Wind power in Texas. Interstate 40, Adrian, Texas
Paul Harris | Photo archive | Getty Images
After the Russian invasion of Ukraine, energy prices jumped. On March 6, U.S. crude oil prices reached $130, the highest since July 2008. About a week later, U.S. gasoline prices hit an all-time high of $4.33 a gallon. Around the same time, natural gas futures in the European Union hit a record high of €345 per MWh.
Since then, gas and natural gas prices have fallen from their highs, and gas prices should eventually come down, albeit more slowly than President Joe Biden would like.
Higher and more volatile energy prices will catalyze individual and global efforts to decarbonize energy networks, which is critical to achieving climate change goals. But energy prices alone won’t be the tipping point that forces society to switch to cleaner energy sources, experts say. Government intervention and widespread education are also critical.
Oilers will drill more
If oil prices remain high, it could lead to a rush to produce more oil as hydrocarbon companies look to cash in on the higher price, according to John Larsen, a partner at Rhodium Group. leads research on the US energy system and climate policy.
In turn, this can lead to oversupply and ultimately lower prices.
This is exactly what Energy Secretary Jennifer Granholm called for when oil cost $109 a barrel and gas cost $4.25 at a gas station.
“We are under martial law – in an emergency – and we must responsibly increase short-term supplies where we can right now to stabilize the market and minimize harm to American families,” Granholm said, speaking to energy industry leaders in Houston earlier. in March. She went on to urge leaders to produce more oil and gas.
Increasing fossil fuel production runs counter to strong calls for decarburization to slow global warming. But this is temporary and therefore reasonable, according to Larsen. “Personally, I don’t think it will jeopardize long-term climate goals if there is serious commitment to move from here to this move,” he told CNBC.
In addition, the oil and gas industries face the same tough job market as the rest of the country, and as such, they may find it difficult to ramp up oil digging and production as quickly as they would like.
“Like almost everywhere in the US, the workforce is really in short supply. It’s hard to hire people, hard to get equipment. Supply chains are very tight.” — Ryan Kellogg, faculty member, Energy Policy Institute, University of Chicago. (EPIC) and a professor at the Harris School of Public Policy, told CNBC. Total unemployment fell to 3.8% in February, according to the Labor Department.
Consumers will seek greater efficiency
High gas prices at the gas station will motivate consumers to switch from a conventional car to other modes of transport, whether it’s an economy car or an electric car, Kellogg told CNBC.
“These higher prices — even if they are short-lived, just subject to this higher price volatility — will make consumers think about alternatives,” Kellogg said.
It can be difficult for consumers to find an electric car, even if they want to. Inventories of new cars and trucks, including electric vehicles, are very low, also due to supply chain problems.
Frank Dahlin, President and CEO of Telemark, a luxury building services company he founded with his brother Roy in 1978, specializes in energy efficient construction of renewable energy homes on New York’s Long Island. Rising energy prices are generating interest in its services, but it is more important to educate consumers about the money they can save by increasing inefficiency.
“I think education is the most important thing,” Dahlen told CNBC. “We justify all the costs,” Dalén said, meaning they clearly explain how many years it will take before the client gets their money back. “And it was very successful.”
Investors take a fresh look at renewable energy
“Other things being equal over the medium term, higher prices are good for clean energy,” Larsen told CNBC.
In addition to the benefits of decarbonization, clean energy investment is also becoming attractive as a way to protect the US economy from fluctuations in energy prices due to geopolitical changes.
Drill Drill will help with pricing now, next year, Kellogg said. geopolitical oil shocks.
While conditions make new energy infrastructure more attractive, changing existing technology faces resistance simply because it is new and needs to be changed. According to Steve Krolius, president of Carbon Neutral Consulting and a former climate advisor at the Clinton Foundation, higher energy prices are helping to reduce the anxiety and risks associated with investment. Crollius advises entrepreneurs and project developers interested in investing in alternative fuel sources.
“If any of them are feeling anxious, then they are probably less anxious,” Krolius said. “The mountain to climb gets much smaller.”
government needed
While more volatile and higher energy prices will typically catalyze renewable energy investment for consumers and large investors, price differentials will not be enough to drive a full transition to a clean energy economy.
“The only thing that really speeds up the deployment of technology to the scale you need is something like heavy EPA regulations on vehicles and power plants, combined with tax incentives, as in Make It Better Than It Was,” said Larsen, citing Biden’s Policy Agenda, which included more aggressive climate provisions. The bill languished in Congress after it was opposed by Senator Joe Manchin, D.-W.Va.
While renewable energy installations are accelerating, Rhodium forecasts show that investments need to be double the 2021 record levels every year through 2030 to cut CO2 emissions from electricity generation by 80% – a milestone on the path proposed by the White House to switch to 100% clean energy by 2035.
“I don’t understand how this catalyzes the change in fossil fuel prices,” Larsen said.