As I reported yesterday, a newly-formed organization called
America’s Energy Advantage “Maintaining America’s Energy (Natural Gas) Advantage for Some Big Private Chemical and Steel Companies” is a group of U.S. manufacturers and chemical companies that want to restrict the ability of U.S. oil and gas companies to export natural gas. In classic rent-seeking/protectionist behavior, U.S. companies like Dow Chemical and Alcoa are devoting resources to influence public opinion and the political process, partly by suggesting that they are concerned about issues like national energy security and the public interest. But public choice theory helps explain that these companies are really trying to use the power of the government to protect or increase their profits, which will be greatly enhanced if they can use the coercive force of the federal government to prevent or restrict the ability of private energy companies to sell their products (natural gas) overseas.
Some companies engage in rent-seeking to secure protection against foreign competition by restricting imports and thereby raise profits, and other companies like Dow and Alcoa attempt to increase profits by restricting exports, in this case for one of their key inputs – natural gas.
And here are some interesting facts that help expose the hypocrisy of the protectionist strategy of Dow Chemical and Alcoa:
According to United Nations data on the world’s 100 largest transnational corporations, almost 68% of Dow Chemical’s $60 billion in global sales in 2011 were outside the U.S., and Alcoa’s sales outside the U.S. represented more than half of its $25 billion in global sales in 2011.
So here in a stunning display of hypocrisy, you have two U.S. companies that both depend on foreign markets for more than half of their sales (and in the case of Dow, more than 2/3 of its sales), and yet both of these transnational companies are attempting to place restrictions on the ability of other U.S. companies to take advantage of the same global markets that are providing them with significant sales and profits.
For their shameless rent-seeking attempts to use the political process to restrict U.S. oil and gas companies’ access to foreign markets and in the process protect or increase their profits, I hereby nominate Dow Chemical and Alcoa for the “Rent-Seekers/Protectionists of the Year” awards.