Cheap natural gas is already spurring investment in steel, petrochemicals, and other industries that supply the sector and use it as an input. In addition, natural gas burns cleaner than coal and oil, and as such while result in reduced CO2 emissions and cleaner air at a lower, not higher, cost.
Our natural gas resources also herald in an export opportunity, albeit one that needs to be approached carefully. Natural gas is about twice as expensive in Europe as it is here and eight times as expensive in Japan. The Department of Energy is in the process of approving up to 20 applications by various firms to export their gas. Unfettered exports of gas would increase output and stimulate employment in the sector by allowing the domestic price to drift upward to the world equilibrium. But the increase in price would also reduce the quantity of natural gas demanded in the States and slow the transition from other fossil fuels and increase input costs to industry.In light of this tradeoff, I'd recommend the resurrection of a policy tool we haven't seen in a long time: the export tariff. In the ante-bellum period, the Federal government was almost entirely funded bu export tariffs from Southern cotton (brings the importance of preserving the integrity of the Union into context, doesn't it?). In recent years, of course, we've been more interested in increasing exports than taxing them. But levying a modest export tax on America's recent find would allow the industry to make a profit from exports while limiting the extent of domestic price increase, all while adding a new revenue stream to the public coffers. Hell, we could even use some of the money to research alternative energy.
