Thus far in 2022, political actors and their acolytes are dusting off, again, every bad idea that has ever permeated political debate in the United States regarding energy. Among them:
• Price caps, which do nothing to provoke demand response or salient investment.
• Export bans, which only shrink the global supply pie, worsening price pressures.
• Tapping strategic oil reserves, originally reserved for emergencies – a tactic too often deployed to manage or attempt to manage prices.
• Appealing to OPEC (and OPEC+) to open spigots while also investigating and/or invoking sanctions against, and/or attempting to legislate against, OPEC.
None of these are new, or even clever, or even useful, but they are being presented to voters here and abroad as such.
Allow us to suggest a simple fix.
To the fearful leaders in our country: step out on your turf and support the domestic oil and gas industries in ways that will build investor confidence and calm markets. There simply is no other way to meet the future without a strong domestic base for energy and materials. Others will take note, including troublemakers we face now and those we’ll face in the future.
There is a persistent lack of comprehension of the global oil and gas businesses and underlying economics and dynamics that drive them – and a deteriorating awareness of what it takes to provide oil and natural gas and achieve some reasonable balance in global markets.
Activists and policymakers are so anxious to move beyond hydrocarbons that they have lost any understanding about what the fossil-fuel industry does for a living. They are ignorant of the sheer contradictions between aligning against fossil fuels while supporting widely espoused values like “affordable” energy.
We could say the same about critical minerals, which underlie every green imperative. Awareness is equally lacking when it comes to what the mining and beneficiation businesses and materials science, chemistry, and engineering clusters do for a living every day.
For these failings, there are no excuses. Modern societies are more literate and better educated, with information and knowledge easier to grab across more platforms, than ever before. This means that a more fundamental problem permeates the policy and decision-making spaces. Attitudes, narrow thinking, blinders, siloes, “carbon tunnel vision,” emissions obsessions, the rise of “spreadsheet decarb” modelers – call the culprits what you will – are blocking sound analysis, pragmatic positioning, and common sense.
The combination of these painful gaps makes for dangerous situations. The dangers permeate the domestic and global economies, fracture delicate geopolitical chessboards, create fissures in societies, and threaten quality of life and even human existence in too many places.
A kind of hysterical amnesia seems to have overtaken policymakers and influence leaders, especially among the nations that make up the prosperous Organization for Economic Co-operation and Development (OECD) – an intergovernmental organization with 38 member countries. In the history of the world, no major energy source has declined in absolute volume. We use more wood and assorted biofuels today than at any time in history (while consuming a smaller share of energy supply). The density of modern fossil fuels has been the primary force in building modern economies. Today’s energy system is complex and massive, and it operates at a scale little appreciated in political debates.
Yes, we can move to the fuels and technologies of the future, but the current crisis reinforces the obvious conclusion: doing so will take a very long time.
The U.S. remains the world’s largest oil and gas producer. American operators extract, process, and distribute these supplies efficiently with an array of advanced technologies. Full integration with the global trading system keeps the entire North American production platform operating efficiently. It may not be the full remedy to solve current imbalances, but our resource endowment is sufficient to expand these so-called “legacy” fuels far into the future.
From 2010 to 2019, U.S. production alone provided over 80% of the supply for rising world requirements for liquid petroleum fuels. The U.S. has emerged as the world’s largest exporter of liquified natural gas (LNG). Potential for further increases is promising.
We may not know what the future holds, but we should bet that healthier and wealthier humans have a far better chance of dealing with whatever comes our way. The lessons of Occam’s razor apply. We need more supply, for an indefinite timeline. Much more important, we need confidence in our domestic industry to achieve it.
Michelle Michot Foss is Fellow in Energy, Minerals & Materials at Rice University’s Baker Institute for Public Policy, Center for Energy Studies.
Lucian Pugliaresi is president of the Energy Policy Research Foundation.