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Economists: U.S. Exports of Oil and Natural Gas Would Benefit Economy

posted on May 2, 2014

The Dallas Morning News reports a jury awarded nearly $3 million to a North Texas couple last week who sued a drilling company over alleged contamination of their 40-acre ranch.

Bob and Lisa Parr filed suit against Aruba Petroleum of Plano, Texas in 2011, alleging spills and emissions from the company’s hydraulic fracturing operations had contaminated their 40-acre ranch near Decatur, Texas. The plaintiffs said the pollution sickened them – as well as pets and livestock -- and, at times, forced them out of their home for months.

Other landowners also have sued drilling companies and agreed to settlements, but the firm representing the Parrs believes the landmark $2.95-million civil verdict reached by a six-person jury in Dallas last week is the first of its kind.

The Associated Press does not appear to have reported the story, but the AP did conduct a survey last month that revealed America -- as a whole -- would benefit from increased oil and natural gas exports.

Economists: U.S. Exports of Oil and Natural Gas Would Benefit Economy

The Associated Press surveyed private, corporate and academic economists on a range of issues. Of the 30 economists participating, nearly 90 percent responded that more U.S. exports of oil and natural gas would benefit the economy.

According to the survey, increased shipments would encourage investment in oil and gas production and transportation, create jobs, and reduce America’s burdensome trade deficit.

Those opposed to U.S. energy exports believe the move could make it more expensive for Americans to heat their homes and fuel their cars.

But even those economists who acknowledge that exports could increase fuel prices in the U.S. say the overall benefit to the economy would outweigh any possible harm. 

Domestic energy production has risen dramatically in recent years, prompting energy companies to seek federal authorization to export crude and natural gas overseas, where the fuels command significantly higher prices. Currently, those shipments are restricted by antiquated energy security regulations.

Oil and gas export guidelines have been largely unchallenged for decades because demand in the U.S. – the world’s largest consumer of fossil fuels -- was rising amidst declining domestic production.  That fueled a surge in energy imports, and few people envisioned that America would ever be in a position to export oil or gas.

But new drilling techniques – including a controversial method of hydraulic fracturing called fracking -- have unlocked oil and gas in formations once thought to be out of reach.  This week, however,  authorities announced more than a billion barrels of oil have been extracted from the Bakken Shale deep beneath parts of Montana, and North Dakota.  

So far, seven terminals are authorized by the Energy Department to export natural gas, and 30 additional facilities are waiting for approval.

Low natural gas prices in the U.S. have helped reduce heating and electricity prices for residents and given U.S. manufacturers a cost advantage over their competitors in Europe and Asia.

But it is far from clear that exports would raise fuel prices or eliminate the country's competitive advantage. Natural gas is so expensive to liquefy and ship overseas that the delivered cost of U.S. gas will always be far cheaper in the U.S., where it can travel by pipeline, than it would be in Europe or Asia.

Exports are even less likely to affect prices of fuels made from oil, such as gasoline and diesel. U.S. crude oil prices have been about 10 percent cheaper than global oil prices in recent years. But consumers don't enjoy most of that benefit because exports of gasoline and diesel are NOT restricted.

Refiners have been able to buy cheaper oil in the U.S., which has helped lower their input costs. But they can then sell their fuels anywhere in the world, which allows them to receive higher global prices, whether they sell to buyers in Boston or Beijing.

Tags: economy energy exports natural gas news oil


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