At the Kroger fuel station last month, my total was a staggering $141.80 for a tank full. While our country is suffering through energy prices at levels seldom seen, in rural states like Mississippi, it is especially painful for the thousands who daily commute 30 miles or more one way. How did prices get so high?
Energy markets are, fundamentally, like any market in price responding to supply, demand and speculation. Also, energy is rooted to almost everything else in the economy, with energy costs embedded in most all materials, products and services. Coming out of covid restrictions, pent-up demand in the global economy increased demand for many products and services, calling for more energy supply.
Meanwhile, the Biden Administration took office in early 2021 and immediately began taking actions that would decrease energy supply in the U.S., including pausing new development of known oil and natural gas reserves and stopping construction of new pipelines designed to increase supply from our Canadian friends. The message has been crystal clear - the Biden Administration seeks to stop new oil and gas development in the U.S.
Recent actions to reduce energy supply followed a renaissance period of U.S. oil and natural gas production from around 2007-2020 where, due to new discoveries, production in the U.S. more than doubled, making our country the dominant energy producer globally and reducing reliance on imports. During this time, supply went up, and price went down. Then, demand went up, supply went down, and well, here we are struggling through the consequences.
Shockingly, the Biden Administration has recently called on OPEC and nations like Venezuela and Brazil to increase production rather than opt for policies that encourage more U.S oil production, which would increase investment and good jobs here. Vilifying energy producing companies and gasoline stations over high prices, as the President has done recently, is neither a policy nor will it solve the supply shortage.
Politicians in both parties have often stated support for an all of the above energy policy. All of the above includes oil, natural gas, renewables, coal, nuclear, new technologies, and robust infrastructure. Mississippi energy costs are less than most other places in the U.S. Perhaps this is because we have low-cost electricity from the Grand Gulf Nuclear Station, new utility-scale solar facilities across the state, proximity to energy production, robust transportation/storage infrastructure and more. In brief, we have abundant supply from multiple sources working as a system.
Areas of the country and world experiencing the most disruptive energy problems, like California and Europe, are largely dependent on external supply and have erred by narrowing energy resources through poor public policy-making.
While public policy is not the only factor, it is a major factor. Today's challenges of high energy prices are an important lesson in energy policy. The scale of energy use in our economy is enormous, almost incomprehensible.
The right policy remains the same - allow access to energy production and encourage supply increases while also reasonably encouraging innovation and new technologies to tackle challenges like emissions. Policy should drive ample supply and affordability, not scarcity. The best new energy solutions will find their way into a competitive marketplace where costs are factored but are not the only factor.
What's the cost of having policies aimed not at adequate supply but at scarcity? We're paying for it now.
Patrick Sullivan is President of the Mississippi Energy Institute.
