Pain at the pump. Home heating sticker shock. Breathtaking natural gas price spikes in Europe. And blackouts in Asia. The global energy crisis shows how reliant the world is on fossil fuels – and muddies the case for aggressive climate action.
The risk for Democrats is that high energy prices – and America’s biggest inflation scare in at least a dozen years – makes voters suspicious of efforts aimed at ridding the world of fossil fuels. And that’s a problem for the White House because President Joe Biden ran on the most aggressive climate agenda in US history and has set a goal of carbon-free electricity by 2035.
Yet the path to that ambitious target is made more challenging by high oil, natural gas, gasoline and even coal prices. Republicans have argued moving too quickly will raise costs even higher on Americans and needlessly kill jobs.
“There’s a genuine threat of a backlash against the green movement,” said Greg Valliere, chief US policy strategist at AGF Investments. “Most people agree with the goals, but their good intentions tend to fade when they look for something to blame.”
$3 gas adds to inflation fears
Regular gas now fetches a seven-year high of $3.32 a gallon nationally, up 5 cents in a week, according to AAA. Gas averaged just $2.17 a gallon a year ago, a time when fewer people were driving, flying and commuting.
Americans despise high gas prices, and – fair or not – tend to blame them on whoever is in the White House.
“You can argue this isn’t Biden’s fault, but he’s the president,” said Valliere. “If you’re the quarterback and the team isn’t doing well, you get a disproportionate amount of the blame, whether you deserve it or not.”
More than perhaps any other good or service, consumers view gas prices as a proxy for the cost of living.
“You stand there and watch the LED screen add up every dollar,” said Ed Mills, Washington policy analyst at Raymond James.
$3.30 gas is only amplifying inflationary fears rippling across the United States. Consumer prices surged by 5.4% in September, tied for the fastest 12-month pace since 2008. The energy crunch, along with a supply chain nightmare around the world, threatens to keep inflation elevated for months to come.
National gas prices spike – especially in Europe
It’s not just gasoline prices creating angst right now.
Natural gas prices have surged to levels unseen since 2008, leading the US Energy Information Administration to warn of sharply higher home heating costs this winter.
China is also dealing with a power shortage that has led to blackouts and shuttered factories.
In Europe, natural gas prices have skyrocketed much further, setting new all-time highs. The continent is grappling with a full-blown energy crisis, forcing some factories to suspend operations.
The International Energy Agency recently said the natural gas spike in Europe has been driven by a confluence of factors, including strong demand, tighter-than-expected supply, cold temperatures last winter and “lower-than-usual availability of wind energy.”
“Well-managed clean energy transitions are a solution to the issues that we are seeing in gas and electricity markets today – not the cause of them,” IEA Executive Director Fatih Birol said in a statement late last month.
‘A warning sign for what could happen here’
Still, critics of the climate provisions in Biden’s sweeping economic package have pointed to the experience overseas as a cautionary tale for the United States.
“In Europe, there has been a very fast rush to the energy transition. I would argue it was too fast,” Mike Sommers, the president and CEO of the American Petroleum Institute, told CNN earlier this month. The API, the oil-and-gas industry’s powerful trade group, is fighting tooth and nail to kill or scale back climate provisions in the $3.5 trillion plan.
“Lawmakers in the United States should pay close attention to what they are seeing in Europe as a warning sign for what could happen here,” Sommers said, adding that other factors are also at play in Europe, including Russia being a “difficult actor.”
The key program Democrats hoped would accelerate the energy transition in the United States may now be kept out of their massive economic bill after pushback from Sen. Joe Manchin of West Virginia. Congressional sources told CNN late last week that the Clean Electricity Performance Program, which aimed to replace coal and gas-fired power plants with solar, wind and nuclear energy, is likely to be cut from the legislation.
Mills, the Raymond James strategist, said high energy prices are also probably the “death knell” for efforts to raise revenue for the larger package through a carbon tax.
Beyond that, Mills doesn’t think the global energy crisis will change many minds in the current debate.
“If anything, it just makes it more complicated,” said Mills, adding that “all parties will dig into their existing positions.”
Making the case for clean energy
Indeed, proponents of climate action view high energy prices as proving their point for why the world needs to say goodbye to fossil fuels.
“We are dependent on volatile fossil markets – but we don’t have to be,” Trevor Higgins, senior director of domestic climate and energy policy at the Center for American Progress, a liberal think tank, told CNN. “Switching to clean energy is actually a way to protect ourselves from increased costs.”
Higgins compared the situation with that of an investor who puts too many eggs in one basket.
“Just like how an investor will diversify his or her portfolio, our energy system needs to diversify its resources so that we have redundancies,” Higgins said.
For instance, a key part of the Biden climate agenda is a push to accelerate adoption of electric vehicles through tax credits and investments in battery technology.
The logic behind supporting EVs makes even more sense at a time when Americans are paying high gas prices. Further EV adoption should ease demand for gas, keeping prices from going higher.
Flooding, hurricanes and heatwaves
Another complicating factor in the climate debate is the role that extreme weather has played in limiting supply of fossil fuels.
Flooding has wiped out coal production in China, contributing to that country’s energy shortage.
Heatwaves in the United States drove up electricity usage this summer, depleting natural gas supplies heading into this winter.
Hurricane Ida knocked offline nearly all of the Gulf of Mexico’s oil-and-gas production and disrupted the region’s refinery activity late this summer.
“Climate change is part of why prices are high,” said Higgins. “If we stick to oil-and-gas dependence, we will make the climate crisis worse and cause more disruption from more heat and stronger hurricanes.”
Yet it remains an open question whether Democrats can credibly make that case.
Republicans may find it far easier to pitch the merits of more drilling to combat high gas prices.
“For those who want climate provisions, they will have to sit there and explain higher gas prices,” said Mills. “And in politics, when you’re explaining, you’re losing.”