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A U.S. government decision to subsidize steel, chemical and other manufacturers by restricting...
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Thursday, January 31, 4:42 PM ETA U.S. government decision to subsidize steel, chemical and other manufacturers by restricting exports of liquefied natural gas would violate global trade rules and damage U.S. credibility after years of challenging exports curbs by China and others, experts warn. Price concerns raised by industrial users such as Dow (DOW) and Nucor (NUE) are "contrary to what the U.S. has been arguing against other countries."
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Please qualify that statement. It has no bearing in today's reality.
I should also point out that every study on exports has indicated that a domestic rise in prices will result, and that cheap domestic energy stimulates the economy far more effectively than sending gas at a US-resident subsidized price to overseas competitors.
I'll also point out that the reason Cheniere is ahead of the pack is because it started its process in '08 setting up as an IMPORT facility, and that in switched its application by '10 to be an EXPORT facility. The timeframe involved for other companies to set up exports is approximately the same as that needed to finish setting up pipelines already in advanced stages, opening up vast new demand in the domestic economy.
The timeframe involved will also be preceded by the erection of a dozen major LNG projects around the world.
I'm getting really annoyed at a handful of investors in producers repeatedly claiming that expensive energy is good for the domestic economy. The case is so weak they are now getting so-called 'experts' to attempt to threaten 'violation of global trade rules'. Hah, I call BS.
The same report stated explicitly that one of the effects would be a rise in the domestic price of NG, while dismissing its impact on the economy at large. A point I will readily dispute and argue against.
The "government picking winners" argument is a rhetorical device meant to leverage 'conventional wisdom' without addressing the issues at all. It is also interesting that one one hand you suggest the government as a policy maker has no investment skill but readily accept conclusions from a government funded and originated study that provides the government with guidance on investment... I link the study here: http://1.usa.gov/WjZ8pb
The point I am making is that demand exists within the domestic economy to easily consume all the current production but is crimped by an infrastructure issue which is being addressed along the same timeline as LNG exports. From a policy perspective, supporting a weak domestic economy with cheap fuel while expanding domestic infrastructure (and creating jobs as a result) is smarter than exporting cheap fuel to competitors enabling them to lower their cost of production and be more competitive against an already weak economy.
From a policy perspective, policy should be supportive of the domestic economy and those who contribute to it and benefit from it. It makes simple sense.
The argument in favor of promoting what is effectively more expensive energy for the domestic economy to the detriment of every single person and productive entity outside, mayyyyyyybe the producers (who would benefit from higher prices) and their investors makes no sense at all.
http://seekingalpha.co...
"Nucor's (NUE) Louisiana plant shows how the abundance of natural gas has made some manufacturing processes, recently seen as uneconomical, feasible. When complete, the plant will process 2.5M tons/year of direct-reduced iron pellets; at current gas prices, DRI can generate iron pellets at $260-$280/ton, while scrap steel trades at ~$390/ton. U.S. Steel (X) also says it is studying options for building a DRI plant."
The EIA is, in my experience with it, both informative and non-political, and since it is full of experts, and not elected officials like Congressmen, I take their reports as a good source of information. The report re-stated what every single macroeconomics text book will tell you: low cost producing nations benefit from trade. Those text books will also tell you that the smaller economies will get the most benefits from trade, so I would not be completely against only allowing exports to the large economies in the world (EU, China, Japan, S. Korea). Either way, if the US government does not allow exports, in the long run the market will correct, and prices will rise. It will take another 2-3 years before the chemical plants that are being built come online, and big projects like converting most of the buildings in NYC from fuel oil to nat gas are complete, so demand should increase meaningfully in the next few years. Let the companies start building export terminals, they'll be built with private funds, create jobs, and allow the US to improve its infrastructure. I have no idea what NG prices are going to be in 3-5 years, but I do know the country needs the jobs now.
Just do some google search to see how many times EIA was correct and what all it had predicted.
I wonder why EPA is not doing anything for tobacco companies. Thousands of people are dying from it. Reason is close connection to donations to democrats by tobacco companies and solid investment from democrats in many tobacco companies.
You're right, how did I miss that there are no restrictions on Tobacco companies because of all the contributions from tobacco companies to Democrats?!?! That $200 billion over 25 years they pay after the MSA was signed in 1988 must not count.
http://bit.ly/WiSCxl
http://1.usa.gov/WQF4KG
Comments like these lead me to believe you are misinformed. For one, this is not true, the initiative is still ongoing (there is a 3 year transition period that ends in 2015. More info here http://on.nyc.gov/VEvRHx). For another, NYC area properties are crimped by low NG pipeline capacity which means even those connected on NG are usually participating in 'dual fuel' programs where during high demand the local utility requires them to switch off NG to oil.
Until pipeline capacity is increased, this will remain the case. That's the 'domestic demand case'.
Having said that, it would be foolish to give up the chance to regain cost advantages for our steel, fertilizer, paper and chemical industries by not retaining control of the NG and consuming it domestically. There will be sufficient domestic use to allow for NG prices to increase and for producers to get a favorable return on their investment. Domestic industrial demand and commercial and residential heating demand will more than balance the growth in supply.
Why not limit the number of export terminals, and rebuild our basic industries, put our people to work, export added value products, and also protect our environment?