Politicians like to talk about how the U.S. should boost our domestic oil and gas drilling which would lower prices and make us less dependent on “foreign oil.” They pretend that more drilling will lower gasoline prices, but that’s just not how it works.
Since 2008, oil and gas production in the U.S. has boomed thanks to new technology such as horizontal drilling and hydraulic fracturing (fracking). We are now producing over twice as much crude oil and about 70% more natural gas than in 2008, and in 2019 the United States finally achieved that favorite buzz phrase of politicians: “energy independence.”
But if that’s true then why are gasoline prices sky-high? What happened? It’s a complex question, but part of the answer has to do with exports.
The first thing to know is that living in an area that produces a lot of oil and gas does not mean that we get a discount on high prices at the pump. Crude oil is traded all around the world and the price is set by the global market. So when Russia invaded Ukraine and many countries responded by refusing to import Russian oil, that sent a price shock through the oil market, directly leading to $6 per gallon gasoline here in the U.S.
Crucially, our “energy independence” did nothing to shield ordinary folks from this shock. Crude prices went up here, same as everywhere, because crude markets are linked. If a local U.S. driller can get a higher price by exporting their oil and selling it overseas, they’re going to take it. In a corporate-dominated market system, the oil always flows where it will generate the biggest profits. Currently oil companies are enjoying high profits, and they are not able or willing to rapidly increase production. Even if they did boost production, the added U.S. oil would only be a “proverbial drop in the bucket in the 100-million-barrel-per-day global oil market.”
The U.S. used to have a ban on crude oil exports, but Congress and President Obama lifted that ban in 2015. Since then, access to international markets has been one of the driving factors in the recent U.S. production boom and we now export around 3 million barrels of crude oil per day. At the same time, export shipments of liquefied natural gas (LNG) went from almost nothing in 2016 to over 3,500 billion cubic feet in 2021. In particular, these new export markets have super-charged drilling in the Permian Basin in Texas and New Mexico.
(To make matters even more complicated, the U.S. is also still a big importer of crude oil, largely because U.S. refineries are optimized for a heavier grade of crude than what is commonly produced here. This means that reinstating a crude export ban would dial back U.S. production and lower greenhouse gas emissions—a very good thing—but it probably wouldn’t immediately lower gasoline prices. However, rising natural gas exports do seem to be a factor driving up domestic natural gas prices.)
Thanks to these developments, the U.S. oil and gas industry is now fully integrated into the global market. The spike in oil prices due to the Russian invasion has been great news for Big Oil, which is reaping tens of billions in additional wartime profits, but it is putting the pinch on ordinary people, many of whom are still recovering from the pandemic downturn.
It is a bitter reminder that fossil fuels are among the most expensive and volatile sources of energy we have. Our reliance on fossil fuels is driving up inflation, in addition to fueling wars, driving the climate crisis, and spewing health-damaging air pollution. What’s worse, price spikes from the periodic “boom and bust” cycles of the oil industry are difficult to predict and even harder to protect yourself against.
The best thing we can do is to get off fossil fuels as fast as possible.
President Biden’s Executive Action Spurs Domestic Clean Energy Manufacturing
In June, the Biden administration announced that it will use the Defense Production Act to support clean energy, and this move to help unlock the potential of renewables is what we need more of to address the climate crisis, create a better future for our communities, support domestic manufacturers, and aid our allies abroad by weakening the fossil-fueled war in Ukraine.
This announcement demonstrates President Biden’s ability to ramp up the transition to renewable energy. Now he needs to go even further by invoking the Defense Production Act across all clean energy sectors, declaring a climate emergency, and addressing the root of the climate crisis by beginning an immediate and equitable phaseout of domestic fossil fuel production.
President Biden must articulate a clear vision for phasing out both fossil fuel production and consumption over the coming years. This includes keeping his campaign promise to end fossil fuel leasing on federal lands and waters, and rejecting permits for any new pipelines, export terminals, or other fossil fuel infrastructure.
Climate policy should aim to reduce both the supply and demand for fossil fuels in tandem. If the U.S. were to focus only on reducing our own fossil fuel consumption, while allowing production and exports to surge, that could spur greater emissions overseas and undermine our efforts here at home. If the oil industry gets its way, this massive buildout of infrastructure could lock the world more deeply into reliance on fossil fuels well beyond the date when we must shift to renewable energy. Every new terminal and pipeline that gets built makes it that much harder—economically, legally, and politically—to transition away from fossils as fast as we need to.
The war in Ukraine has exposed fossil fuels as a destructive dead end. Now more than ever we need to put them behind us and move forward into a future built on renewable energy and justice.