Analyst: Canceling Keystone & oil, gas leases not to blame for current high energy prices — Real cause? ‘Endless repetition’ of myths of inevitability of ‘energy transition’ – Energy investing ‘too risky in current political environment’
By Michael McKenna
In the last few weeks, much of the rhetoric about energy has focused on President Biden’s cancellation of the Keystone XL pipeline and his de facto suspension of new oil and gas leases. Those are great as far they go, but they don’t really have anything to do with current high oil prices, the looming global problem of durably high oil prices, or the European catastrophe of high prices for natural gas.
It probably would be better if we focused on the real pathologies that Team Biden nurtures concerning federal energy policies.
The most significant feature of the landscape that retards and complicates energy production is the endless repetition of the propaganda about the utility of alternative energy sources, the possibility of net-zero greenhouse gas emissions and the inevitability of an “energy transition.” These foundational myths have led directly to our current problems.
Those involved in finding and producing the fuels that power the world — coal, oil and natural gas — are concerned that our government might be serious about creating an electricity system entirely dependent on solar or wind power or outlawing gasoline or diesel-powered cars or trucks. How can anyone blame them when that is all they hear?
Consequently, these businesses have underinvested in oil and natural gas over several years. In 2014, the world spent about $490 billion finding and producing oil and natural gas. In 2021, that amount was just $220 billion.
Despite high prices, growing demand (as countries and people become richer, their demand for reliable energy increases) and shrinking supplies, these companies are disinclined to rush to produce more oil. They listen to their government and conclude that such investments and actions — which require years to pay off — are simply too risky in the current political and social environment.
In tandem with governments introducing unnecessary risk into the system, one of the latest fads on the left is the “environmental, social and governance,” or ESG movement, in which large companies and financial institutions — under pressure from the left — promise to be environmentally sensitive, diverse, inclusive and whatever.
Team Biden has moved aggressively to harness those efforts for its own purposes. It wants to require companies, especially energy companies and banks, to assess the risks posed by potential climate change. (They can ignore the risks posed by rapacious governments). The Biden administration has made sure that its appointees to the Securities and Exchange Commission, the Treasury and other financial regulators are committed advocates of the ESG-climate complex.
It has not helped that financial companies such as BlackRock, which will make money off whatever the federal government does to increase the price of energy, have managed to install their stooges on the boards of energy companies (like ExxonMobil). That also has made energy companies less likely to invest in oil and natural gas energetically and without hesitation.
There are, of course, specific government actions that exacerbate all of this.
For example, we could export more liquefied natural gas to Europe if the Department of Energy and the Federal Energy Regulatory Commission would process and approve in a timely manner applications for LNG terminals and the pipelines that will feed those terminals. Every day of delay is another day that the EU relies on Russian natural gas.
Closer to home, the Environmental Protection Agency recently issued a rule mandating the composition of the automobile fleet. That rule will increase the average cost of a new car by at least $1,000. Those who buy crossovers, SUVs, trucks and performance vehicles will pay much more than that because they will subsidize the purchases of smaller cars.
The rule also creates a de facto electric vehicle mandate (17% by model year 2026!), the burden of which will be borne by consumers.
Delaying LNG permits, increasing the costs for new cars and trucks, and mandating the purchase of electric vehicles through federal rule would not have happened in the absence of the fundamental and foundational myth of the possibility of a world run on alternative energy.
Those who want to do something meaningful about energy prices should start to contest the fundamental thesis that the world will transition away from coal, oil and natural gas anytime soon. They should emphasize that traditional fuels are and will be essential to our way of life and standard of living for decades to come. They should prevent government actions that create an environment where people and companies hesitate to invest in finding and producing affordable and reliable energy.
Voters will be focused on energy and energy prices into the indefinite future. Now is the ideal moment to scrutinize the “transition,” the role of the pressure groups in investing, and how government distorts and obstructs energy investment.
• Michael McKenna, a columnist for The Washington Times, is the co-host of “The Unregulated” podcast. He was most recently a deputy assistant to the president and deputy director of the Office of Legislative Affairs at the White House.