The calls to ‘reserve’ natural gas for domestic industry continue. But it is simply protectionism in disguise. I have briefly discussed this before, but Bruce’s comment on that post has led me to develop the argument further. The full discussion is at the Conversation. However, it is a nice example of the simple application of elementary economics.
A gas reservation scheme can be thought of as the ‘sum’ of two separate policies – a tax on the domestic sales of gas (which cannot be avoided due to a requirement to sell a certain quantity of gas domestically); and a subsidy to domestic manufactures who use gas.
Of course it is the subsidy that the domestic users want. But they are hiding their claim for a handout behind the arguable policy of a ‘gas tax’. By separating the two policies out we can see the argument by the domestic manufacturers for what it is – a blatant claim for protectionism.