The Coming Natural Gas Boom

Businessman Charles Morris argues that the natural gas boom will encourage investment in America's infrastructure and create millions of middle-class jobs.

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Despite a slow recovery from the Great Recession, America is on the brink of a long-term economic boom, says author Charles Morris, former managing partner of the business consulting firm Devonshire Partners. In "Comeback: America's New Economic Boom," Morris argues that the natural gas boom will encourage investment in America's infrastructure, increase productivity and create millions of middle-class jobs. Morris recently spoke with U.S. News about how an energy boom would impact the U.S. economy and what the industry is doing to address environmental concerns. Excerpts:

What's behind the economic comeback?

What makes it possible is the shale oil and gas revolution. It can really help our current account deficits; it can also empower a lot of other industries that are energy intensive.

It could be the spur for a manufacturing recovery. There's a lot of stuff going on in places like China now, where their costs are getting to be very close to parity with well-run plants here. Now, if you add to that high-energy-using firms, like chemical or steel plants, [whose] energy costs can be as much as 10 percent or more of your total cost, [if they] can get natural gas at about one-third the energy cost worldwide, that makes a big difference. So, that's creating a surge of interest in actual relocation of plants from overseas home now. All the jobs in those industries create many more jobs in raw material transfers, shipping, packaging and distribution.

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How does this economic boom compare to previous ones?

In the recent past, most of our booms have been based on artificial things. Lower mortgage rates prompted a housing boom; lower bond rates prompted a bond boom on Wall Street. Things like that have the unhappy feature where when you're simply talking about an interest rate gain [for example], a lot of people become very rich very fast without investing very much.

What can be done to sustain this progress?

I’m most worried about a movement to let us export as much of our natural gas as we can. Now what I'm afraid of is that that's going to raise prices to the oil linked level. Everyone says that the only way to let gas prices settle is to use free market methods and let people export as much as they want and let the free market decide what the price should be. That sounds very good, but it misses the point that oil is not a free market. Oil prices are set by the OPEC cartel. If it weren't for the cartel, oil prices would probably be cheaper than natural gas. So we shouldn't be letting natural gas rise to the cartel-set oil price; we should be letting natural gas stay at its real market price, which is what people are willing to pay right now and what it costs people to produce it at an average profit. And, if we have that, that will really reinforce this whole manufacturing boom. And we'll get a lot more jobs out of the manufacturing boom than we will get from exporting all of our natural gas, or even half of it.

Is this a job for the market or government?

Right now, the government is in the blocking seat. I think the right thing to do is for them to go very slow on the export license approvals, and they've got the right to approve them. Economists speaking for the industry say if we just approve all natural gas export permits, the actual volume of natural gas exported will be fairly low. Now, I think that's not going to be true. But let's test it, and just go slow. There's a bill put into Congress now to take all government limits off of natural gas exports. That would be a very bad thing, I think. Japan has lost its nuclear power, so they're desperate for energy and are perfectly happy to pay $100 oil-equivalent of natural gas.

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What is going to be the biggest challenge?

I think that the very right wing – cut all government spending, don't invest in infrastructure, anything the government does is bad – wave is starting to run its course. I think that once manufacturing firms are moving into the Midwest and so forth, they will start to put pressure on fixing the internal waterways, for instance. And there's ways to do it, so it's not just federal dollars. There are good ideas for infrastructure banks, public-private partnerships. But we really have to get all this transportation up to snuff. I'm assuming that a future Congress, either after 2014 or 2016, will be willing to fund those things.

Corrected 8/9/13: A previous version of this article incorrectly stated Charles Morris' stance on natural gas exports. Morris is worried about unlimited natural gas exports. The article also incorrectly referred to oil-linked prices.