The great debate over natural gas exports has taken a very interesting turn. President Obama, in a speech last weekend, hinted that the U.S. could be a net exporter of gas by the end of the decade. This move, it would appear, puts him on the same side as none other than Exxon Mobil Corporation (NYSE:XOM).
Exxon Mobil Corporation (NYSE:XOM) and companies such as The Dow Chemical Company (NYSE:DOW) and Alcoa Inc (NYSE:AA) have been sparring back and forth recently over exports. The two manufacturing giants are vocally opposing unchecked LNG exportation because of the energy-intensive nature of their businesses. These heavy users of gas believe that unabated natural gas exports will cause the price of natural gas to rise dramatically.
Exxon Mobil Corporation (NYSE:XOM) and other export advocates believe that exporting natural gas would actually be healthy for our economy. Higher gas prices would entice producers to invest in drilling projects, which would create jobs and generate more tax revenue. It’s a case that was recently boosted by a study from the U.S. Energy Information Administration, which concluded that there would be a “net benefit” to furthering natural gas exports. The report concluded that any increase in the price of natural gas, which it deemed to be minor, would be more than offset by an increase in economic output.
While President Obama probably sees the economic benefits, his interests in exports could go even deeper. In his speech, Obama said that his decision will not rest on yes or no but will extend to figuring out a way to assure the best price structure in the Western Hemisphere. One reason for this approach is that it’s believed that if the U.S. begins exporting gas on a meaningful scale, the international tendency to link natural gas prices with oil could be broken.
You see, outside of the potential economic benefits of exports, there’s a certain geopolitical leverage that our country can wield if we’re exporting gas. In a speech last month, White House national security advisor Tom Donilon noted that our new-found energy resources give us a “stronger hand in pursuing and implementing our international security goals.”
Think of it this way: For years we’ve been bullied by the price of oil. Our dependence on oil has caused wars and racked up debt. We really had no leverage other than our military might to ensure that oil continued to flow. Now we’re not only using less oil, but we’re also producing more of our own, which is starting to tilt things in our favor. Further, by becoming a dominant force in the international gas market, we could delink gas and oil prices, which could weaken our international competitors.
Right now, though, the debate is purely economic. That’s one reason only Cheniere Energy, Inc. (NYSEMKT:LNG) has been permitted to export natural gas to non-Free Trade Agreement countries. The company recently noted that its first two export trains are ahead of schedule, meaning it should begin exporting by second half of 2015. So while Cheniere Energy, Inc. (NYSEMKT:LNG) will be first to market, there are a number of companies with projects in the pipeline that want to join Cheniere Energy, Inc. (NYSEMKT:LNG), including, of course, Exxon Mobil Corporation (NYSE:XOM).