During B.C.’s 2013 election campaign, at a conference of energy economists in Washington, D.C., I spoke about how one of our politicians was promising huge benefits during the next decades from B.C. liquefied natural gas exports to eastern Asia. These benefits included lower income taxes, zero provincial debt, and a wealth fund for future generations. My remarks, however, drew laughter. Later, several people complimented my humour.

Why this reaction? The painful reality is that my economist colleagues smirk when people (especially politicians) assume extreme market imbalances will endure, whereas real-world evidence consistently proves they won’t. For B.C. Premier Christy Clark to make promises based on a continuation of today’s extreme difference between American and eastern Asian gas prices was, to be kind, laughable.

For many years, natural gas prices differed little from one region to another. But the shale-gas revolution in the U.S. in the past decade created a glut, causing rock-bottom prices in North America. Meanwhile, prices in eastern Asia were pegged to the price of oil, which has risen. These two trends led to a price divergence starting in 2008. By 2012, Japanese gas prices were more than four times higher than North America’s.

If that difference was to hold for several decades, producers could earn sufficient revenues from Asian sales to cover shale gas extraction, pipeline transport, cooling to liquid in LNG plants, shipment across the Pacific, healthy profits, and billions in royalties and corporate taxes. That’s an attractive image in an election. But it can quickly become a mirage as gas markets behave like markets.

In competitive markets, a price imbalance triggers multiple profit-seeking actions, which work to eliminate the difference — usually sooner than expected — by those hoping to benefit from it. In this case, there are many potential competitors for the gas demands of China, Japan and their neighbours. China can invite foreign companies to help develop its massive shale gas resources. It can buy from Russia, which has enormous gas resources. It can also buy from other central Asian countries, such as Kazakhstan. It can also encourage a bidding war between prospective LNG suppliers from many parts of the world, some of which will have lower production costs than B.C.

The result will push down the price in eastern Asia. As was easily predicted by my smirking colleagues, it’s already happening. Unofficial reports put the price of a recent gas contract between China and Russia at $10.50 per million British Thermal Units, far below the peak Asian price, and close to (if not below) the cost of sending B.C. gas to China. At this price, there will be no government royalties, no lower income taxes, no debt retirement, no wealth fund. Maybe no LNG plants.

If any LNG plants are built in B.C., they will likely be constructed and operated as cheaply as possible, which will put the lie to another promise of Clark’s. In a province with legislated targets for reducing carbon pollution, she promised B.C. would have “the cleanest LNG produced anywhere in the world from well-head to waterline.”

As it turns out, this promise is easy to verify. Experts know the cleanest LNG in the world is the Snovit project in Norway, which emits 0.35 tonnes of CO2 per tonne of LNG. The under-construction Gorgon facility in Australia will match it.