While there is general agreement in the scientific community that the world’s climate is changing, the impact of human activity on the acceleration rate is debatable. President Biden has set his energy policy on the belief that human use of fossil fuels must be eliminated. However, because of current world events, he must reverse his energy policy -- immediately.
Biden believes that the carbon emission from fossil fuels is adding significantly to the rate of change in the climate. As such human’s must generate their energy cleanly. As soon as he was sworn into office, he began to implement his policy.
Unprofitable, Record Inflation
In order to reduce the use of fossil fuels, he took action to reduce the supply. In the short term, he ending drilling on public lands and ended drilling in Anwar off of the Alaska coast. In addition, he added regulations essentially designed to slow production and further reduce supply.
In the longer term, Biden cancelled the Keystone XL pipeline. That action signaled to the business community that the oil industry would not be profitable in the future, meaning there would be very little new investment.
The problem with Biden’s policy is much of country and the world depend on fossil fuels for energy. That means the reduction in supply would lead to higher prices and would have some geopolitical complications. Both the price issues and the geopolitical issues are being seen today.
Biden’s actions that reduced supply coupled with the increased demand as the economy recovered from recession, meant prices skyrocketed. Energy prices rose 30% to 40% in one year. That hit consumers hard. Had Biden not implemented his policies, energy prices would have increased by less than half of what actually happened.
It also hit business hard. Coupled with wage inflation due to the labor shortage, rising energy prices pushed up production costs and eventually product prices. Overall consumer inflation soared to 7.5%, a 40-year high.
The reduction in domestic supply also meant the US would no longer be energy self-sufficient. In fact the US would have to import oil, some of it from countries that are our adversaries, like Iran and Russia.
Crowned Russia Oil, Gas Czar
It also meant that the US could not sell excess energy, mostly liquified natural gas, to our allies in Europe. That meant those western European countries had to buy oil and natural gas from Russia which left countries like Germany dependent on Russian energy well into the future.
Germany and Russia agreed to build a second Nord Stream pipeline to easily supply Russian oil to Western Europe. Germany’s dependency on Russia oil is having an impact on Germany’s position in the current Russian-Ukrainian war.
Considering these events, the proper action for the President to take is to reverse all of those policies. He says, “I want to limit the pain the American people are feeling at the gas pump. This is critical to me.”
Releasing some oil from the US strategic reserve won’t have a significant impact on prices. There may be a few cents per gallon drop, but then prices will continue upward. Eliminating the national or state taxes on gas will somewhat help, but then there will be less funds that are used for maintenance and repair of our roads and highways.
To really hold down prices he must increase the supply by removing the counter-productive regulations, permit drilling on public lands and off the coast of Alaska and allow construction on the Keystone XL pipeline to proceed. That action would significantly reduce future energy inflation in the US.
That would not only mean US energy independence but there would be surpluses produced that would be available to our allies. From an economic and geopolitical standpoint this makes sense. However, according to Biden, this will accelerate climate change and his voters expect him to slow climate change.
Now it is a question of priorities. In peacetime, with no significant threat of war, and when the economy is not experiencing skyrocketing inflation, concentrating on slowing the rate of climate change may make sense. But that is not the case today.
Biden should set reducing inflation and helping to create a more peaceful world as higher priorities than climate change. Failure to do so will lead to further, more difficult, problems.
Michael Busler is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in Finance and Economics. He has written op-ed columns in major newspapers for more than 35 years.
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