The one area where the U.S. might prove to be a decisive factor is the trade in global natural gas. It has long been dominated by the use of oil price-indexed contracts, keeping natural gas prices at uncompetitive levels and reducing displacement of oil and coal in industry and power generation in many parts of the world. There is no economic justification for setting oil and gas prices at equivalent levels, based on heat content, any more than coffee and tea prices should equivalent based on caffeine content. Because U.S. LNG exporters are more competitive-minded (or have more animal spirits perhaps) than most of those involved in the trade (think Gazprom), they might break down this long-standing but ill-advised contract practice, which could have a beneficial effect on the global economy and environment.
Ultimately, the best lesson is that the reduced dependence on foreign energy came about not because of a ‘moon shot’ program such as President Nixon proposed or President Carter’s Synthetic Fuels Corporation, but from American ingenuity and entrepreneurship. Fracking was not developed because of a desire to achieve an intangible like ‘energy security,’ but because George Mitchell and his people saw an economic potential and risked tens of millions trying to achieve it. That should be considered the true spirit of independence.
Check out our other current stories, we dare you…
- Nigerian refinery delays opening until 2020
- Oil price about to hit the roof?
- Aramco changing the formula for pricing
