What Will It Take to Stabilize Energy Costs in the U.S.?
The ongoing war in Ukraine has caused economic disruption and heightened uncertainty for western countries due to vulnerabilities they face from dependence on Russian oil and natural gas. According to a report from the World Economic Forum, “two-fifths of the gas Europe burned [in 2021] came from Russia and over a quarter of the E.U.’s imported crude oil comes from Russia.” The U.S. is largely oil and gas dependent for its energy needs, and oil and natural gas prices in the U.S. are still subject to the volatilities of the global market. Drops in the supply elsewhere have far reaching impacts on prices everywhere, regardless of Russian energy dependency. As average gasoline prices in the U.S. reach record highs, exceeding $5 per gallon, the U.S. should take this as a warning to invest more in the pursuit of other potential energy supplies to replace fossil fuels as a main energy source.
Despite market instabilities, according to the Energy Information Administration’s short-term energy outlook report, U.S. demand for natural gas will remain high as prices increase. Currently, natural gas makes up about 38% of U.S. electricity generation, with coal accounting for 22%, and petroleum 0.5%. Coal-fired power plants are expected to decrease, and nuclear generation and renewable energy resources are forecasted to significantly increase “up from a share of 20%” compared to 2021. Although efforts to produce more green energy have been rising, the U.S. must continue to invest more into innovating other major forms of energy to combat against potential short falls from fossil fuel energy sources.
The Biden Administration has taken steps to encourage the transition towards clean energy. For instance, towards the end of his first year in office, President Biden signed an executive order increasing federal funding intended to expand solar, wind, and nuclear power that can potentially help absorb a larger share of energy costs. However, these efforts still fall short, as evidenced in the U.S. failure to meet its Paris Climate Accords commitments. President Biden has also been pushing Congress for a three month gas tax holiday to temporarily suspend federal gas tax in order to stabilize the impact on consumers’ wallets. Yet, suspending the federal gas tax will make little to no long-term impact.
Thus, there needs to be greater incentives to encourage innovation within various sectors of clean energy production while providing greater access to clean fuel technology to the general public. For instance, Congress should create more legislation and promote better economic incentives at the federal level, so people from all economic backgrounds are enabled and encouraged to buy electric cars or solar panels. The U.S. should also pursue policies that help ease the burden on green trade and work with other countries to increase the efficiency and use of renewable energy. Initiatives such as these can not only help address climate change issues but also relieve economic instabilities driven by conflict abroad.
The private sector has an important role to play as well. According to the Cybersecurity and Infrastructure Security Agency, “more than 80 percent of the country’s energy infrastructure is owned by the private sector …” By this nature, government actions can have an influence, but are ultimately limited by private industries and market forces that are a significant factor in the business of energy production. Nonetheless, they must adapt to the demand for more sustainable sources, or inevitably go out of business as legislation changes and the market shifts. Consequently, companies must set more ambitious targets for low carbon emission levels and invest in clean energy projects to still provide accessible energy for both developed and developing economies. Furthermore, renewable energy companies should be partnering with fossil fuels businesses that are expected to be affected in such transitions. Essentially the best solution to protect the U.S. from the hostility of the global market is to make clean energy resources the new norm that will provide a more stable market.
For now, the future of energy security is still uncertain as the ongoing war in Ukraine combines with the inherent unpredictability of oil and gas markets. Russia’s invasion has been a wake-up call for the U.S. to start steering away from fossil fuel industries and promote innovation in the renewable sector. The U.S. and the world can either seize the opportunity to accelerate the transition to cleaner and more stable energy markets or continue to pay the increasing costs of inaction.