Reverse Protectionsim Keeps Natural Gas Prices Low, Flaring High

Earlier this month the Wall Street Journal had an interesting article about some companies, Dow Chemical among them, lobbying for President Obama to block exports of natural gas. These companies, mostly in the manufacturing field, are enjoying the lower gas prices. They don’t want those prices to go up due to increased demand through export.

So they want protectionism, but not the usual sort of protectionism which stops foreign goods and services from coming into our country but a sort of reverse protectionism which stops US goods from being exported to international markets. Because that keeps prices low.

That’s problematic for two reasons.

The first is that it hinders our ability to solve our problems with gas flaring. Oil plays, such as North Dakota’s Bakken oil fields, end up flaring off a lot of natural gas. That gas could be captured and brought to market it, but there are market and regulatory hurdles to doing so.

Keeping gas prices artificially low just creates a larger disincentive to building out the sort of infrastructure necessary to capture gas instead of burning it off.

Second, keeping gas prices artificially low dampens production and exploration. The oil and gas industries are keeping huge numbers of jobs – the industries are one of the few bright spots in our economy right now – but when prices are kept artificially low, exploration and production is slowed. That means fewer jobs, less economic activity, and less benefit for the country.

Protectionism, be it blocking imports or restricting exports, is always bad for our economy. The free market should decide the right balance for imports and exports, and the proper equilibrium for prices.