01 March 2013 09:06 [Source: ICB]
It's interesting to compare the US liquefied natural gas (LNG) export debate with what's happening with US gasoline prices.
The US is producing much more oil from shale formations, and more gasoline. Yet local gasoline prices are high and rising, pinching consumers. Why? Prices tend to be based on Brent crude oil, which is much higher, and there are infrastructure issues of getting gasoline to where it's needed in the US.
But another reason is that refiners are exporting greater amounts of gasoline. The US has moved from being a net importer of gasoline just a few years ago, to a net exporter. Exports have surged in the past three years.
One could argue that in the best interests of US consumers, with all this new oil from shale and more gasoline production, why not keep it in the US to keep prices low? This could boost the economy.
But it's a free market. Refiners can sell into the local market or export if they can get more money. The government cannot restrict gasoline exports in any way.
Some US chemical CEOs and trade groups are trying to limit the building of LNG export facilities with the "public interest" provision in the Department of Energy's remit for exports to non-free trade agreement countries. But once they are built, there will be no way to restrict LNG exports - just the same as with gasoline.
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