[Editor's note: This story originally was published by Real Clear Energy.]
By Benjamin Zycher
Real Clear Energy
Never let a crisis go to waste, as the age-old Beltway wisdom goes, but one might think that the Ukraine crisis, in which thousands of innocents are dying and losing their homes, millions have been driven into refugee camps, and in which Russian military savagery is the order of the day, might give the usual Beltway suspects pause.
Get real. Utter shamelessness is a feature rather than a bug in these politicized times, and in no context is such cynicism more blatant than with respect to the use of the ongoing Ukraine tragedy to attack the fossil-fuel industry and to promote unconventional energy hugely expensive, utterly unreliable, and environmentally destructive.
This opportunism has taken two forms. The first is the laughable attempt to blame high gasoline prices on anyone, everyone other than the Biden administration. High gasoline prices represent “Putin’s price hike,” a stance not consistent with the reality that gasoline prices have been rising since December 2020. The oil companies are engaged in “price gouging” and “profiteering,” an argument not consistent with the failure of overseas gasoline producers to drive prices down by exporting ever-more gasoline to the U.S. market, thus capturing those profits for themselves.
The fossil producers ostensibly are allowing 9,000 approved leases on federal land to go unused, an argument that ignores several inconvenient facts. Leases are not the same as permits. Litigation by environmental groups has tied up many approved leases in endless delay, as have environmental reviews required under the National Environmental Policy Act. Individual leases are not actually useable for horizontal drilling operations until a continuous leasehold is acquired and the permits granted, a general roadblock not eased by the Biden administration de facto ban on new leases. As noted by the Western Energy Alliance: Because there are 37,496 leases in effect, the “9,000 unused leases” claim implies a 75 percent utilization rate, an historic high.
In a word, all of this is balderdash, a transparent attempt to distract attention from the incoherence of the Biden energy policies, which can be summarized as an effort simultaneously to suppress long-term investment in U.S. fossil-fuel infrastructure while begging — literally — overseas producers to increase output so as to constrain the prices of crude oil and gasoline in the here and now. It is that suppression of long-term investment that explains the sharp increase in crude oil (and gasoline) prices.
But it is the second use of the Ukraine crisis that is truly perverse, to wit, the attempt to justify ever-greater favoritism for wind and solar power, electric vehicles, and the other dimensions of the “clean energy transition.” (There is nothing “clean” about it; unconventional energy imposes massive environmental damage.) The basic argument is that if only the U.S. (and Europe) were weaned off of fossil fuels, we would be insulated from the adverse energy supply effects of such foreign crises as the Ukraine tragedy.
Where to begin? Foreign crises and supply interruptions are risks, which the energy market is wholly capable of evaluating and hedging against with long-term contracts, stockpiling, and investments in substitute production capacity and supplies. There is nothing to prevent the market from substituting unconventional energy in place of risky fossil fuels, except for the considerable reality that unconventional energy is hugely expensive and unreliable. Without massive subsidies, guaranteed market shares, and other large subventions, wind and solar power simply cannot compete with conventional generation, which is why investment in such capacity collapses when a renewal of the subsidies is in question. EVs too are preposterous in terms of the satisfaction of consumer needs, which is why the market for them remains small despite enormous direct subsidies and implicit cross-subsidies created by the tightening of fuel economy standards for conventional vehicles.
In other words, the price risks of fossil fuels justify incurring some costs for insurance, the various forms of which the private sector is in the best position to evaluate. That market test demonstrates that the massive costs of a transition to unconventional energy are vastly too high; that is why Europe now is transitioning toward LNG imports in the short run, and greatly expanded investment over time in nuclear power and other conventional energy as substitutes for unreliable Russian natural gas. Are the Europeans turning toward more wind turbines and solar panels? In a word: no, as the costs of wind and solar power have become too high to ignore. And by the way: An expansion of unconventional energy will create its own set of dependencies, upon China for heavy metals and rare earth minerals, upon Russia (!) for lithium, cobalt, and nickel, and so forth. Has the Biden administration not noticed this?
Even long-term projections of primary energy use bullish on the outlook for unconventional energy conclude that fossil fuels will remain the dominant form of energy supply for decades. For the U.S., EIA projects a market share for petroleum, natural gas, coal, and nuclear power of 82 percent in 2050. For the world economy, the EIA projection for that market share in 2050: about 72 percent. Whether these projections will prove precisely correct is beside the point. The more important observation is that confident assertions by politicians and others that the Ukraine crisis will hasten a transition away from fossil fuels are not to be taken seriously.
But in a classic exercise in projection, critics of the fossil industry now are accusing it of “trying to take incredibly cynical advantage of a really tragic situation,” said Collin Rees, U.S. program manager for the environmental group Oil Change International. “It makes it all the more clear we need to break our dependence on fossil fuels around the world and that means more distributed renewables.” Actually, the fossil producers are wholly correct that price relief at the pump requires an increase in long-term investment in fossil-fuel infrastructure, and assertions to the contrary are at blatant odds with reality.
[Editor's note: This story originally was published by Real Clear Energy.]
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