article discusses several key concepts that we have discussed in class including the basic ideals of supply and demand as well as how price can be deceptive when externalities are not factored in.

The United States is able to extract natural gas from the ground via fracking at a reasonably  “low” cost (without factoring in the multitude of external costs such as water contamination, health issues, increased traffic and other such impacts on local regions). The U.S. would then be able to sell this natural gas on the global market, where the price is extremely high due to huge global demand and gas shortage. As the stated in the article “The wide price disparity between American and global markets has energy giants like Exxon Mobil and BP eager to sell cheap American natural gas to foreign buyers to cash in on robust global demand.” It appears to me that these externalities are not being factored in by American energy companies. Would the United States still be able to make such a huge profit on selling this “cheap” natural gas to the global market if they took externalities and social cost of this gas extraction into account? Do the external costs outweigh the potential benefits of becoming an international exporter of natural gas?

http://www.nytimes.com/2012/10/24/business/energy-environment/excelerate-energy-aims-to-be-a-leader-in-natural-gas.html?_r=1&ref=businessspecial2

1 Comment »

  1. johnsmac Said,

    October 31, 2012 @ 3:10 pm

    This article puts together the diverging desires to increase economic growth and to minimize external costs. The increasing global demand for natural gas is a good indicator that some countries, such as India or China, are advancing and developing economically. The increased demand for cars in China, as well, can show the rising standard of living. The ability to export would also be beneficial for American producers of natural gas, who would greatly benefit from the increase in price due to high global demand.
    However, the external costs of this step are large, yet repeatedly seemed to be put on the back burner. Fracking is a destructive and heavily criticized procedure by environmentalists. Furthermore, dumping more unsustainable energy into the world system does nothing to reduce anyone’s reliance on such energy. While the hike in prices may cause a few American consumers to look for alternatives, there are almost no substitutes for natural gas or other forms of fossil fuels. A lack of viable technology may even mean that increased natural gas prices are still lower than those of alternative energy. Furthermore, opening up the natural gas market in the United States and elsewhere to global demand adds to the intricacies and delicate ties that link nations’ economies. This makes it more difficult further down the road for a country to make a change in its fuel consumption, as its actions could affect a dozen other nations.

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