Why we need to transition, quickly, from fossil fuels to clean energy

On Friday, representatives of exploration and production (E&P) companies from the oil and gas sector met with President Trump at the White House, seeking government intervention to increase the price of energy. More expensive energy is the last thing our economy needs right now.

Cleaner energy sources use less fuel. That makes them cheaper. It is in our economic and environmental interest to accelerate the clean energy transition, but it is being blocked by a White House that has more interest in the past than the future.

To be sure, energy prices are unusually low right now. Collapsing demand from the COVID-driven shutdown, coupled with Russian-Saudi collusion to increase supply has driven energy prices down. The price of oil has plummeted by nearly two thirds since Jan. 1, and the price of natural gas is down by nearly a quarter.

That’s a good thing, as it helps us all to stretch finite dollars a little farther. 

That means front-line health care workers don’t have to spend as much on gasoline to get to work.  Grocery stores spend a little less to keep their refrigerators cold. Delivery services are a bit more cost effective, making it that much easier to keep revenue flowing into your favorite local restaurant. It also helps our energy sector. Whether you are a refinery, a power plant, or a steel mill, spending less on raw material is always good for business.

But Friday’s meeting wasn’t about what’s good for the American people, or the American economy. It was about what’s good for the owners of E&P assets in the oil and gas space. This is a sector that has become heavily reliant on debt in recent years, propping up equity returns not with fundamental value but with high-risk leverage. As prices have fallen and high-yield debt markets have seized up, that strategy is being exposed. Now owners are using their powerful friends to ask the White House for handouts.

Rick Perry is suggesting that the Treasury Department should buy up oil futures to boost E&P revenue. Harold Hamm is suggesting a ban on oil imports to raise prices via supply tightening. Others are suggesting we use an old Texas railroad law to create a modern cartel.

These aren’t the kind of ideas promulgated by an industry that embraces competition or free markets.  And they certainly aren’t the kind of ideas that would help the American people. They would serve only to benefit the equity investors in the E&P sector. But here’s the thing: in this moment, prioritizing the interests of E&P equity holders over the interests of American families is not just economically foolish – it’s amoral.

It would instead increase fuel prices when we can least afford it, just to protect the wealth of folks who are already doing fine.

To be fair, there is a real risk that low prices will cause production operations to slow down and job losses to accelerate. Congress has passed, and will continue to work to pass legislation that protects and preserves the economic security of the American worker. 

It would be naïve to assume that federal intervention can undo the century-long boom/bust cycle in the US oil patch – and no one is proposing we charge people more for their health care in this moment so that more money can be paid into the pockets of laborers at ventilator assembly plants. 

Important to remember in all of this is that the oil and gas industry already receives an estimated $650 billion per year of subsidies from the government. For reference, this is more than Americans received in the form of small business assistance, recovery rebates to individuals, or expanded unemployment insurance which Congress included in the latest COVID relief package – it’s also roughly the same size as our annual defense budget. These taxpayer-funded subsidies have tamped down the competitiveness of the industry and made it complacent against innovation and lowering the carbon intensity of its fuels.  

One lesson we’ve all learned this past month is that just because a horror is unimaginable or incomprehensible does not mean it’s impossible. This time it is a pandemic spreading disease across the world; next time it could easily be rising sea levels and temperatures forcing millions from their homes, rendering land uninhabitable and unable to produce food we all depend on. And just as this crisis was preventable, so is the next one. That is why we need to transition, quickly, from fossil fuels to clean energy. That means not extracting every known molecule of oil and gas from the ground.

Luckily for us, there is an alternative; low-cost renewable energy and efficiency gains aren’t pie-in-the-sky, they’re reality. Major companies like Shell, Repsol, and BP have shifted their long-term strategies to lower the carbon emitted by their fuels, recognizing the need to be honest with their investors about what must be done to still exist in a world compliant with the Paris agreement. In 2018, the U.S. bought more than 350,000 electric vehicles, and had reduced CO2 emissions from the power sector by more than 25 percent compared to 2005. The clean energy transition is happening.

The E&P companies that are looking for handouts from the Trump administration rather than shifting their business models are sending a message that they have a failed strategy and aren’t savvy enough to adapt.

Investors shouldn’t reward that, and neither should taxpayers.  

Casten represents the 6th District of Illinois and is a member of the House Science Committee.