For the Sake of American Energy, It's Time to End the Trade War
This week, Chinese President Xi Jinping is again meeting with senior Trump administration officials in Beijing, where they'll attempt to defuse trade tensions between the world's two largest economies. If they fail, the United States will raise tariffs on $200 billion of Chinese goods starting March 1.
The trade war has taken a toll on many sectors of the U.S. economy. That's particularly true for the energy industry. In September, the Chinese put a 10 percent tariff on U.S. liquefied natural gas. As a result, LNG shipments to China have plummeted. While 25 U.S. LNG vessels reached China during the last six months of 2017, only six did during the same period last year.
With U.S. natural gas production surging thanks to fracking, there's more fuel than ever before available for export. And China is poised to be the American LNG industry's best customer. But unless President Trump ends his trade war, he'll squander this business opportunity and the economic benefits it would create for everyday workers.
China consumes more energy and emits more greenhouse gases than nearly every other country. Eager to reduce its use of coal and end the burning of wood and dung in living spaces, the country is actively looking for alternative ways to power its factories and homes. In 2016, China's poor air quality caused over 1 million premature deaths, according to a study from the World Health Organization.
Regarding renewables, China recently decided to only consider new solar and wind projects that can compete with coal on price. The Chinese are also concerned that renewables projects could destabilize their energy grid.
China found an answer to its energy problem in natural gas -- which is more reliable and efficient than renewables, but emits half as much carbon dioxide as coal. "LNG shipments allow the environmental benefits of natural gas to be spread around the world and can help reduce global greenhouse gas emissions," according to a report by energy company PACE Global.
But the country doesn't get enough natural gas via domestic production or pipeline imports to meet demand.
That's where U.S. LNG comes in. Our nation's energy companies are producing nearly 3 trillion cubic feet of natural gas each month, more than any other nation. And we're the sixth largest exporter of liquefied natural gas. The Energy Information Administration projects America will more than double its LNG export capacity by the end of 2019 and could become the top natural gas exporter as early as 2022.
In other words, America is well-positioned to sell China the LNG it needs. But the trade war is complicating things. Last year, the number of U.S. liquefied natural gas vessels that traveled to China fell by around 20 percent compared to 2017.
If the trade war continues, other LNG suppliers like Qatar and Russia will step up to take America's place. Earlier this fall, PetroChina, a subsidiary of state-owned China National Petroleum Corporation, signed a deal with Qatar to purchase 3.4 million tons of LNG annually through 2040 -- the biggest supply deal PetroChina has ever made.
And the same month China implemented tariffs on U.S. LNG, Chinese President Xi Jinping and Russian President Vladimir Putin dined over Russian crepes and discussed possible joint natural gas projects.
A healthy trade relationship with China would greatly benefit the U.S. economy. If President Trump truly wants to achieve energy dominance and create jobs for American workers, he should pivot east and extend an open hand to China. Both nations will get a lot in return.
Robert L. Bradley Jr. is the founder and CEO of the Institute for Energy Research.