Friday, November 16, 2012

Seeking Gas (and rents)

Major players in the natural gas industry are pressing their case to get the federal government to either allow or forbid the exportation of natural gas.  Big consumers of gas, like Dow Chemical that depend on cheap supplies, would rather see all that gas stay put.  Producers of gas, seeing limited demand in the United States (the US is considered the ‘Saudi Arabia’ of natural gas) would like to sell their gas to eager buyers, like Japan.  The government is expected to make a decision soon.  Let’s hope they vote in favor of free trade.

It comes as no surprise that big users of gas, like Dow Chemical, want cheap inputs.  Lowering the cost of production is a desire of all firms.  However, lobbying the federal government to protect Dow’s access to cheap gas is naked rent seeking. 
Of course, that the government has to be consulted in this matter at all is nonsense.  Gas producers should be free to sell their wares to any buyer – those here at home and those abroad without interference from politicians. 
Whatever the decision, rest assured it will be wrapped and sold as “in our national interest”, which is code for “jobs.”  You can bet government bureaucrats are busy modeling both scenarios and the model that nets more jobs will win.  Whether this “win” is for free trade remains to be seen.

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