Democrats must limit oil shocks along with climate risks
Energy issues are defining U.S. consumer, economic and security challenges more profoundly than any time since the oil embargoes of the 1970s. Russia’s invasion of Ukraine has placed enormous pressure on global oil and natural gas supplies, driving up prices around the world, and exacerbating already high domestic inflation, with U.S. consumers facing new record gasoline prices of more than $4.50 a gallon in part due to the new EU embargo on Russian oil this week.
Yet, the crisis comes with real opportunity. Consumer anger over energy costs and new concerns about U.S. energy security are together providing key Democrats, especially perpetual swing vote Sen. Joe Manchin (D-W.Va.), with fresh political motivations to enact a sweeping package of clean energy tax incentives that can also limit future oil shocks.
Late last week, Manchin indicated that renewed talks with Senate Majority Leader Chuck Schumer (D-N.Y.) and Senate Finance Chair Ron Wyden(D-Ore.) may yet yield a deal on clean energy, as part of a scaled back Democratic-only budget reconciliation bill also focused on deficit reduction and Medicare prescription drug price cuts. And while Manchin has said reducing inflation is his chief policy concern, he and other Democrats have been slow to acknowledge that a revolution in domestic clean energy innovation and commercialization through tax incentives can help insulate America from future global oil shocks, improving U.S. energy security, along with addressing climate change.
Gaining long-term benefits of cheaper energy and insulation from fossil fuel commodity price shocks, however, will require a period of time where certain technologies need pending tax incentives to gain market share, help balance the electrical grid and lower prices. The costs of wind and solar power has fallen by more than 80 percent in just the last decade, making it cheaper than fossil energy in many markets, but due to it’s intermittency these climate-friendly renewable energy sources will require greater deployment of electricity storage and smart grid technologies encouraged through the tax code and federal innovation incentives.
Electric vehicle adoption can over time reduce U.S. oil demand dramatically, lowering consumer fuel and maintenance costs, and helping America manufacturers compete with foreign EV producers, especially China. But today, EVs typically have sticker prices of at least $10,000 more than comparable gasoline-powered cars, although auto producers project rapidly reduced new EV prices as production lines reach scale. This is precisely why a pending Senate Finance Committee bill proposes consumer tax credits for EVs of at least $7,500. Under current law, domestic EVs produced by GM and Tesla no longer qualify for tax credits, so Congress must act to help our own manufacturers.
Even so, the U.S. will still need to produce more oil and natural gas for years to come to limit price shocks and improve energy security, as many Democrats have been slow to admit. But greater renewable electricity, along with existing and new nuclear, hydropower, geothermal, hydrogen and other sources, can reduce domestic price pressures on U.S. natural gas, more of which will need to be exported to help our EU allies break free from Russian gas. More broadly, the reduction in U.S. oil and gas reliance must remain a central long-term goal, both to address climate change and to wean the world from the influence of petro-dictators like Russian President Vladimir Putin.
Just as in the 1970s, the U.S. today cannot now rely on increases in Middle Eastern oil supplies to help cut oil prices, since Saudi Arabia especially has turned a deaf ear to requests for more production while making billions each day in new profits. The Saudi crown prince, the Kingdom’s de facto ruler, recently refused to even take President Biden’s call on the topic, and last month the Saudi energy minister said he intends to “work out a [production] agreement with OPEC plus …which includes Russia.”
This suggests the Saudis and OPEC intend to limit production and keep global oil prices high for the foreseeable future, perpetuating energy inflation, their own high profits, and U.S. oil security vulnerability. This prospect is a key reason Biden now intends to visit Saudi Arabia and meet with the crown prince after a visit to Israel in late June.
Historically, in the face of Russian aggression, Middle East hostility, and oil price spikes, the U.S. has responded with bipartisan policies to increase energy supplies, reduce oil demand and address resulting economic and security vulnerabilities. In the 1970s, legislation supported by both Democrats and Republicans created the U.S. Energy Department, instituted the first auto fuel efficiency regulations, and created the Strategic Petroleum Reserve. Again in the 2000s during the Iraq War, Congress passed the Energy Policy Act of 2005 with bipartisan support to increase alternative supplies, and a Democratic House and President George W. Bush were able to pass a bill to raise domestic auto fuel efficiency to cut oil demand in 2007.
Yet, in a stunning demonstration of the high cost of extreme political partisanship to average Americans, Congress has been unable to pass major bipartisan energy and climate legislation, even as the energy crisis has worsened.
Now as midterm elections loom, time is running out for Congress to act. If bipartisan negotiations falter, as seems likely, then Democrats must act alone this summer as best they can. The White House and most Democrats may simply have to swallow hard and accept elements like increased debt reduction aimed at inflation to make sure needed energy and climate action finally happens.
At a May press conference, Biden said, “I want every American to know that I’m taking inflation very seriously and it’s my top domestic priority. … And to reduce our dependence on foreign oil and reckless autocrats like Putin, I’m working with Congress to pass landmark investments to help build a clean energy future as well.”
Given newly urgent energy inflation and security concerns important to most Americans, Democrats now have compelling new reasons to act on clean energy, in addition to the climate crisis. If they don’t, an increasingly disgruntled electorate tired of years of inaction on energy and climate will likely seal their fate in November.
Paul Bledsoe is strategic adviser at the Progressive Policy Institute and professorial lecturer at American University’s Center for Environmental Policy. He served as communications director of the White House Climate Change Task Force under President Bill Clinton.
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