Suddenly, due to improved drilling techniques, the U.S. is overflowing with natural gas, driving down domestic prices. But foreign prices remain high, which means there is an opportunity for us to export natural gas. Unfortunately, the infrastructure does not currently exist. To transport natural gas across the ocean, you have to liquefy it first. We have the facilities to import liquefied natural gas, but not to liquefy it ourselves and export. In order to start exporting, we need to build the appropriate facilities, which requires regulatory approval from the Energy Department. A number of applications have been made to build new facilities.
So why wouldn’t the Energy Department approve this? Some are arguing that allowing exports would raise prices for domestic consumers and manufacturers, and this would be bad for American users of natural gas.
For more on all this, see the Washington Post here and the NY Times here.
Normally, free trade is about whether or not to allow imports, but preventing exports in an effort to help domestic interest groups is really just the same situation in reverse. The Washington Post has a good editorial in which they argue for allowing exports. As they put it:
USUALLY, OPPONENTS of freer trade argue that Americans shouldn’t be buying so many cheap products from abroad, sending their cash overseas. But when it comes to exporting some of this nation’s abundant supplies of natural gas, those who oppose opening up to the world turn that logic on its head — arguing, strangely, that Americans shouldn’t be trying to sell this particular product to other nations, bringing money into the country in the process. Both arguments are unconvincing, and for the same reason: When countries can buy and sell to each other, their economies do what they are best at, producing more with less and driving economic growth.
That’s well put, but let me just add one thing: Under our international trade agreements, we have promised not to restrict exports. We can’t restrict exports just to keep domestic prices down. In fact, we have already brought a successful WTO complaint against China for doing similar things. If we want others to play by the rules, we have to do so as well.
So, not only is allowing exports of natural gas good policy, it is what we have promised to do, and what we are demanding of others.