Vladimir Putin and Mohammed bin Salman are giving a big boost to U.S. renewable energy. The oil price war being waged by Russia’s president and Saudi Arabia’s crown prince has killed the conceit that an America reliant on fossil fuel can be energy independent.
Fracking has allowed the United States to become the world’s largest producer of crude. That has helped reduce oil imports by around a quarter since 2005, according to U.S. Energy Information Administration data.
But the rapid plunge in the oil price precipitated by the Putin-bin Salman spat has sideswiped drillers from Exxon Mobil to Chevron. They and others are cutting production in the all-important Permian Basin as it’s nowhere near economic at the current below $25 a barrel. The Department of Energy has flipped from wanting to sell barrels from the strategic reserve to seeking $3 billion from Congress to fill it up; U.S. Treasury Secretary Steven Mnuchin said on Thursday he wants almost seven times that amount.
In the short term, such aid, and even more direct bailouts, might seem prudent, not least to keep workers paid. But it doesn’t solve the problem that the industry, and the country’s energy security, can be upended from abroad.
A more decisive switch to renewable power would not save the fossil-fuel industry. But it would create even more jobs in a sector that already accounts for, at 3.3 million people, three times as many jobs as oil and gas, according to lobby group E2.
Moreover, carmakers like Ford Motor, General Motors and Volkswagen are between them investing hundreds of billions of dollars in electric vehicles. Wind and solar power are already cheaper to produce than natural gas- and coal-fired plants, even before factoring in externalities like climate risk, according to Lazard. That makes them appealing investments, whose main vagary in the cost structure is the equipment, not the raw material – which also doesn’t need importing.
Cheaper oil, of course, pits energy independence against lower prices for gasoline and other products – not least as more barrels may need to come from abroad as low prices put domestic producers out of business. And renewable energy doesn’t yet have the scale to power the entire country. But ensuring security requires longer-term thinking.