A good deal of the buzz generated by America’s ongoing energy revolution has centered on the way surging domestic production is changing the crude oil imports picture. No question, it’s a pretty one, with net imports as a share of consumption falling to levels not seen in nearly three decades. That’s great news for job creation, the economy, our balance of trade and America’s energy security.
But here’s another pretty picture: declining imports of liquefied natural gas (LNG). Actually, “declining” is too mild a term for what we’re seeing. Thanks to energy developed from shale using hydraulic fracturing and horizontal drilling, the U.S. has become the world’s No. 1 natural gas producer – which has dramatically cut the need to shop the world market for supplies of natural gas, illustrated in plummeting LNG imports:
The downward curve on the trend line above looks a lot like the one for oil imports in this post. It also supports the view that the United States, as the world’s No. 1 natural gas producer, also ought to be among the world’s leaders in the export of LNG.
We’ve posted on the studies that back the export of U.S. LNG (here, here and here). Recently, the U.S. Energy Information Administration (EIA) issued an analysis of the effect of increased levels of LNG exports on U.S. energy markets. Like the other studies, EIA’s market analysis points to positive impacts that support pro-export policies and actions:
- Increased LNG exports would be balanced by increased domestic natural gas production. EIA says across various export scenarios, higher domestic production satisfies about 61 percent to 84 percent of the increase in natural gas demand. In other words, the U.S. has ample domestic supply and the ability to increase capacity.
- More LNG exports would grow the economy, as measured by real gross domestic product (GDP). EIA projects economic gains that increase with the amount of added LNDG exports. One of EIA’s charts:
Increasing LNG exports leads to higher economic output, as measured by real gross domestic product (GDP), as increased energy production spurs investment. This higher economic output is enough to overcome the negative impact of higher domestic energy prices over the projection period. … Implementing the export scenarios specified for this study increased domestic economic output, measured as GDP, by 0.05% to 0.2% over the 2015-40 period depending on the export scenario. Investment and consumption lead the GDP gains.
America’s energy story has almost completely reversed from less than a decade ago, thanks to domestic oil and natural gas reserves, innovative technology and robust industry investments in development. Less than 10 years ago, the United States was building facilities to handle imports of LNG. Now the impetus for building LNG export projects is clear.
Unfortunately, despite ample evidence the U.S. has the capacity to supply domestic natural gas needs and to become a leading player in the growing global LNG market, the Energy Department continues to dribble out approvals to construct facilities to export LNG to non-free trade agreement nations.
America stands to reap considerable benefits. ICF’s study estimates LNG exports would generate average net job growth of 73,100 to 452,300 between 2016 and 2035, including all economic multiplier effects. Manufacturing job gains would average between 7,800 and 76,800 net jobs over the same time period, ICF says. The net effect on annual U.S. GDP would range between $15.6 billion and $73.6 billion annually between 2016 and 2035, depending on how much LNG was exported.
These are numbers full of impact for individual Americans and the broader economy. It’s time for policy to catch up with market realities. Needed is leadership to make it happen.
By Mark Green
Originally posted November 13, 2014
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