More Drilling Hasn’t Protected Us From High Gasoline Prices. Here’s What Will.
by Tim Donaghy
June 7, 2022
What will protect us from high gas prices, reliance of fossil fuels, and the stalling of our government? Renewable energy is the answer!
Way, way back in the summer of 2008, Barack Obama was battling John McCain for the Presidency – and gas prices were soaring. McCain’s running mate, Alaska Governor Sarah Palin, had a plan to bring down prices – “Drill Baby Drill.” The idea was that the U.S. should boost our domestic oil and gas drilling and that would both lower prices and make us less dependent on “foreign oil.”
John McCain lost that election, but the weird thing is that we basically went with the “Palin Plan” anyway. 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 buzzword of politicians – “energy independence.”
But if that’s true then why are gasoline prices sky high yet again? What happened, Sarah? It’s a complex question, but part of the answer has to do with exports.
Energy Independence Is For Rich Corporations… Not Ordinary People
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, that added U.S. oil would only be a “proverbial drop in the bucket in the 100-million-barrel-per-day global oil market.”
Politicians like to pretend that more drilling will lower gasoline prices, but that’s just not how it works.
— Senator Ted Cruz (@SenTedCruz) March 7, 2022
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, who are 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.
Exploiting the War to Lock In More Fossil Fuels
The 1992 Rio Earth Summit will mark its 30th anniversary next month. If our political leaders had taken meaningful action to fight climate change at any point in these last three decades we wouldn’t be in the mess we are today. An economy built on renewable energy would be healthier, more affordable, and more just. We’re paying the literal price today for years of political failure. This moment could be different – but the industry is moving quickly to take full advantage of the chaos.
Thanks to the Ukraine war, the energy crunch is most acute in Europe, which is heavily reliant on Russian fossil fuels. To shift away from Russian gas, the industry has proposed a slew of new projects to import more natural gas from the U.S., Qatar, North Africa, and elsewhere. But this gas stampede is a mistake. Studies have shown the European Union already has sufficient import capacity, and most new projects will take years to come online and do little to help the current crisis.
The Biden administration has promised a surge of LNG exports to help Europe, and U.S. exporters are naturally hoping to swoop in and fill the gap left by Russia. A glut of proposed export terminals along the Gulf Coast are suddenly seeing more financial interest, and new floating export terminals have been proposed. But the problem is the same on the export side: new export capacity is not needed to meet Europe’s short-term demand, and projects that will take 3-5 years to come online could face a world with a shrinking market for LNG.
If new crude and LNG export terminals are given permits, it will increase the pollution and public health burden on the Gulf Coast in addition to lighting a fuse directly to the Permian carbon bomb. Scientific studies have shown that each stage of the oil and gas life cycle brings health risks for the disproportionately Black, Brown, Indigenous and poor communities living nearby. In particular, the Gulf Coast is already burdened with a high concentration of polluting facilities.
The Way Forward
Europe is already taking action to address climate change. Conservative scenarios show declining EU gas imports over the next few decades, and more ambitious climate plans have Europe phasing out natural gas entirely by 2040. Accelerating the deployment of renewables will allow Europe to reject the Russian oil and gas imports that are fueling Putin’s war machine and avoid simply switching to another supplier, most of whom also have poor track records on human rights, pollution, and environmental racism. A new study found that the G7 nations (US, UK, France, Italy, Japan, Germany, Canada) could reduce their gas consumption by 18% by the year 2025.
Here in the U.S. some renewable solutions were included in the Bipartisan Infrastructure bill, but much more is needed to meet our climate goals. There are numerous steps that Biden’s EPA can take, especially in finalizing strong vehicle and power sector regulations, and just this week Biden took executive action to use the Defense Production Act to accelerate the manufacture of heat pumps and other renewable energy technologies. But a big piece of the puzzle is currently stalled in Congress, thanks to Senator Joe Manchin. windThe proposed clean energy tax benefits from Build Back Better will spur a build out in wind and solar and save money for families across the U.S. Biden needs to figure out a way to get the bill over the finish line.
But most importantly, 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. Because fossil fuels flow all around the globe, that means that we must work together across borders to phase them out and build the world that science and justice demand.