Oil and natural-gas prices spiked after Iran-backed Hamas invaded Israel over the weekend. With the supposed transition to “net zero,” some might expect the prices of electric batteries, wind turbines, and solar panels to follow suit, but they appeared to be unaffected. This underscores the obvious: Global economies are driven by the prices of fossil fuels, not by the prices of renewables.
This is all the more reason for President Joe Biden to change his policies on domestic oil and natural-gas production. America can be the world’s largest supporter of oil and natural gas, and it can ramp up production to offset cuts in oil production from Iran and the rest of the Middle East.
Biden campaigned on a platform of getting rid of fossil fuels, and he put his campaign promise into practice when he became president by using what he described as the “existential threat” of climate crisis as an excuse. Without legislative backing from Congress, he has used his executive-branch power to reduce oil exploration and production, and made it more difficult to transport oil and gas to where they can be used in the country and to where they can be exported.
With Iran-backed Hamas attacking Israel, and with Russia still at war with Ukraine, this needs to change. Higher oil prices increase revenues for Iran and Russia, giving these countries more funds for aggression.
Biden can use these new wars to announce that he has changed his policies on U.S. domestic oil production. The Democratic policy is a fragile coalition of green environmentalists and blue-collar workers. Biden has been siding with the greens over the blues, but the attacks in Israel give him a reason to change.
This would help Biden in three ways. First, announcing a new policy on onshore and offshore drilling would immediately lower prices before another drop of oil is produced, because prices are set on expectations of future production rather than on current production.
Second, these lower prices would reduce the price of gasoline. These are the costs that blue-collar Americans see many times a day as they drive to work or on errands. Biden’s popularity would increase if gas prices were lower.
Third, energy prices drive up the prices of goods throughout the economy. Although energy-price increases rose at a slower rate in September than in prior months, almost 75 percent of the increase in the final-demand-goods component of September’s Producer Price Index, released on October 11, was due to the price of energy. Americans are rightly concerned about inflation, and lower energy prices mean lower inflation.
In addition, although it may shock many greens, higher prices thanks to the focus on renewables and discouragement of oil and gas production (and the higher costs for electricity and transportation that they have brought in their wake) will bring practically no climate benefits. Even completely eliminating all fossil fuels from the United States would result in less than 0.2 degrees Celsius in temperature mitigation by 2100, according to research using the EPA’s own climate models.
This is because in order to produce supplies of renewables, China is increasing its construction of coal-fired power plants. America has 225 coal-fired power plants, and China has 1,118 (half of all the coal-fired plants in the world). China has increased carbon emissions by over 5,000 million metric tons over the past 16 years. In contrast, America’s carbon emissions have declined by over 1,000 million metric tons over the same period due to the use of cleaner natural gas.
Energy prices are higher not only due to decisions over onshore and offshore oil leases, but also due to actions by executive-branch agencies, including the Environmental Protection Agency, the Council on Environmental Quality, the Office of Comptroller of the Currency, the Securities and Exchange Commission, and the Federal Energy Regulatory Commission.
The EPA has proposed new, expensive rules for power plants, driving up the costs of electricity that would be needed to charge larger planned numbers of electric vehicles. The EPA plans to regulate carbon dioxide and other greenhouse-gas emissions from both new and existing natural-gas and coal-fired power plants, and to require carbon-capture systems or a switch to hydrogen fuels.
The Office of the Comptroller of the Currency, which regulates banks, has appointed a chief climate-risk officer to assess and to monitor climate-driven risks to banks, including loans for pipelines and power plants. Monitoring climate risks to bank lending and assets will discourage investments in fossil fuels and will allow the investigation of companies and banks that OCC believes are making the wrong investments.
Securities and Exchange Commission chairman Gary Gensler has proposed rules to require companies to disclose information about so-called climate risks and events. This rule would make it more difficult to get capital for fossil-fuel investments, such as pipelines and drilling rigs, and so reduce America’s energy independence.
It should be noted that even proposing rules such as these sends a signal that oil and gas companies will not fail to notice: That signal will not encourage them to increase production.
Americans, particularly the poor, farmers, and blue-collar workers, are paying a high price for this energy agenda. The Iranian-backed Hamas attacks on Israel give the president an excuse to take on the greens in his party, help the blues, and pivot to a policy that would strengthen our allies and stop enriching our enemies.
This piece originally appeared in the National Review on October 13, 2023