Gas export control half-baked idea – by William Watson (National Post – September 5, 2013)

The National Post is Canada’s second largest national paper.

A report in this paper Wednesday told of a new lobbying effort by the country’s big energy users to get the National Energy Board to pull back on Canada’s exports of liquefied natural gas. They evidently don’t want to pay the world price for energy they’d prefer to have privileged access to.

That’s great news for this country’s newspaper industry. Having vanquished Verizon, our Big Three telecom companies have no further need of two-page ads for their over-the-top nationalist crusade and can instead go back to the business of encrypting their various service plans in ways not even consumers with super-computers can decipher. If big natural gas users start an anti-export campaign of the sort recently organized by Dow Chemicals in the U.S., that can only help your revenue-challenged factitioners.

In its story on Dow’s campaign, The New York Times summarizes the company’s position as “the government needs to plan an energy policy that carefully balances the interests of the oil and gas companies that want to freely export natural gas with those of industries like Dow Chemical that fear that an export boom could outpace domestic gas supplies and bring higher energy prices.” Lord help us when governments get into “careful balancing.”

Anyone who considers them capable of such a thing just hasn’t been paying attention. It’s no credit to this nation’s economists that a “Keep our gas in Canada” campaign will find lots of sympathizers, even beyond gas-users who profit personally when domestic gas prices are held below the world price. Do-it-yourself economics, as the economist David Henderson calls it, says that if you’ve got gas (as it were), you should restrict its export, thus lowering its price and helping out the “value-added industries” that use it intensively.

Non do-it-yourself economics says, on the contrary, that a resource’s price — the price of everything, really — should reflect its opportunity costs. If instead of keeping the gas at home and depressing its price, we could sell it to foreigners at, say, double the domestic price, we should do so. That way we make sure the domestic price of gas reflects its 100% higher value on the world market. With a price that high, it’s obviously a very valuable resource.

Even environmental nutters — maybe especially environmental nutters — understand that valuable resources shouldn’t be priced as if they weren’t valuable. What better way to waste them than to let them be sold for half their opportunity cost?

For the rest of this article, click here: http://opinion.financialpost.com/2013/09/05/william-watson-gas-export-control-half-baked-idea/

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