On March 18, 2014 at 10:17 a.m., over at naked capitalism I commented on the Ukraine situation (and got clocked for it) thus:
Well, the U.S. gets a double win here, as eventually Europe will have to buy our natural gas exports (and we can legitimize our need to export), and what a great bargaining chip that becomes in forcing the EU to start agreeing to the U.S. terms on the trans-Atlantic trade agreement.
Damn, who thinks these things up in D.C.? Pure (evil) genius.
My point remains: A move to export natural gas doesn’t have to “make sense.” In her March 31, 2014 post at Our Finite World, “The Absurdity of US Natural Gas Exports,” Gail Tverberg does a great job of arguing her point against exports, but even she recognized why these efforts are moving forward:
“Why all of the natural gas exports, if we don’t have very much natural gas, and the shale gas portion (which is the only portion with much potential for growth) is so unprofitable? The reason for all of the exports is to pump up the prices shale gas producers can get for their gas. This comes partly by engineering higher US prices (by shipping an excessive portion overseas) and partly by trying to take advantage of higher prices in Europe and Japan.”
Her emphasis, not mine.
And right or wrong, the speculators seem to be onboard.
We have legal restrictions on natural gas exports in place, and the energy companies are leaning on Congress to remove those restrictions.
What better way to stir the we-need-natural-gas-export-restrictions-lifted pot than to find a bottleneck in the gas supply in a country that had a shaky political landscape (Ukraine), the help of which we could get those restrictions removed? Blunt force to remove those restrictions would not have played well with an American public that has grown accustomed to the we-need-energy meme.
Once those restrictions are removed, the carrot starts to look bigger for those trade agreements dangling over the Atlantic (TransAtlantic Free Trade Agreement, or TAFTA) and Pacific (Trans-Pacific Partnership, or TPP). Intransigent opposition to U.S. demands, from either side of those ponds, can quickly melt away when European and Asian political leaders are faced with populations growing cold over a harsh winter. Consider:
The crisis also is being used to promote a proposed trade deal, known as the Trans-Atlantic Trade and Investment Partnership, between the U.S. and 28-nation European Union.
“The recent developments in Ukraine only make it more clear why TTIP is important,” Froman said during a March 22 interview in Brussels.
(see “Ukrainian Crisis Not Wasted by Washington Lobbyists” link below for source of this quote).
While Germany and Japan rattle their sabers and threaten a return to coal power, they do so mainly as a weak attempt to counter what they know will be a choice between a) doing an about-face and return to nuclear, or b) adopt a larger share of natural gas, to counter adding to greenhouse gases during the generation of electricity. By adopting natural gas, both Germany and Japan know that road runs through the U.S., but are – at this point – unwilling to admit it for fear of the inevitable: The U.S. using its gas supply as a bargaining chip in the ongoing trade negotiations mentioned above. While the U.S. government wouldn’t restrict the flow of natural gas to these countries, they certainly have the power to control export tariff levels on gas supplies.
With slowing demand for energy due to a global economic anemia settling in, what better use of a synthetic crisis (Ukraine) to keep natural gas prices rising? Right now, with the widespread use of fracking, the U.S. is awash in natural gas, and energy companies want to get it off U.S. shores so that prices can rise, rather than falter. Never mind the transportation costs: If natural gas prices rise, the cost of developing the infrastructure to ship natural gas overseas will increasingly become a secondary, even tertiary, consideration.
This certainly adds credence to the argument that Ukraine simply became a pawn in a larger natural-resource pricing move: Ukrainian Crisis Not Wasted by Washington Lobbyists.
And there’s nothing like a crisis to keep the momentum of foreign energy companies (including the U.S.) moving towards the Drain of Spain: Foreign Frackers Now Find Comfort in Water-Hungry Spain. And Spain itself is running into trouble from its reliance on hydro-electric power, only adding to its eventual need for natural gas.
For those who find it unimaginable that stupidity runs rampant in the natural-gas sector consider this: Gas Carousel Making Spain Europe’s Biggest LNG Exporter. So do you think with this kind of mentality the LNG folks will really care if they ultimately drive up the price of doing business in the U.S.? They don’t get paid to be considerate. Besides, reflecting on the global scope of the natural-gas moves in play, it’s plain to see the powers-that-be in this sector intend to drive the prices upward on a global scale, thus not creating any cost disadvantage solely for American businesses.
A pot of gold at the end of an otherwise gray rainbow?
In the long-term, this manic drive to increase natural gas prices should spur other countries to develop alternative energy technologies, to remove themselves from the shackles of both U.S. and Russian natural gas. Perhaps, just perhaps, we’ll see the advent of a real paradigm buster with the creation of technologies that will finally make hydrogen a viable energy source, unleashing the potential of our universe’s most plentiful element.