Exporting energy

Date posted: September 4, 2013

Energy production in the U.S. has increased dramatically in recent years. Both domestic oil and natural gas production are way up. This has raised a question of whether all of this additional energy should be kept and used in our country, or would it hurt if some were exported? What’s the economics behind this question?  N.C. State University economist Mike Walden responds.

“Well, first of all, you’re absolutely right about domestic energy production. Oil production, for example, in our country is up by one third, 33 percent in the last five years, primarily due to improved technology for recovering oil as well as natural gas as well as high world prices.

“And I think it’s logical a lot of people will say, ‘Hey, we should just keep that oil here. We should refine it, make gasoline. That’s going to keep our prices lower, and we should not export it.’ I think that a large number of people think that’s the case.

“Well, the reality is that energy is an international market. And if your concern is price, it really doesn’t matter where the oil that we produce and the natural gas that we produce goes in the world, because if we produce more it’s going to increase world supply, and given whatever demand is, it’s going to cause prices to be lower than it would have been without that supply.

“But also we need to worry about if we do want to keep that oil and natural gas here, we have to refine it. So, we have to build additional refineries, which a lot of people don’t want. We have to store that energy. We have to have pipelines. So, the good news on this issue is if you’re concerned about price, as long as we’re producing more, it really doesn’t matter where that supply goes.”

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