Tom Power Commentary: “Undermining Energy Independence: The Rush to Export America”

Since at least the mid-1970s, when foreign oil producers began flexing their economic muscle through OPEC, the United States has been at the mercy of volatile energy prices, especially oil, gasoline, natural gas, and coal prices. High energy prices drained purchasing power away from households and ran business costs upward, slowing economic growth, sometimes pushing us into recessions, while adding inflationary pressures to overall prices. We were made poorer.
Although the chicken-and-egg causality has often been pretty confused, our reliance on foreign sources of oil also drew us further into foreign intrigue and several wars in the oil-rich countries of the Middle East. As a result, our dependence on foreign sources of oil came to be seen as a national security issue too.
Although it is always dangerous to use present trends to forecast the future, the United States appears to be on the verge of shifting its energy demand-supply balance from being the world’s largest energy importer to being one of the world’s more significant energy exporters.
There is growing enthusiasm about exporting a broad range of energy products from the U.S. For instance, the proposal to ship Powder River Basin coal to Asia via new or expanded west coast coal ports is one example. The proposals to turn the liquid natural gas terminals that were going to be built to import natural gas as LNG, are now being proposed to be used to export the “surplus” natural gas we have due to the success of “fracking” shale deposits across the nation.
The Keystone Pipeline is actually part of this export craze. Oil production in Alberta’s tar sand fields has gone beyond what can be used within Canada, and probably the U.S. Along the way that Keystone Pipeline passes through the booming Bakken oil fields of North Dakota and Montana. The pipeline would move the oil from both areas to refineries in the Gulf region. Much of the gasoline and other petroleum products produced there are also likely to be exported.
In some ways the current energy export craze in the United States is not surprising. As much as we grumble over how high energy prices are, compared to many other countries, we face unbelievably low energy prices. Wholesale natural gas prices are currently about $2.20 per mm Btu. In Europe natural gas sells for six times that and in Japan it sells for eight times that. U.S. natural gas prices are sinking because supply is expanding and there is no easy way to export that gas overseas. It has to be liquefied, put on very large ocean-going tankers and shipped thousands of miles. But the gap in those relative prices have potential exporters slobbering over the profits to be made if we build enough LNG ports.
Currently Powder River Basin coal is selling for about $8.50 per ton at the mine site. For the equivalent Btus, Chinese coal price indices for coal ready to be shipped to the industrial and population coastal centers of China are at about $100 per ton. Of course, it is a long way from the northern Great Plains of the American West to the south coast of China, and the transportation costs are substantial. But, again, so are the cost differentials. Powder River Basin coal companies are also slobbering over the potential profits if they sell their coal overseas instead of to utilities in the eastern United States.
Oil producers in northeast Montana and northwest North Dakota, as well as the companies wringing petroleum out of Alberta’s tar sands, feel the same way. Their product is currently being dumped into a limited geographic market where the transportation costs to get it to market are also high. The Keystone pipeline to coastal refineries would allow these oil producers to get a much higher price for their oil.
The private logic of these export plans is clear. The public logic is much more muddled. The energy producers involved see themselves as being forced to sell their energy at outrageously low prices. It is unclear that those low prices are bad for the rest of us when we pay our utility or gasoline bills. It is also unclear that having large quantities of energy available for domestic use on into the future is bad from a national security perspective. We, in fact, are becoming more energy independent, just as our national policy for four decades urged us to do.
Now that we are more energy independent and face lower energy prices, even possibly lower gasoline prices in the future, our energy developers want to undermine both of these positive consequences. They want to ship our energy overseas, thus more rapidly depleting those resources, and they hope that reduced domestic supply will soak up what they see as “surplus” energy within the U.S, thus raising domestic energy prices too. Our energy companies seek to kill two domestic energy policy birds with one stone while reinforcing their profits.
The justification for this, of course, is that it will create relatively high paid jobs in the United States and help us reduce our trade deficit with the rest of the world. We will export raw materials to the rest of the world and import the goods they manufacture. This is a strange and potentially dangerous reversal of roles. We become dependent on their manufacturing of both low-tech and high tech-goods while we focus on supplying them with raw materials. We become the colony; they become the manufacturing centers.
For instance, we would send Powder River Basin coal to China and import from the Chinese solar- and wind-electric technologies along with all of the other electronic equipment we use. This does not sound like a very viable or prosperous economic future for the United States.
We need to call a timeout and think more carefully about where the energy export path on which we seem to be blindly jumping is actually likely to carry us. The random results of private international energy companies’ decisions did not give us a viable energy policy in the past. The most recent self-serving lurch by those international energy companies is likely to make things even worse.

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