Tackling Inflation Requires Energy Clarity

Brigham McCown
Brigham McCown
Senior Fellow and Director, Initiative on American Energy Security
Turbines from the Mount Storm Wind Farm stand in the distance behind the Dominion Mount Storm power station August 22, 2022, in Mount Storm, West Virginia. (Chip Somodevilla/Getty Images)
Turbines from the Mount Storm Wind Farm stand in the distance behind the Dominion Mount Storm power station August 22, 2022, in Mount Storm, West Virginia. (Chip Somodevilla/Getty Images)

Today’s economic and security headwinds have extended into the energy sector, where prices have outpaced inflation while production remains below pre-pandemic levels. Natural gas prices have more than doubled and are expected to increase further as we appropriately move to shore up our European allies with natural gas made necessary by Russia’s weaponization of energy. Similarly, crude oil prices have also dramatically increased, and recent modest declines still leave prices for gasoline, diesel fuel, and other oil products priced well above pre-pandemic levels. The reason for this imbalance is simple, demand has returned, but oil and gas production has not.

What has become clear is the continuing requirement for an “All the Above” approach to energy markets, as neither fossil fuels nor renewables alone can meet demand today. As global energy markets seek to rebalance supplies to match demand, the strength and longevity of fossil fuel dominance remain undeniable as these fuel sources remain necessary to stabilize grids and meet baseload power requirements. Before recent market disruptions, fossil fuel’s role was understated and perhaps underappreciated. In Europe, the policy had successfully leveraged supplies of inexpensive Russian oil and gas to subsidize growth in renewables. Simultaneously the U.S. replaced dependencies on Middle Eastern oil and natural gas by ramping up domestic oil and gas production made possible by fracking while at the same time leveraging private sector innovation in renewables.

We must focus on the root cause of these economic headwinds: the ability to provide the best mix of energy today and into the future. By doing so, the Biden Administration can effectively address core inflation, provide reliable energy supplies to our allies, and simultaneously reduce geopolitical risk and instability to world energy markets exacerbated by Russia’s invasion of Ukraine. This approach requires policymakers to ensure the energy mix is comprised of fuel sources that are available, reliable, and affordable while simultaneously guaranteeing the resiliency of our energy and transportation infrastructure. Resiliency means providing the right fuel source to where and when it is needed without interruption.

While the mix of renewables will undoubtedly grow over time, today’s high prices directly reflect the absence of sufficient supplies of fossil fuels in our current energy mix. Facilitating higher domestic oil and gas production by curbing excessive permitting and approval processes will address runaway energy costs – especially as we have promised to come to Europe’s rescue by providing them with fossil energy supplies this winter. Meaningful change can occur almost overnight by ordering executive branch agencies to act with a sense of urgency as the current dilatory pace is choking the country’s efficiency and productivity.

As a condition for passing the Inflation Reduction Act, Senator Joe Manchin (D-WV) demanded that Congress take up environmental permitting reform in a separate bill this year. The reason for his position is apparent as some members of his party remain singularly focused on renewables while practically assaulting the fossil fuel industry. While a conversation is highly encouraging, those uncertain of its benefits should be reminded that agency reforms are urgently needed if we are to address the current supply imbalance. Demand is back for these products, and a rational approach requires us all to address the truth that additional oil and gas supplies are urgently needed if we are to grow our economy, create jobs, and lower energy prices for the foreseeable future. Simply put, there is no time to waste.

According to a summary released by Senator Manchin’s office, numerous reforms propose streamlining the approval of both renewable and fossil projects. Manchin’s bipartisan energy permitting framework requires the President to designate 25 high-priority energy projects to expedite construction, clear maximum timelines for NEPA reviews, and complete critical infrastructure projects to increase energy production.

Democratic Congressional leaders and the White House have committed to bringing commonsense permitting reforms to a vote this fall to “ensure all energy infrastructure” can be efficiently and responsibly built. This is one area where consumers and our overseas allies expect action from Congress and the administration. Let’s hope they deliver, or we could all be in for a frigid and expensive winter.

Read in RealClearEnergy.