The folly of blocking natural-gas exports

The boom in American natural-gas production during the past several years, and the consequent crash of domestic natural-gas prices, has caused many to call for the liberation of U.S. natural-gas exports.

The ongoing Russian invasion of the Crimea and threat to the rest of Ukraine has added still greater urgency to these calls, as the need take action to weaken Russian President Vladimir Putin’s natural-gas stranglehold over Europe has become vital.

Despite these economic and national security imperatives, there are still those who maintain that allowing American natural-gas producers to export their product would damage the national interest. According to them, enabling natural-gas exports would harm Americans, by causing their fuel prices to rise.

Let us consider the logic of this argument. If stopping exports of natural gas really helps Americans by keeping their gas prices down, why not extend the principle and ban all exports? Then, according to such wisdom, everything would become cheaper.

If we stopped American farmers from exporting a large part of their products, and instead forced them to dump them on the domestic market for whatever they could get, the commodity price of corn and wheat would crash. Not only that, if we stopped industrialists from exporting their products, all sorts of manufactured goods would become available for fire-sale prices.

Imagine the benefits: bread at 10 cents of loaf, new automobiles for less than $3,000, Boeing jets at 80 percent off list price. The savings would be endless.

Such a plan would certainly be feasible. The United States has the largest and best Navy in the world. Using just a small portion of it, we could blockade all American ports, preventing exports.

It will be recalled that with a much smaller fleet at its disposal, and lacking any assistance from aerial or satellite reconnaissance, the federal government was able to blockade Southern ports rather effectively between 1861 and 1865. Without question, it could do an even better job today.

Moreover, if we take advantage of readily available international assistance, the cost of maintaining such a blockade could be greatly reduced. While German U-boats failed twice at the task, this was only because of the interference of the Wilson and Roosevelt administrations, which for some reason thought that enabling American exports was a good idea.

If the Obama administration were to show a more cooperative attitude, there is little doubt that Mr. Putin would be happy to send the Russian navy to do the job for us, enforcing an airtight blockade on all U.S. exports, at no charge to the American taxpayer whatsoever.

Why stop there? Zero is an arbitrary number. If less exports are better, why not aim for negative values? Instead of just stopping exports, we could increase our imports, and glut the domestic market even more.

Instead of merely keeping natural-gas exports illegal, perhaps the federal government should pass a law requiring natural-gas producers to import an equal amount of natural gas to that which they produce, and sell it on the domestic market alongside their own product. Of course, if they were to do this, they would drive foreign natural-gas prices up while crashing those at home, so such transactions would need to be done at a loss.

But what of it? The big natural-gas companies might lose some cash, but the rest of us would get our fuel for next to nothing. In fact, they probably would have to pay us to take it. Furthermore, as noted above, we could readily extend such laws to all sectors of the economy. Then everything would be practically free. Wouldn’t it?

Wait, let’s think about this. Is it possible that by making companies buy expensive goods abroad and sell them for less at home, we would simply drive them out of business?

Is it possible that by forcing American producers to sell their goods where they get the smallest return, rather than the largest, we might cause them to cut production? If we prevented Boeing from selling its airliners abroad, would that really drive them to drop their prices at home to make up the volume, or force them to raise prices to cover their fixed costs with a smaller number of sales?

If we passed a law requiring New York publishers to only sell their books in Manhattan, would that crash book prices on the island as they flooded their limited home market, or send prices soaring as they were forced to pay for much shorter print runs?

The answers to these questions make evident the absurdity of the export-blockers’ position. Like the makers of crops, airplanes and books, producers of natural gas create goods to meet the size of their available market. The larger the market, the more they can produce, and the more revenue they can obtain both to cover their fixed costs and invest in future development.

This is why, as the world’s population has gone up, nearly all goods have become cheaper and more plentiful, rather than the reverse. This is also why blockading another nation’s exports is generally considered to be a hostile act, rather than a form of economic assistance.

The federal government was created to defend the United States, not to wage war upon it. The Obama administration should lift its blockade of American natural-gas exports now.

Robert Zubrin is president of Pioneer Energy (pioneerenergy.com) and author of “Energy Victory” (Prometheus Books, 2009).

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