On May 17th, the New York Times published “Energy Exports are Good!” by Joe Nocera. It is a sufficiently confused bundle of thinking that it really merits reading:
Nocera begins by approvingly citing an editorial that had been written by Andrew Liveris, the Chairman and CEO of Dow Chemical. Liveris (and Nocera) point to fracking for natural gas as
- Strengthening our economy
- Increasing our national competitiveness
- Creating jobs.
Nocera then rather obtusely argues that Dow Chemical is hypocritical because they want natural gas prices to remain low (to boost their profits) by limiting gas exports (oh my god, a regulated market!), yet they [Dow] own a stake in a natural gas exporting venture.
Which, when you think about it, is actually a kind of interesting situation for Dow, though not necessarily hypocritical.
Nonetheless, Nocera’s position is clearly that the unfettered marketplace should determine where natural gas extracted from America should go, and that unholy regulation of the market MUST NOT BE ALLOWED. Oh, and that sure, yeah, gas in the good old U.S.A will stay cheap under this scenario.
Now, Nocera is confused on several fronts here, so let’s just take a stroll through some of his assertions.
Given his endorsement of the three items above, it is clear that Nocera views the combustion of fossil fuel (e.g. natural gas) as not a behavior that America must address. As I have written (tiresomely, I’m sure) elsewhere, natural gas combustion results in the generation of carbon dioxide, and carbon dioxide causes ocean acidification. But apparently that concerns us naught.
I suppose we can say that fracking strengthens our economy (point number 1), to the extent that all that drilling puts some people to work, and cheap natural gas makes our manufactured goods more competitive globally. Of course, there are externalities that may not yet have been priced out. For instance, if fracking ruins or uses up aquifers, how do we estimate that effect on our economy? If people have water faucets that can be lit with a match because of gas entrainment in the aquifer, how do we price that?
Somewhat hysterically (as in funny), Joe takes care of the externalities question with a simple stroke of the pen:
“But the answer is to ensure that wells are drilled in an environmentally safe manner. That is true whether we export gas or not.”
Of course! Why didn’t I think of that? Maybe Joe can write a sentence saying that we’ll “ensure” cars won’t have accidents anymore, or that planes will never crash. That’d be great, too!
Point 2 is really a subset of point 1. Point 1, when you think about it, is a pretty vacuous slogan that kind of subsumes points 2 and 3, but no matter.
The question here is, how does fostering increased dependence on fossil fuels increase our national competitiveness? Might a country that learns to innovate, to make things more energy efficiently, that begins to learn to cost effectively harness the sun, the winds and the tide for power be even more competitive? Nah…
Point 3 is probably true, actually. You’ve got guys looking for gas, guys drilling for gas, guys selling gas, and guys cleaning up the inevitable mess that all the fracking is causing – it’s jobs heaven. Unless we find out the externalities and our renewed love affair with fossil fuel turns out to be a major strategic error. In which case we’ve screwed the pooch.
Anyway, Nocera also makes an interesting claim about the wonders of unfettered exportation of natural gas – which mean old (and hypocritical) Dow chemical does not want, viz.:
‘Most studies suggest that the main impact of exports will be to increase U.S. production rather than take away other uses,’ [Michael] Levi says. Thus, it will not likely have a major effect on the price of gas.
So lemme get this straight. Natural gas costs about $15 a decatherm in Japan, and about $4.00 in the good old U.S.A. And Nocera finds a source who claims that for-profit energy companies are not going try to globalize natural gas as a commodity? Hmm. And I always thought increasing shareholder value was the ambition of publicly traded companies.
On the other hand, we get a huge discount on the oil we drill here in the United States compared with foreign oil and…Oh, wait a minute. No we don’t. Oil is a fungible global commodity and oil from Texas sells for essentially the same price as oil from Saudi Arabia. Bad example.
Joe ends his column by claiming that Dow was “having [its] cake and eating it, too”, but it’s really Joe who is doing this. He sees no worrisome environmental issues with fracking or fossil fuel use, and he sees no adverse pricing effects resulting from the exportation of liquid natural gas – gas companies will willingly sell us cheap gas when they could substantially increase their profits by exporting. The punchline, of course, is that Nocera calls Dow “hypocritical” because Dow knows that unfettered gas exportation will increase their cost of doing business in America. But that isn’t hypocrisy. It’s a logical business decision that happens to run counter to Nocera’s received wisdom about unfettered markets.
In point of fact, we are encouraging and increasing our national reliance on fossil fuels, we are ignoring (or treating dismissively) the environmental effect of fracking, and we are moving towards the globalization of the LNG marketplace, with the concomitant price leveling that we see with other global commodities.
Dow Chemical knows better, and so do we.
So when all is said in done, it’s almost admirable how Nocera stitched this narrative together. Not convincing or logically consistent, but it was a good old college try.