HomeInvestmentFuel Prices Aren’t Going Down Soon

Fuel Prices Aren’t Going Down Soon

Gas prices over the $8 mark are advertised at a Chevron station in Los Angeles, May 30.



President Biden says that in the short term, there is little he can do to lower gas prices. Unfortunately, he’s right. Releasing supplies from the Strategic Petroleum Reserve has had virtually no impact on fuel costs, and the modest increase in production Saudi Arabia recently announced won’t either. Nor would authorizing the completion of the Keystone pipeline. The global economic recovery from the pandemic shutdown has boosted demand, and Russia’s invasion of Ukraine has scrambled supply lines in ways that won’t be fixed soon. Only a global recession, which no one wants, would lower prices appreciably in the next year or two.

The problem extends well beyond crude oil and its derivatives. The price of natural gas has soared, futures for coal delivered to Europe have risen 137% this year, and cash prices for Appalachian coal have more than doubled since last June.

Yet the long-term outlook is more hopeful. The policies we adopt in response to the current price surge can create a more stable energy sector a decade from now. We need something we haven’t had for a long time: a comprehensive energy strategy built on realistic premises about supply, technology and politics.

To begin: The goal of “energy independence,” often touted by Republicans, is misleading. The U.S. can achieve an arithmetic balance between the total energy it produces and consumes, and between production and consumption in specific sectors such as crude oil and natural gas. But America cannot decouple itself from the international market, which determines the prices for these commodities. Fossil-fuel costs for U.S. consumers will decline only when global supply outruns demand. Increased production could help, but shifting the mix of energy consumption away from fossil fuels toward other sources would have a greater impact over time.

Another key premise: Ideologically driven thinking gets in the way. The right’s refusal to take climate change seriously has little to do with science; it is part of the culture war it is waging against the left. Conversely, the left’s belief that humanity can declare a “climate emergency” and quickly phase out fossil fuels is a fantasy.

Everyone should set ideology aside and start thinking practically. Let’s assume that we are in the early stage of transition toward a new balance between fossil fuels and other energy sources. We need to plan for this transition in a manner that is consistent with costs, technological possibilities and public opinion.

Read More Politics & Ideas

To do this, America should rethink—without preconditions—every possible source of energy. Longtime opponents of nuclear power, including climate-change activist

Bill McKibben,

are coming around to the view that the U.S. cannot afford to phase it out. California Gov.

Gavin Newsom,

who brokered a plan to shutter the state’s last operational nuclear plant, Diablo Canyon, by 2025, is open to extending its life. It’s now possible to build smaller nuclear plants that could alleviate environmental and safety concerns.

In addition, the U.S. should revise its approach to coal. Coal advocates insist that it can be used without spewing unacceptable amounts of carbon dioxide into the atmosphere. If they can show that innovations in carbon capture and sequestration would allow power plants to meet this test, fine. Government should establish a level playing field by setting reasonable environmental standards for all energy sources and determining whether an energy source can meet them. The public interest is in the ends, not the means.

Without electricity, life as we know it would grind to a halt. But mounting problems with the nation’s electrical grid have experts warning of rolling blackouts this summer. Long stretches of extreme weather, construction delays and—ironically—a faster-than-expected transition to electric vehicles are combining to put pressure on a power grid that has been neglected for decades. Yielding to objections from property owners, state regulators have been slow to authorize the transmission lines needed to bring power from remote solar and wind farms to big cities. A national energy-transition policy must reduce regulatory delays, now up to five times as long as peer countries like Germany, Canada and Australia, while giving federal agencies the authority they need to overcome today’s fragmented oversight of the national power grid.

Finally, a realistic approach to our energy future must acknowledge the increased influence of geopolitics on national policies. In the wake of the Russian invasion of Ukraine, political risks have risen, and the fuel prices will reflect enhanced concerns about the resilience of energy supply chains. Europe’s plan to decouple from Russia will reorder energy flows everywhere. And so long as demand for oil remains high, the U.S. will be forced to deal with autocratic countries such as Saudi Arabia in ways that offend our moral sensibilities—unless the American people decide that they are happy to pay much higher prices to power their cars and heat their homes. I’m not holding my breath.

Journal Editorial Report: Grid operators warn of widespread summer outages. Images: AFP/Getty Images Composite: Mark Kelly

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