Energy price spikes show need for continued conventional fuel investment
Energy prices are spiking as 2021 comes to a close and winter creeps in. Rising prices for gasoline, natural gas, home heating oil and propane are going to make this an expensive winter in New Hampshire.
The U.S. Energy Information Administration (EIA) has predicted that natural gas prices will be 27% higher this winter, home heating oil 33% higher, and propane 49% higher.
The Consumer Energy Alliance projects that these higher prices will cause Americans to spend $13.6 billion more for energy this year.
Why? Demand for energy is rising faster than the supply of fuel. The economic slowdown caused by the pandemic prompted oil and gas companies to scale back production. The surprising speed of the economic recovery has sent demand surging.
“A lot less product is available to meet this now rapid growth we’re seeing,” Exxon Mobil Corp. Chief Executive Darren Woods said last month, The Wall Street Journal reported.
The International Energy Agency reported in its World Energy Outlook last month that the world is underinvesting in energy production.
It reiterated that point in its October Oil Market Report, writing that “the world is not investing enough to meet its future energy needs. Transition-related spending is gradually picking up, but remains far short of what is required to meet the rising demand for energy services in a sustainable way. At the same time, the amount being spent on oil appears to be geared towards a world of stagnant or falling demand.”
In addition, reduced natural gas production has sent natural gas prices so high that industries around the world are switching to dirtier-burning oil and coal, the IEA reported.
Every environmental activist group that successfully blocked a fracking project or a new natural gas pipeline, or successfully pressured a company or government to reduce natural gas production, can take partial credit for increased oil and coal emissions this year. Well done.
President Biden’s changing positions on energy production offer a nice illustration of how environmental rhetoric collides with economic reality.
Caving to pressure from radical environmental groups, candidate Biden promised to ban new oil and gas drilling on federal land and to focus on rapidly transitioning away from fossil fuels. But the Biden Administration is actually approving new leases. And the president has responded to surging fossil fuel prices by urging G20 countries to boost production and calling on OPEC and Russia to produce more oil.
This is in direct conflict with climate pledges. The IEA calculates that global oil and gas investment is down roughly 26% this year — and will need to stay there for years, before dropping further, to reach the goals of the Paris Accord, which Biden in January committed the United States to rejoining.
Major investments are being made in renewable energy production, which is great. But that sector still accounts for only 12% of U.S. energy production, according to the EIA. Petroleum accounts for 32% and natural gas for 36%.
If energy demand were shrinking, then investments in additional oil, gas or nuclear production would be of questionable value. But demand is growing and is projected to continue growing both domestically and globally. Since neither renewable nor nuclear power is ready to fill the country’s immediate and short-term energy needs, it falls to fossil fuels to plug the gap.
Nuclear should be a bigger part of this mix. Again, we can thank environmental activists for playing a large role in limiting the growth of the nuclear power industry.
One day, humans might fill all of their energy needs without burning things. But it is not this day. And it won’t be a day that arrives anytime soon.
As humans strive to achieve that laudable goal, civilization will continue to require power. Generating that power will require fuel that can be converted to reliable, affordable energy now, not 50 years from now.
Pretending that this isn’t true will not help anyone. It will only hurt people as it causes either ongoing price increases or energy shortages, or both.