By Tom Magness
Last week the UN’s 27th Conference of the Parties (COP27) concluded during which world leaders gathered to discuss the world’s climate goals and explore the best paths to combat rising global temperatures. That included envoys from the Biden administration, who have set ambitious climate goals for the U.S., including net zero emissions by no later than 2050.
Although well intentioned, Biden and his allies in Congress are still pushing misguided domestic measures that will obstruct us from meeting the dual challenge to reduce energy prices and address climate change.
To make a difference on climate change, we’ll need viable solutions that require a great deal of cooperation between governments. While we should certainly be ambitious, those solutions must acknowledge certain realities of global energy demand, especially as we head into the winter months, with families across the world already struggling with high prices. World leaders and policymakers here at home must keep that in mind and focus on practical, all-of-the-above strategies. Policymakers should take into account a number of realities about proposals on the table:
First, bolstering our energy security is more important now than ever. Despite this, some politicians continue to insist that we have to choose between energy and the environment. That simply isn’t true. Attacking fossil fuels in the name of the environment might feel good to some activists, but the reality is that it hurts America’s economic interests and even threatens the transition to a cleaner energy future. As one market analyst explained, “The strongest engine of the global energy transition is the rapidly reducing costs of solar and wind energy,” not tearing down oil and gas.
Yet the relentless attack on America’s domestic oil and gas industry continues and the insistence on a “Renewables-Only” approach defies reality. Oil and gas demand is on the rise as we enter winter and will continue to stay strong in the near future. The Energy Information Administration’s Short Term Energy Outlook predicts that U.S. gasoline consumption this year will represent only a slight decrease from 2021 and will remain that way in 2023. Meanwhile, U.S. consumption of natural gas is expected to rise from 2021 levels, reflecting more consumption across almost all sectors. And a National Renewable Energy Laboratory study found natural gas the most reliable and cost-effective method to fill the gaps left behind by intermittent wind and solar. A reliable, sustainable approach requires “all-of-the-above” solutions.
Second, a proposed windfall profits tax would make matters worse. One of the industry’s loudest and most predictable critics is California Governor Gavin Newsom, who is pushing a new windfall profits tax on the oil and gas industry. Others have also suggested the same Carter-era policy at the federal level. These approaches are not helpful solutions to fix market imbalances. In fact, past evidence shows a policy like this only makes matters worse by reducing domestic supply, resulting in price increases. Not helpful.
Third, another policy proposal is to fix our supply issues by keeping supplies here at home. The White House recently asked the Energy Department to evaluate the potential impacts of a ban on gasoline, diesel, and other refined petroleum product exports. But while keeping energy products in the US might seem like common sense, the global energy trade is complicated, with a ban on exports likely hurting the U.S. more than it helps.
The reality is that U.S. resources play a complicated role in the global market when it comes to both exports and imports. For example, the U.S. mainly exports light, sweet crude oil, while our Gulf Coast refiners are optimized to process heavier crudes that we import. In the first half of 2022, the U.S. averaged nearly 6 million barrels per day of exports to our allies overseas. If exports are banned, those supplies would be stranded, decreasing the global oil supply and putting more upward pressure on global product prices. The U.S. could also face backlash, including losing access to some imports we rely on heavily to produce everyday goods.
Finally, some lawmakers are proposing to confront OPEC with new laws that threaten antitrust lawsuits against Saudi Arabia as payback for recent oil production cuts. This approach might grab some headlines but would do nothing to secure our future supply of energy, nothing to reduce prices, and would only invite retaliation from OPEC countries against American businesses.
To achieve the energy security we all want and to win the fight on climate, the U.S. must increase energy supply by facilitating greater domestic natural gas and oil production. As leaders gather at COP27, they just remember that we can’t win on climate and stabilize gas prices without all options on the table.
Tom Magness, a retired Army colonel, formerly served as a commander in the U.S. Army Corps of Engineers.
Originally published by RealClearEnergy. Republished with permission.
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