POLICY
It’s Your Policies, Mr. President, That Are Driving Energy Prices Up
E
nergy prices have been rising for over a year and in recent weeks, they’ve been skyrocketing both at home and abroad. The causes of this impending energy cost crisis are multitudinous, but they are all rooted in the same problem: command and control energy and fiscal policies put in place by lawmakers that think they know best. From policies like wind and solar mandates and subsidies that push us away from tried and true technologies, to more extreme proposals like net-zero and all-electric mandates for cars, many of the policies being proposed and implemented both in this administration and globally are causing the very problems that those same global leaders responsible for the problem purport to be perplexed by. The Biden administration is front and center in this push away from affordable and reliable domestic natural gas and oil production. In this administration, we’ve seen the revoking of pipeline permits and pausing the issuance of new oil and gas leases on federal lands, all as the President calls for increased production and accuses companies of withholding production capacity out of greed. Energy prices are rising globally, but some of the sharpest increases can be seen in European countries that are much further along the same policy trajectory as this administration has placed us on. These price increases should come as no surprise. For months
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they have been steadily rising. But rather than enact well-constructed policy to cope with the challenge, lawmakers chose to double down on anti-market energy strategies that simply don’t work. Now that the price crisis is well underway, legislators across the country are resorting to quick-fix policies that serve only to further distort markets and create the perception that they are actually concerned, even though they know that higher energy prices are a fixture, not a bug, in their Green New Deal agenda. Both Maryland and Georgia have temporarily ceased collection of their state gas taxes. In Maryland this has spurred other D.C. area residents to cross over into Maryland to make their gas purchases, distorting the market. New Jersey and Connecticut are also among the states considering suspending the tax. Meanwhile, California is weighing a more extreme solution, a $400 per car gas tax rebate capped at $800 per household. Predictable and consistent policy is key to minimizing the market distorting effects of various forms of taxation. But when we wait to respond to an issue until it has become a crisis, clear and measured decisions are far more difficult to make. This was true for the policy responses to energy issues at the beginning of the pandemic, and it’s true now. Government meddling created this problem, and further government meddling is serving only to exacerbate it. There are so many factors playing into the rise in energy costs,
but a major one, especially in Europe, is an overreliance on wind power, which underperformed this summer and winter along with decades of underinvestment in natural gas and oil. Consequently, European Union countries now depend on Russia for 40 percent of their natural gas (and 34 percent for oil), which clearly poses a threat to their security. Now that countries like Germany have shown support to the Ukrainian
cause, they must find replacements for the bulk of the Russian gas capacity that they had been relying upon. Germany’s grid has some of the highest wind penetration in the world, but when a period of calm coincides with other supply shortfalls like those caused by the war in Ukraine, their options are limited. This March, just shy of 19 percent of Germany’s electricity came from wind. In March of 2021,
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By: Thomas J. Pyle
