Archive for the ‘’ Category

Dear President Obama: End the Ban!

Larry Summers, leader of President Obama’s National Economic Council from 2009 to 2010 and former Harvard University President, made a forceful case last week at the Brookings Institution to end the 39-year-old crude oil exports ban.  The ban, which was put in place in 1975 in response to the Arab oil embargo, reflects policy stuck in the 1970s. We have an opportunity to promote U.S. economic development through a booming energy renaissance that demands a very different policy some 40 years later.  Permitting U.S. oil exports will lower gasoline prices at the pump, provide Americans with new jobs, lower unemployment, and strengthen the nation’s flexibility in international policy.  Mr. Summers believes President Obama should act now.  His case is straightforward: “We should not have prohibitions without a reason.  We need all the economic benefits we can get.”

Mr. Summers spoke at the release of a new report by the Energy Security Initiative (ESI) at Brookings, entitled “Changing Markets: Economic Opportunities from Lifting the U.S. Ban on Crude Oil Exports.”  The study supports his argument for exports.  U.S. refineries cannot handle the dramatic increase in domestic crude oil production that has resulted from the domestic shale boom.  Mr. Summers also makes clear that his support for ending the export ban is not an argument against climate change or the need to address it.  The US is already making surprising progress in limiting carbon, he observes.  Retaining a ban on exports is not the solution to additional changes that may be considered in well construction and wastewater disposal, associated with hydraulic fracturing.  Ending the ban on oil exports will drive economic growth with new jobs and increased disposable personal income that comes from savings at the pump.  Improved efficiencies in the refining process are also likely.

According to the macroeconomic study conducted by the ESI and the National Economic Research Associates (NERA), eliminating a ban on crude oil exports could inject between $600 billion and $1.8 trillion into the domestic economy and reduce gasoline prices by 9 cents per gallon by 2015.  The study coincides with a study by IHS released earlier this year that also forecasts lower gasoline prices and increased employment and economic revenue.  Because oil production is now at its highest point since 1987 as a result of the steep rise in domestic horizontal drilling and hydraulic fracturing, suppliers are looking for ways to bring their product to market.

Without increased market access via international exports, the study warns that U.S. production will decline. Crude stockpiles climbed to a record high on the U.S. Gulf Coast earlier this year, a trend that will continue so long as the industry believes that the export ban might be lifted.  With broader market access, however, oil production in the Gulf Coast alone could increase by over 1.5 million barrels per day.  Brookings gets it right: “We think the key lesson of our economic history in the energy space is that the U.S. economy works better by embracing market forces than trying to resist them.”

Mr. Summers’ succinct comments are the latest example in a growing trend of influential American leaders who wish to revisit the ban.  Obama Administration officials—including Energy Secretary Ernest Moniz—have asked to reexamine the ban’s utility.  Several high-profile lawmakers, for example Sens. Mary Landrieu (D-La.), Lisa Murkowski (R-Alaska), and Rep. Joe Barton (R-Texas), have followed suit.  According to an Associated Press poll conducted this year, ninety percent of economists surveyed believed allowing crude oil exports would improve the economy.

Additionally, the comments by Summers and the release of the Brooking’s report come on the heels of the Commerce Department’s decision earlier this summer to allow the export of lightly processed condensate, a first step that further bolsters Summers’s argument. Brookings believes President Obama has the authority to remove the ban without consulting Congress, meaning he could capitalize on the increasing momentum without getting weighed down in a political battle in Congress.

The President has the clear authority to act. The American people stand to gain substantially from ending the ban. The U. S. stands to gain additional international foreign policy leverage in a world where oil and natural gas exports provide power to some and constrain others in the continued European and Russian dance over the Ukraine.  Lawmakers and policy wonks are loudly supporting a rational crude oil export policy.  It is now time for President Obama to capitalize on this momentum and end the ban on crude oil exports. 



The Challenge of Energy in 2014

The abundant availability of energy in 2014 is encouraging – in very many ways.  New technology associated with accessing and extracting natural gas and oil has created an energy boom along with new jobs.  The Economist likened the boom in energy to the California gold rush.  But this boom is very different in its technology and the very particular political challenges it faces – for both traditional fossil fuels and renewable energy.

Beyond creating new jobs and new sources of energy, the “boom” has leveled prices of natural gas and oil.  It has also moved the United States closer to what multiple presidents have called for in historic, campaign political statements – energy independence and energy self-sufficiency for America.  For consumers, access to widespread, available oil and natural gas means price stability, including months of decline during 2013 in the price of gasoline at American gas stations.

Of course, there is no guarantee that international issues will not alter current supplies and threaten recent price stability.  Both supplies and price are particularly vulnerable to the continued instability in the Middle East and the uncertainty over persistent, volatile political issues on the Korean peninsula and old territorial disputes between China and Japan.  Historic trends in prices have frequently been disrupted by political volatility.

Despite the very good news for consumers and the U.S., reactions to the boom in energy availability have not been uniformly positive.  Concern over the environment and the desire to avoid “energy production in my backyard” have led to voter restrictions on hydraulic fracturing or “fracking” – the extraction of natural gas from shale beds using the injection of water and chemicals.  The public’s negative reaction is not restricted to gas wells; indeed, consumers have also reacted unenthusiastically to the presence of windmills that produce renewable energy and sometimes kill errant fowl.  That same environmental concern has led to pressure on government to control energy production with new rules.  Misplaced beliefs about the ability to restrict global markets has also led to pressure on the federal government to limit exports as well via licenses for ports associated with liquid natural gas.

In so many ways, the public has benefitted from the ingenuity that has come from the marketplace.  That benefit has come in the form of stability in energy prices, new jobs in the fossil and renewable sectors of the industry, and increased availability of energy, globally and at home.  The last decade has not only seen a boom in the oil industry with newly identified sources of oil and natural gas, but it has seen improved technology in the renewable energy sector as well.  In addition to improvements in the technology associated with the generation of electricity via wind, progress has continued with greater efficiency of solar cells too.

Yet, the challenge to energy availability in 2014 is likely to continue.  For those who support renewable energy and for those involved in traditional fossil fuels, there is a common interest.  It is in limiting government restrictions on energy production and supporting R&D.

Why Science Matters, Part I: Methane Emissions Research

In this – or any other age – where argumentation is often based on belief systems, science presents an alternative. Science is a systematic way of pursuing knowledge via the scientific method.  It employs observation, prediction, and measurement, and it contrasts with belief systems.  The purpose of today’s blog is to examine how recently published science contributes to our knowledge of energy and climate change.  Science offers a foundation for improvement in business efficiency, profitability and the establishment of sound government policy.

In examining why science matters, we start with an examination of the recent scientific research associated with methane emissions from natural gas wells.  The research comes from the published work of David T. Allen et al. in the Proceedings of the National Academy of Sciences, and it has already received attention in some media because of its findings and their inconsistency with some people’s beliefs and earlier research.  The findings include lower than expected overall release of methane from newly drilled wells, many of which are associated with hydraulic fracturing.  Hydraulic fracturing, or fracking, refers to the process of injecting water and chemicals into subterranean shale in order to release the natural gas stored within the pores of the shale.  Methane is the primary component of natural gas, and it is a potent greenhouse gas that is scientifically associated with climate change.

The study by Mr. Allen and his colleagues used measurements of emissions monitoring equipment during the completion process of wells during a seven month period that included the summer, fall, and parts of the winter and spring seasons of 2012 and 2013.  The method was direct measurement of methane emissions, an important contributor to the credibility of this research.  The results were almost 97% less than a 2011 estimate by the US Environmental Protection Agency (EPA).

The study also examined 150 existing production sites and 489 wells with samples taken from them.  These wells use pneumatic controllers, which are designed to use air pressure created by the well to drive related equipment.  These devices can release methane as a part of their routine operation from equipment leaks that were detected using infrared cameras.  Mr. Allen’s and his colleagues’ observations were that methane release from pneumatic controllers was 57-67% higher than earlier EPA estimates.

While this scientific paper did not address business practices or policy, there is an opportunity to look to changes in practice that could further reduce methane release.  Pneumatic controllers were the primary source of methane release in this research and there are various actions that can be taken by natural gas companies, even without changes to policy that can help reduce the amount of methane release.  If companies were to install low-bleed devices in pneumatic controllers, retrofit machines with low-bleed devices, and improve maintenance associated with gaskets, tube fittings and seals we could see a significant reduction in the amount of methane being released by the pneumatic controllers.  Reducing the unintended loss of natural gas via pneumatic controllers has financial advantages for both the owner of the well and the environment. Owners of the wells can make more natural gas available for sale and the reduction of methane release in the environment can help mitigate any climate implications.

When taken together, methane emissions from new well installations and pneumatic controllers were 10% lower than earlier EPA estimates.  These findings are a valuable addition to our knowledge base.  Nine natural gas producers supported the research, and some media have indicted the credibility of the research because of the source of funding.  Since most scientific research is supported by one source or another, the particular source, per se, is less important than the soundness of the method used and the design of the hypotheses.  In both cases, Mr. Allen and his colleagues followed expected scientific practice that lends considerable credibility to the new information about lower than expected emissions of methane from natural gas extraction. This is the value of science.


Federal Energy Regulatory Commission and Costs to Consumers

This week’s Senate hearings for the new head of the Federal Energy Regulatory Commission (FERC), Ron Binz, former Colorado Public Utilities Commissioner, deserve the public’s attention because of the role that FERC will have on consumer prices for energy.

It will be a challenge to make the issues from the hearings clear because most of the public is unaware of even the existence of FERC.  Before the Bush administration, FERC drew little attention but its power grew under President Bush, and that position of increased power has continued under the Obama administration.  As a part of the Energy Policy Act of 2005, FERC was revitalized and given responsibilities for establishing and strengthening the smart grid, the integration of renewables along with the responsibility for the regulation of natural gas, liquefied natural gas terminals, natural gas pipelines, and interstate transmission of electricity.

With a broad-based charge, the Commission has the capacity to affect the costs of electricity and the prices ultimately paid by the consumer.  Much of the direction that FERC takes will depend upon the assumptions it adopts about energy sources and future change to energy policy.  Because Mr. Binz has a long history in the industry, he has left the public with an understanding of his own assumptions and the direction he may take as the head of FERC.  For example, he is an author of Practicing Risk-Aware Electricity Regulation: What Every State Regulator Needs to Know.  This report is available from Ceres, a nonprofit organization advocating for sustainability leadership.

The report focuses on how regulators and utilities make decisions relative to risk.  The fundamentals of the report are straightforward; decisions are always fraught with risk, and the decision-maker, e.g., a utility, has a responsibility to moderate risk, based on assumptions about the future.  What are the assumptions that Mr. Binz will make about the future?

Among them is that renewable sources of energy, like solar, will receive government incentives for their use, that additional federal regulation will be imposed on fossil fuels, that the supply of natural gas is volatile, and that the likelihood of price increases for a low carbon fuel like natural gas is moderately high. The report states, “the authors expect that the scientific evidence of climate change will eventually compel concerted federal action that greenhouse gas emissions will be costly for fossil-fueled generation.”  While the scientific evidence for the impact of fossil fuels on climate change is increasingly clear, the validity of these assumptions is questionable.

Here are some of the reasons why the assumptions may be faulty.  First, technology associated with solar technology is advancing, making it more likely in the future that solar energy may become increasingly affordable without the need for government incentives.  Second, the impact of fossil fuels on the release of atmospheric carbon is varied.  For example, natural gas is a relatively low contributor to atmospheric carbon when compared with other fossil fuels.  Third, known reserves of natural gas from shale are vast and the carbon footprint for natural gas is relatively low (see EPA Study Provides Striking, Favorable findings for Natural Gas).  Thus, the likelihood that natural gas prices will raise is constrained by the increasingly available supply of natural gas.  Moreover, the lower carbon footprint of natural gas makes it a likely continued choice by energy generators, even in the face of the evidence for climate change.

Assumptions matter when assessing risks in decision-making.  FERC can make decisions that matter for consumers.  Consumers are well advised to pay attention to the Senate hearings this week on the new head of FERC.  The outcome of the hearings will likely affect consumers’ wallets and energy production for years to come.

New Report Confirms Continued Growth in Demand for Natural Gas

The US Government has just released data that confirm the growing role of natural gas as a source of energy in the US.  The growing role of natural gas is especially important because of its relatively lower production of atmospheric carbon when compared with other fossil fuels (see Penley On Energy and Education).  It is also important as a factor associated with the U.S. becoming increasingly reliant on its own energy sources and more energy independent.

We have seen considerable growth in domestic production of energy, including natural gas. This shift to greater reliance on domestic production of energy is possible because of recent technological developments, including those that have allowed energy companies to extract natural gas from shale in the U.S., using a process called hydraulic fracturing.

The Federal Government’s short-term report, released August 6, indicated a continuing trend upward in the U.S. production of natural gas with production projected to increase another 1% from 2012 to 2013 and 2% between 2012 and 2014.  This modest but continuous increase comes as imports of natural gas have continued to decline over a 5-year period.

Prices for natural gas have risen somewhat, based on average future prices of $3.58 for November 2013, compared with an average of $3.26 in November 2012.  There are many potential reasons for the move upward in prices.  Among the reasons reported were the heat wave in the northeast that increased demand for natural gas during the summer of 2013.

Another factor contributing to the rise in prices is the continued pipeline capacity restrictions.  Despite recent additions to capacity, we are still seeing restrictions that impacting price and pushing it upward.

Demand for energy, including natural gas, is also increasing as a result of the improvement in U.S. economic conditions.   New orders for manufactured durable goods rose 4.2 percent in June, and sales of new single-family homes increased by over 38 percent from June 2012 to June 2013, and 8.3 percent from May 2013 to June 2013.

All these factors are contributing to the U.S. economic boom for natural gas developed here at home and helping to increase the marketplace for this increasingly desirable fossil fuel. The future of U.S. energy independence lies with the growth and development of natural gas as a primary source of energy.

Transformation in the Energy Industry

The evolution of the energy industry is a change that has been evident for some time now. Shifts in energy demand from developed countries to developing countries continue to expand and what is most apparent is the shift in the mix of energy sources under demand.  While demand for renewable energy has not grown very rapidly, it is becoming a larger part of the energy consumed.  As Penley on Education and Energy has previously reported, consumption of energy from renewable sources has doubled in many parts of the world, including developing countries.

Still, it is the demand for “clean energy” that is changing at a rapid rate.  While clean energy includes renewables, it is increasingly represented by a shift from oil to natural gas.  A recent piece by The Economist titled “Yesterday’s Fuel” highlighted this shift from oil to natural gas and the concept of reaching “peak oil”. The Economist argues that consumers will reach “peak oil” consumption soon. In recent years, there has been much discussion and debate on the peak in available oil, an argument that has been a repeatedly discounted over the years as more reserves have been discovered and formerly inaccessible reserves have become available through new technology.

What is different, reports The Economist, is the shift in consumption, essentially having created a peak in demand for oil rather than a peak in its supply. Penley on Education and Energy has repeatedly described the growth in known resources of natural gas, our recently acquired access to those sources via hydraulic fracturing, and the more favorable impact of natural gas on the environment.  Natural gas produces substantially lower atmospheric methane and carbon, two major sources of environmental change.

What is especially new in The Economist’s article, Yesterday’s Fuel, is the geopolitical implications of the shift in the mix of energy consumption.  The Economist highlights the impact that this potential shift from oil to natural gas will have on the global balance of power.  The piece notes that the Saudis have the capability to increase production, lowering the price of oil, and slowing the shift to natural gas, however, the changes in transportation and power generation will gradually make oil less desired, even at a somewhat lower price than natural gas.  Moreover, the power shift will swing the energy influence to Russia and the U.S.  With decreased dependency on oil, Russia’s potential for dominating its consumer’s declines.  And the U.S., with its very large reserves of natural gas, will continue on its way to energy independence. This newfound energy independence makes the U.S. far less vulnerable to foreign decision-makers.

Lowering U.S. vulnerability to foreign powers will be welcomed benefit here at home while increasingly clean energy use will be applauded globally.  The energy industry has been in a state of considerable change for some time.  An increasingly decentralized and complex industry along with substantial changes in energy sources consumed will alter the landscape in the next decade.  Most of this change will be welcomed, even by traditional energy giants that have already made substantial changes to their supplies and marketing.

Implications of President’s Obama’s Climate Remarks for New Energy Technology

President Obama’s remarks at Georgetown make certain tax reforms essential for achievement of his goals.  In his remarks, Mr. Obama highlighted the role that technology plays in our energy future.  New technology has yielded the drilling advances and extraction capability linked with America’s growing supply of natural gas and oil.  Additional new energy technology will come not only through federal research grants but also from R&D done in the private sector. New taxes on the energy industry, in both the traditional oil & gas segment, as well as the renewable sector, will only take away money from areas that support R&D. Historically, the energy industry has sought out new and innovated technologies that increase energy capability and development which benefit everyone.

The President noted the benefits that the U.S. is receiving from the technological advances that have led to growth in the supply of natural gas.  Observing that there are criticisms of natural gas extraction, the President stated, “We should strengthen our position as the top natural gas producer because, in the medium term at least, it not only can provide safe, cheap power, but it can also help reduce our carbon emissions.”  The lower carbon intensity of natural gas is one of its considerable advantages (See Penley on Education and Energy – EPA Study Provides Favorable Findings for Natural Gas).

In addition to the role that new technology has played in unlocking the enormous U.S. supply of natural gas, technology is also making a considerable difference in other energy areas, e.g., efficiency of photovoltaic cells for the production of solar energy, oil sands technology and high efficiency carbon capture.  The latter area of technology development becomes especially important to mitigating climate change from atmospheric carbon in that fossil fuels, as Mr. Obama observed, will be around for many years to come.

Accomplishing the President’s goals, however, makes policy change essential. Among the most valuable policy changes for incenting new energy technology is tax reform associated with R&D tax credits for U.S. companies.  This type of reform was called for in a bipartisan report from the American Energy Innovation Council (AEIC): Catalyzing American Ingenuity: The Role of Government in Energy Innovation.  Without broadly drawn R&D tax credits that are generally applicable to the energy industry that do not have limitations to just the renewable energy sector, it is unlikely we will achieve the President’s goals.

The AEIC has linked a viable U.S. energy policy directly to the economic health of the country.  AEIC pointedly notes that underinvestment by the private sector in new R&D in energy limits U.S. economic health.  As the report detailed, U.S. underinvestment in energy R&D occurs as a result of the capital-intensive nature of the energy industry, the need for large up-front investments with slow turnover in capital assets, and the imperfect energy market leading to slow adoption of new technology.

R&D tax credits have historically been subject to repeated expiration with uncertainty about their renewal or the timetable for renewal.  That uncertainty limits the development of new technology in capital-intensive sectors like energy.  Moreover, R&D tax credits have been targeted at specific segments of the energy industry like wind and solar.  This practice of targeting specific segments of the industry limits the development of widespread new energy technology.  The consequence is that the historic underinvestment by the U.S. energy industry hampers the development of a broad range of new technology — from innovative sources of renewable energy to innovative technology for capture and sequestration of carbon to cheaper and more widely available sources of cleaner fossil fuels like natural gas.

The President’s remarks at Georgetown were about more than climate change; they addressed the need for policy that will advance the development of innovative energy technology.  They make the case for the President to address tax reform with specific attention to the issue of R&D tax credits that will encourage an industry that is critical to our economic health.

US Leads World in Growth in Oil – As Forecasted

As predicted before, new evidence about energy production and consumption provides considerable insight into the development of market strategies.  The new report shows dramatic growth in the available supply of oil from the U.S. The 62nd annual BP Statistical Review of World Energy reported that the U.S. was among the larger global producers of oil.  The U.S. led in growth of oil production with a 14% growth rate, year over year.  Saudi Arabia, still a world leader in oil production, grew at a 4% rate by comparison while U.S. production now represents about three-quarters of Saudi Arabia’s daily production.

The growth in U.S. production of oil is something that Penley on Education and Energy has previously noted as a likely outcome of technological improvements associated with oil extraction and the development of shale beds. Interestingly though the real news in the BP report is the increasing use of non-oil energy sources and the worldwide shift in demand for oil, once again signaling that that emerging markets will increasingly play an even greater role in the world market.  Bob Dudley, Executive for the BP Group and Thunderbird School of Global Management alumnus said:

For those of us in the energy industry, the challenges are about how we respond to the big shifts we are seeing – a shift in demand towards emerging economies and a shift in supply towards a greater diversity of energy sources, including unconventionals.

In developed countries like the U.S., oil consumption declined by 3%, despite the dramatic, forecasted increase in production.  The shift in increased consumption in emerging markets was evident once again in this data.   Although consumption increased by 5% in China, this was not record-setting for its rapidly growing economy.  Far more significant is the signal for growth in developing markets such as Africa where consumption was up 5% and in the Middle East were increases rose by 4.5%.

Differential changes to regional oil consumption continue to signal the global shift in economic opportunity from North America and Western Europe to regions of the world represented by emerging market economies such as Africa, Asia and Latin America. This serves as a reminder to businesses from all sectors, including education, that the prospects for the future lie in these emerging markets..

The BP Report also, as Mr. Dudley observed, a greater diversity in sources of energy and the continued potential that exists in non-traditional sources of energy for changes to labor markets and business opportunities.  Consumption of energy from renewable sources grew by double digits in many parts of the world, including developing countries.  In the U.S. and Europe (including Eurasia), consumption of renewable energy rose year-over-year by 12% and 15% respectively.  In emerging market regions like Latin America, the growth rate of consumption of renewables was even stronger at 20%.  Israel’s growth rate was a staggering 46%. Still accounting for just less than 5% of total energy consumption worldwide, renewables managed to reach a new record at this level.

Further evidence of the shift to more diverse sources of energy was the 2% increase in the production of natural gas.  The U.S. led the way in total volume change, but production grew in every global region except for Europe.   A surprising element of the data was the finding that trade in liquefied natural gas (LNG) declined.  This could have been the case for several reasons.  One possibility is the global growth in use of the new technologies associated with fracking, limiting the need for imports from other regions of the world.  A second possible reason is continued restrictions by some governments such as our own here in the U.S. on export permits of LNG.  A third is the simple matter of the increased costs associated with transportation.  The Center for Energy Economics at the University of Texas estimated that, at the low end, cost of terminals, liquefaction and transportation from Louisiana to Malaysia, for example, added $1.68 per million BTu.

The BP Report shows us that there is considerable change in the production and consumption of energy across the world..  Its implications are significant for our understanding of global economic development and for understanding the foundation for the development of global market strategies.  These changes also help to signal where labor markets are headed and offer insight to those of us in education about the likely areas where job growth will grow and ebb.  The study of energy consumption and reports like these show us not only where energy is going and how it’s moving but also where the next great opportunities lie.

Fracking, Natural Gas, and Health

The health impact of fossil fuels has been an issue under discussion for some time.  Earlier this year, I examined the issue of air quality, fine particulates and their scientific relationship with respiratory health in Penley on Education and Energy.  Another topic that has been repeatedly explored is the increased use of natural gas in the generation of electricity and it’s substantial, positive impact on the environment. New research reported here is consistent with the environmental value that comes from the increased availability and use of natural gas in the generation of electricity.

A scientific study, published in the February 2013 issue of Environment International, addressed the broad topic of the economic impact of fossil fuels via the relationship of fossil fuel-related emissions to health costs.  The research is worth understanding in light of the continued controversy over hydraulic fracturing or fracking –the primary method of accessing the plentiful amounts of natural gas located in shale formations across the country.  Fracking is the process whereby liquids are injected into shale substrata or formations in order to release stored natural gas, previously inaccessible without this new technology.

The scientific study from Environment International examines the economic impact of three fossil fuels widely used in the generation of electricity — coal, oil and natural gas.  The impact on health from fossil fuels can be understood from their creation of atmospherically released particulates or particulate matter (PM).  There is documentation that fine particulates, such as those associated with the burning of fossil fuels have an impact on respiratory health.  The widely circulated pictures of poor air quality in Beijing in the last year along with the increased reports in temporally associated respiratory problems are a well-known example.

The health-related costs referred to in the study are what economists call externalities.  Externalities are the costs or benefits to a society that are not included in the price of a good, i.e., in this case the price of the fossil fuel being used to generate electricity.  The study found that there were vast differences related to health costs from coal, oil and natural gas. The study’s results are relatively consistent with earlier research conducted by the National Research Council on the hidden costs of various fuel sources.

The study found that dollars to dimes, natural gas had a much smaller effect economically on overall health costs when related to other fossils fuels. While coal or oil have associated economic values of health impacts ranging from $.08-$.45/kWH; natural gas was found to be only between $0.1-$0.2/kWH. When you consider the amount of electricity generated by a coal-fired plant or one fueled by natural gas, economically the health costs to natural gas attribute to only a mere 5% of the total amount.

The considerably lower impact on the health costs of natural gas makes a strong case for its increased use. Natural gas has been found to be cleaner to burn, widely-available, affordable to access and far more cost-neutral when it comes to the economic health costs associated with its development. The development of hydraulic fracturing has not only opened a window to the stability of our energy future, but also to our long-term health costs when dealing with the use of fossil fuels.

Jobs and More Jobs – the Promise of Natural Gas in the US

The Small Business & Entrepreneurial Council’s new study is telling about the potential future for job growth.  Entitled, The Benefits of Natural Gas Production and Exports for U.S. Small Businesses, this study makes clear that natural gas has led to the expansion of small business in the US and to the creation of 146,000 jobs between 2005 and 2010 as total US jobs fell by 4.3 million over the same period.  As we approach more forums by the Senate Energy and Natural Resources Committee relative to liquid natural gas (LNG) exports, it is worth noting the jobs-related potential that can come from allowing new permits for LNG export.

The Council’s report not only identified the specifics of job growth, it attributed some of the job growth to small businesses. While total employers fell over the five-year period between 2005 and 2010 by 4.2% in the US, small businesses with less than 500 employees in sectors like oil and gas extraction grew by 3%.   In some other related sectors, growth percentages were higher in the face of a declining overall US economy.

The forums by the Senate Energy and Natural Resources Committee could make a difference in the potential for future job growth.  The US continues to have an enormous potential for the production of natural gas.  This huge reserve has meant that the US has very favorable prices for natural gas when compared with the rest of the world.  The Council’s study reports recent prices for natural gas in the US of $3 per million metric British thermal units of energy, compared with a price of $11 – 13 in Europe and $18 in Southeast Asia.  The price differential explains the potential for exports from the US to the rest of the world – and the potential for additional job growth from large and small US businesses.

Some business representatives, especially in the chemical industry, have argued against permitting additional LNG exports.  Their argument for industry protection is associated with their own interest in protection and in producing chemicals at relatively lower prices with cheap US natural gas.  This kind of argument for isolating an industry or a country from world markets is one we have seen for centuries.  Isolationism and industry protection have not generally proved good for a country’s economy.  Some historians have catalogued the decline of the Spanish economy centuries ago to its decision to isolate domestic markets.  More recent examples of attempts at isolation are evident in agriculture from both the US and the European Union.

Generally speaking, the economy is a global one, and attempts at isolation are suboptimal.  Isolation tends to raise prices for a country’s citizens and limit economic growth.  The consequences are slower growth or decline in new businesses and limitations on growth or declines in new jobs.  As the US economy remains fragile in its recovery from the recent recession, this is no time for the US Government to take actions, which will be harmful to US job growth.  And the argument is easily made that this is especially no time to stifle the potential in an industry like natural gas that has been nearly singular in its job growth in the face of overall decline in most other US industry sectors.


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