One of the most consequential energy decisions on the Obama Administration's plate isn't one typically discussed in the election-year hot house -- whether to expand drilling, allow the expansion of a pipeline for Canadian oil sands, or to throw clean-tech entrepreneurs to the sharks.
It is whether to more fully open the floodgates of the U.S. natural gas boom on the world by permitting greater exports of shale gas. The appearance of large volumes of U.S. shale gas on the global market could rattle geostrategy and markets from Russia, to Europe, China and the Middle East.
Shale gas drillers -- saddled with a glut of gas, and fire-sale prices -- are pushing hard for permission to build liquefied natural as terminals and export some of their supply, perhaps 60 billion cubic meters a year, especially to Asia.
In addition, thirsty nations are on America's doorstep. Japan is most insistently lobbying
the White House to open up U.S. gas exports, reports the Wall Street Journal's Tennille Tracy. The reason is the need to compensate for its loss of nuclear-power production since last year's Fukushima nuclear reactor meltdown. Others wanting U.S. gas include India and South Korea.
But a Japanese Trade Ministry official told Tracy that he expects no decision until after the November election. The reason is politics -- a number of economists are calling cheap gas a savior for a U.S. manufacturing revival, perhaps even the harbinger of a new industrial revolution
. So if you start exporting the gas, and spark higher domestic prices, you may jeopardize this potential opportunity to revitalize American industry. President Obama would be accused by his critics of another job-squandering demonstration of economic incompetence.
Yet the chances are that the U.S. will end up with higher prices whatever the case. This is because drillers will not forever produce at high rates for $2.50 per 1,000 cubic feet; they will slow or shut down production from some fields, and the resulting drop in supply will send the price higher.
This is at it should be. To the degree that the frackers get their act together environmentally as suggested
by the International Energy Agency, the global availability of shale gas could assist the resolution of numerous global conundra -- the problem of carbon buildup in the atmosphere; of Europe's over-reliance on Russian gas; of increasing Chinese restiveness with coal pollution; not to mention of Western manufacturing competitiveness. If there is a large, long-term shift to hybrid electric cars, oil demand could drop, and shake up the economic calculus in the Middle East.
Charles Ebinger of the Brookings Institution told me that U.S. exports will send up domestic gas prices at the margin -- "The anticipation of more export projects would lead to people lining up reserves to support them," he said.
But ultimately, the big impact will come with an industrial embrace of more natural gas, and a greater shift by U.S. utilities to the conversion of large coal-fired power plants to natural gas. Michael Levi of the Council on Foreign Relations agrees. The volume suggested for export is "less than 10 percent of current U.S. production," Levi told me.