What to Do – And What Not to Do – About Rising Energy Costs
Lem Smith
Posted November 2, 2021
Bad news: Energy supply crunches are hitting Americans where it hurts.
Good news: Solutions are just beneath our feet.
The fundamentals of natural gas demand outpacing supply have driven energy prices to their highest since 2014. With colder weather coming, some analysts expect a global natural gas supply crunch with potentially wide impacts this winter – including possible market tightening that could affect U.S. household budgets, drive up costs for consumers and create havoc for others.
Across the Atlantic, Europe’s ongoing energy crisis (noted recently in this blog about how the lack of North Sea wind has sent prices upward) illustrates the risks of becoming dependent on energy imports, as well as some limitations of intermittent resources. Wind power, in particular, has fallen short. Prices for coal and natural gas – both now in high demand – have risen, as have costs for manufactured goods. Electricity prices have skyrocketed.
All of this should give serious heartburn to U.S. policymakers who are leading the charge to a shaky future scenario in which Americans’ daily lives and the U.S. economy will be increasingly dependent on intermittent energy sources without being sufficiently bolstered by natural gas. We have made the case that dropping natural gas and oil from the U.S. energy portfolio – and forcing an aggressive switch to come-and-go energies – is unwise, bordering on negligence. As California’s five new natural-gas generators at power plants show, it’s also premature.
Leading nonpartisan government experts underscore a point we have been repeating and reinforcing for decades: Natural gas and oil are the world’s leading energy sources today and will be tomorrow. In fact, the U.S. Energy Information Administration last month said it expects that nearly three decades from now natural gas and oil will supply nearly 50% of the world’s energy (compared with 54.7% today).
As we navigate these waters together, a key dilemma for policymakers to ponder: Do we want natural gas and oil companies to keep working toward a cleaner energy future with government partners, other industries and fellow innovators to meet energy needs? Or do we want energy policies that could put America at a disadvantage – jeopardizing jobs, increasing costs and harming American competitiveness?
The choice is clear. A few other thoughts as Congress develops reconciliation legislation:
- We should NOT unilaterally restrict access to American energy reserves – as the administration did earlier this year with its months-long pause on new federal leasing.
- We should NOT hamstring efforts to build needed pipelines and other energy infrastructure.
- We should NOT impose punitive tax increases on the natural gas and oil sector that could increase costs, discourage investment and hinder production.
- We should NOT curb exports of American natural gas and oil to friends and allies abroad.
The solution to affordable, reliable energy is here at home.
Instead of looking to restrict access and trade and asking other countries to increase their production, the administration and Congress should continue the bipartisan tradition of promoting American energy leadership. Doing so offers the promise of jobs, security and government revenue from energy produced under environmental standards that are among the strongest in the world.
About The Author
Lem Smith is API’s vice president for Federal Relations. Lem joined API in February 2020 as vice president for Upstream Policy & Industry Operations. He previously served as a principal at Squire Patton Boggs, an international law and public-policy firm, where he advised private and public sector clients on federal and multi-state policy matters and provided counsel on communications strategies, campaign affairs and crises management. Previously, Lem was director, U.S. Government & Regulatory Affairs at Encana, and responsible for all aspects of U.S. government relations and regulatory policy matters at the state and federal levels. Prior to that, Lem was director of Government Relations for Kerr-McGee Corporation. Lem began his career on Capitol Hill, working for U.S. Senate Majority Leader Trent Lott, U.S. Rep. Roger Wicker (Mississippi) and the late U.S. Rep. Charlie Norwood (Georgia), where he negotiated key member priorities within the 2005 Energy Policy Act (EPAct). Lem is a graduate of the University of Mississippi.