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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Soaring Energy Prices Are Bad News For Biden’s Ambitious Climate Plan

  • The timing of the current global energy crunch could not be worse for Joe Biden, who is attempting to push his climate plan through congress before COP26 at the end of this month
  • High gasoline prices are one of the few things that all President’s fear and the prospect of making energy even more expensive is proving to be a tough sell
  • Democratic Senator Joe Manchin, who represents coal-producing state West Virginia, is set to vote against the bill

President Joe Biden’s climate plan has become increasingly difficult to sell to a divided Congress amid a global energy crunch that has sent oil, natural gas, and coal prices rallying and gasoline prices in America jumping to the highest level in seven years.   

The Biden Administration wants to shift America’s power generation to 100-percent carbon pollution-free sources by 2035 and make the United States a net-zero emissions economy by 2050 with climate packages aimed at incentivizing renewable energy sources and transport electrification and penalizing fossil fuel producers and power generators with additional fees and taxes. 

Earlier this month, the U.S. oil benchmark, WTI Crude, topped $80 per barrel for the first time since 2014, gasoline prices are also at their highest since 2014, and Americans have been warned they will be paying much higher energy prices this winter. 

Rallying Global Energy Prices 

Although some U.S. energy prices - such as natural gas - are expected to be spared from the global crunch and the skyrocketing price rallies in Europe and Asia, President Biden’s climate plan that aims to restrict U.S. oil and natural gas production and levy additional taxes on the industry looks shakier than ever, even among some moderate Democrats. 

Reducing American oil and gas production - while demand is not going away anytime soon - will expose the United States to the international energy markets and prices. The U.S. will have to boost its imports of oil from counties such as Saudi Arabia or Iraq, exposing itself to a market dominated and controlled by OPEC. The current gas crisis in Europe, where power prices have hit records in major economies, including Germany and the UK, is a reminder that 100-percent clean energy power grids need huge battery storage (not yet built out) or natural gas as a backup. 

Europe’s dependence on natural gas imports and the crisis unfolding now should serve as a reminder for the U.S. Administration as it attempts to make the cost of producing natural gas and oil in America more expensive, oil associations and critics of the climate plan say. 

“The situation in Europe should serve as a huge warning to the Biden Administration and Members of Congress calling for punitive taxes, fees, and onerous new regulatory requirements on our industry,” American Exploration and Production Council (AXPC) CEO Anne Bradbury said last week. 

“By pursuing policies that restrict supply and make it harder to produce oil and natural gas here in America, Americans will have to pay more for their energy,” Bradbury added. 

“As we have seen in Europe and elsewhere, the world cannot address climate change without being realistic about growing global energy demand. American oil and natural gas producers stand ready to work with this administration to meet that dual challenge,” she said. 

Biden Struggling With High Gasoline Prices 

Just as President Biden tries to push climate legislation in the $3.5-trillion social spending bill, he faces the highest gasoline prices in seven years. They are the result of rallying international crude oil prices amid recovering global demand and muted supply response from producers, including from the U.S. shale patch. 

“Compared to the price of gas a year ago, it now costs consumers about $17 more to fill up their vehicles,” AAA spokesperson Andrew Gross noted earlier this week, when AAA said, “sorry folks, but the cost of gasoline is still going up.”

“And unfortunately, it doesn’t look like drivers will be finding relief at the pump any time soon,” Gross added. 

The price of gasoline is one of the few things that scare every American president, including President Biden. 

The President reportedly discussed the rallying fuel prices with representatives of the U.S. oil industry earlier this month, while the White House signaled this week that the Biden Administration hadn’t given up on calling on OPEC+ to increase supply to the market to bring crude and gasoline prices down. 

Moreover, Americans will see much higher residential energy bills this winter due to high U.S. retail energy prices, the Energy Information Administration (EIA) said last week. 

“Affordability Is Not Optional”

Amid rallying energy prices this year, President Biden’s climate package proposal in the $3.5-trillion bill stands on shaky ground as Joe Manchin, a moderate Democratic Senator representing major coal-producing state West Virginia, opposes measures to penalize utilities using fossil fuels as he calls for reliable energy supply. 

“Affordability is not optional. I’m concerned we are on a runaway rise,” Manchin, chairman of the U.S. Senate Energy and Natural Resources Committee, said at the end of last month during a committee oversight hearing of the Federal Energy Regulatory Commission (FERC). 

After Senator Manchin opposed the climate proposal, Democrats in the Senate are now scrambling to find alternatives and are pressing Manchin to propose such, Politico reported earlier this week. 

At the same time, the most progressive Democrats have signaled they won’t have a spending bill without a package addressing climate change in it. 

President Biden is also running against the clock, hoping he can go to the COP26 climate summit in Glasgow in early November with a deal on climate action secured. 

For climate activists and some governments that have pledged net-zero by 2050, the recent surge in energy prices is just another reason to push for a fast move away from fossil fuels to shake off dependence on volatile prices. 

Yet, reality showed that oil and gas demand is bouncing back strongly after the pandemic, which was not the final nail in the coffin of fossil fuels, as some had predicted. A move away from oil and gas - especially in U.S. domestic production - will even increase price volatility if the energy systems, power grids, and battery storage are not prepared to deal with demand. 

Right now, they are not. 

By Tsvetana Paraskova for Oilprice.com

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