By Todd Royal
It is clear to Americans across the country that their dollar is not stretching as far as it once did, even just a few short years ago, and now Russia has invaded Ukraine, which has spelled more trouble for energy prices. As costs continue to increase, services diminish, and supplies dwindle, resulting in warranted discontent by consumers. Add a barrel of oil at, near or rising above $100 a barrel, expect major cost increases being felt at the gas pump.
Overall, US inflation increased 7 percent last year, and energy costs were one of the top drivers of inflation in 2021, rising 29 percent since 2020. Gasoline prices alone have nearly doubled, while fuel oil costs have jumped 41 percent according to the Bureau of Labor Statistics. The cost of natural gas is expected to remain nearly $4/MMBtu this year. In the face of this discontent, some of our elected officials are searching for a scapegoat, and the White House and their allies in Congress are attempting to blame the energy industry. The reality is the energy companies are not driving up the costs. In fact, rising energy costs we’re now experiencing are more accurately attributed to the policies being implemented in Washington, D.C.
We are witnessing a collapse in energy literacy and understanding such basic issues as over 6,000 daily products come from a barrel of crude oil, including COVID-vaccines. Essential products we take for granted could be jeopardized if U.S. policy actively restricts domestic oil and gas production.
Policy shifts have major consequences, and our elected leaders continue to push unproductive policies that restrict production and supply, thereby resulting in higher fuel prices. For example, the Biden administration as one of its first acts revoked the permit for the Keystone XL pipeline. Keystone would have delivered 830,000 barrels of Alberta oil per day to refineries on the Gulf of Mexico. Similarly, the administration suspended oil and natural gas leases in Alaska and placed a moratorium on new oil and gas leases on federal lands under the pretext of taking action on climate change. This moratorium could cause U.S. coal use to increase by 15% by 2030; the result would ironically increase carbon emissions if the U.S. reverts to greater coal use to make up for reduced natural gas resources.
Moreover, the administration and its allies in Congress last year attempted to advance the Clean Electricity Performance Program (CEPP) and a proposed natural gas tax (in the form of a “methane fee”), which would have restricted natural gas for power generation from our grid. If either the CEPP or the natural gas tax had come to fruition, the results would have been higher electricity costs for everyday Americans on top of the unstable grid we have across America, because of closing reliable and resilient power plants in favor of the sun and wind for electricity. Maybe one day renewables will be reliable 24/7/365, but at no time in recorded history have they been.
Despite past miscalculations, the administration and Congress have avenues to alleviate the ballooning cost of energy. For starters, they can move forward with renewing a new five-year plan for offshore energy leases. Currently, the plan stands to expire on June 30, 2022 and the Department of Interior has provided no indication of whether it plans to advance offshore leasing access. Allowing the five-year plan to expire will have dire climate impacts, as the U.S. will increase its dependence on more carbon-intensive fuel imports from overseas. We can hamper the Kremlin using natural gas as a soft power weapon. Since many of these imports come from rivals in the Middle East and Russia, the administration’s inaction will directly inhibit our energy security, at a time of dire unrest between Russia and Ukraine. In addition, the U.S. will lose access to domestic energy sources thereby restricting our supply while demand continues. Limiting supply while seeing an increase in energy demand is a clear recipe for a new rise with energy prices.
Unfortunately, energy costs are unlikely to come down considering Energy Secretary Jennifer Granholm petitioned OPEC to produce more oil late last year. It’s deeply disturbing the U.S. has gone from a net exporter of crude oil to net importer in less than a year. Oddly, this appeal was inconsistent with President Biden’s message to world leaders at the G20 weeks prior when he indicated that the U.S. would reduce fossil fuel consumption. Nevertheless, OPEC ultimately rebuffed Secretary Granholm’s plea and domestic fuel prices will continue rising along with all basic household goods.
OPEC’s rejection of Biden’s request coupled with continued, depressed energy production in the U.S. will likely continue to keep prices high unless the administration takes a different posture toward encouraging greater domestic energy production.
Instead, some lawmakers in Washington have criticized the energy industry for allegedly enjoying high profits as everyday Americans struggle. This is a disingenuous critique since energy is a commodity-based industry. Still, when compared to the corporate profits across sectors, the S&P 500 energy sector is below average compared with other industries like communications, real estate, and IT. Additionally, millions of Americans with investments, pensions, and other market-connected financial interests benefit when the energy industry performs well.
Energy producers are in the business to sell energy for consumption. Sound practices that target specific emission sources, including flare management, and collaborating on technologies to make our country safer, cleaner, and economically prosperous should be the goal. Simply put, this administration’s energy polices and lawmakers who support these actions will hurt Americans by increasing energy prices in the midst of rampant inflation. The Biden administration, members of Congress, Governors and state legislatures who supports ruinous energy policies must reset its posture towards encouraging domestic energy production and ensuring reliable electricity if it wants to ease energy prices and costs. Reconsideration of the counterproductive and unnecessary policies that will continue to prolong the U.S. recovery is a good place to start.