Published on February 5th, 2013 | by Jeremy Bloom0
Fracking liars: So much for energy independence
So how come the minute they get approval, the companies turn around and immediately demand the right to export all that energy?
From coal to tar-sands oil to coal to fracked natural gas, the process is repeated over and over again.
The latest: 26 companies are demanding approval to build insanely expensive liquefied natural gas export terminals. Why? Gas is too cheap in America. They want to be able to send it off to Europe and Japan where prices are much higher. This would be great for the gas companies… they’d reap huge profits on the exports, plus they’d create scarcity in the US as well, driving up prices for all of us.
So… why on earth should we let them do this?
The U.S. power-generating industry is steadily converting from coal to gas, and the gas bonanza has triggered a recovery of American energy-intensive manufacturing, such as chemicals, plastics, and steel. Dow Chemical recently has listed 108 major industrial projects planned, announced, or already under way by energy-intensive manufacturers, 33 of them with 2012 or 2013 start dates and 62 with start dates by 2015. The total planned investment is estimated at $95 billion.
…Energy-intensive industries tend to have high employment multiplier effects, as much as three to one, or even more; unlike the banking or software industries, they have long production chains, involving raw material extraction, transportation, multi-stage processing, and shipping—virtually all of them generating traditional blue-collar jobs that pay quite decent wages to capable high school graduates … [analysts]have estimated the growth in manufacturing employment, taking into its multiplier effects, may be on the order of 3–5 million jobs within the next decade or so.
And what happens if we let them export all that natural gas? Could it both force up domestic prices AND stifle the boom?
There is quite a large risk that the answer to both of these questions is, “Yes.” The Japanese are currently paying about $17 a unit for their gas; corrected for export costs, that would imply $12 gas in the United States, considerably higher than it was during the collapse of manufacturing employment in the first years of the 2000s. So, quite possibly, it would mean goodbye to the boom.
- The benefits analysis was done in such a way that no matter WHAT numbers you throw into the mix, the “benefits” would always be positive.
- Nothing was said about the obvious economic benefit we’re getting NOW from lower energy prices (which exports would eliminate).
- The report actually recognized that gas exports would lead to lower wages for everyone, but inexplicably concludes that this would be balanced out by the additional income to “consumers who are owners of liquefaction plants.” Do YOU own any liquefaction plants? I don’t. I don’t think most consumers do.
- Elsewhere the report is willing to admit that “households with income solely from wages or government transfers, in particular, might not participate in these benefits.” But they don’t draw the connection.
Fortunately, not everyone jumped on the bandwagon, and the companies that actually CONSUME energy are fighting back with their own report, which concludes:
- The NERA report relies on 2009 data, and the market has shifted massively since then (demand growth is now projected to DOUBLE because of the fracking boom) – as NERA knew perfectly well.
- The infrastructure for exports is NOT compatible with domestic use. This would screw over domestic customers, as investment is pulled from them to export pipelines and terminals.
- The report assumes UNLIMITED production. That would, indeed, keep domestic prices down – but is a ridiculous assumption.
- The report also assumes total free-market pricing – in an energy field long dominated by cartels, as well as price inflexibility created by long-term contracts.
- The report dismissed high-energy industries as “low margin” – because they don’t reap huge profits for those at the top, the way oil and gas or financial products do. But the DO provide good salaries to workers, reasonable profits to owners, and a huge multiplier effect throughout the economy.
Even more ironic – Morris points out that a decade ago, everyone thought we’d be IMPORTING gas, and companies spent something like $100 billion to build expensive, dangerous LNG terminals to bring the stuff into the US (in the movie Syriana, it’s an LNG ship that the terrorists target). Then, it turned out we could frack our way back to cheap domestic production, and all those plants are sitting idle.
The implication: The same bozos may end up spending nearly that much again to gear up for exports… And because the market has been so volatile, THIS may end up being a total waist of money, too.