by Sasha Mackler
In just the last three weeks, Russia’s invasion of Ukraine has significantly altered our national energy policy landscape and dramatically shifted the political dynamics around legislative priorities and political possibilities in Congress. The roiling of global oil markets, underpinned by an already tight supply situation from the post-pandemic economic awakening, has been driven by perceived risks of supply disruption caused by the Russian invasion. Risk premiums and a formal American embargo of Russian energy have sent prices skyrocketing and revealed, once again, that we have few good short-term options when faced with energy supply challenges. While our tools are limited today, the current moment may present an important window of opportunity to develop a policy approach that reduces this vulnerability and limits our exposure next time. This renewed attention to energy security combined with a focus on fighting energy inflation has the potential to galvanize a bipartisan policy pathway that would have been unthinkable as the year began.
The broad support that materialized in Congress and the White House for a ban on Russian oil and natural gas imports earlier this month is a case in point. Remarkably, widespread congressional support for the ban occurred despite already high gasoline prices, with oil prices well over $100 a barrel and gasoline averaging more than $4.30 a gallon across the nation.
As President Biden said when announcing the ban, “Americans have rallied to support the Ukrainian people and have made it clear we will not be part of subsidizing Putin’s war… This is a step that we’re taking to inflict further pain on Putin, but there will be costs as well here in the United States.”
The administration has been urging additional oil and natural gas production by the U.S. industry in the near-term to fill the gap from Russian imports. The White House has also asked other large oil producing nations with spare capacity to bring more crude into the market quickly including Saudi Arabia, the United Arab Emirates, and even possibly Venezuela. This, so far, has had limited success.
To address energy prices in the U.S., a well-supplied global oil market is critical, however, the biggest new opportunity for meaningful policy action may lie not with oil but with natural gas. The U.S. has abundant and low-cost gas reserves, international gas markets are much less interconnected than oil markets, and alternatives for those dependent on Russian natural gas are in short supply. Earlier this month, the European Union unveiled a new goal to dramatically reduce its reliance on Russian gas which currently supplies about 40% of its needs. The EU plan envisions a much larger role for U.S. liquefied natural gas imports. While U.S. LNG exports to the EU have already nearly doubled this year, maintaining and expanding this supply is an important aspect of increasing U.S. geopolitical security in the decades ahead, a longstanding priority for Republicans.
A clean energy tax incentive package focused on domestic deployment of advanced energy projects could be a powerful complement to this oil and gas supply agenda. Such an approach could be modeled on the clean energy tax incentives included in the Democrats’ Build Back Better legislative package developed last year and would accelerate the energy transition here at home — a key plank of the Democrat’s stalled climate agenda — while diversifying our energy system so that oil and gas price spikes have a smaller inflationary impact. And fundamentally, it could free up more of our gas for export.
This combination of exporting more U.S. natural gas abroad and deploying more clean energy here at home appears to be a winning package in this moment. This pathway must be designed with important safeguards ensuring the emissions and price impacts are managed effectively.
Clamping down on upstream methane leakage and improving the permitting of infrastructure supporting the build out of natural gas exports, along with clean electricity transmission, are elements that could move forward in a bipartisan manner.
The bipartisan infrastructure law passed with significant support from both Republicans and Democrats in 2021 shows that both parties can come together around a pragmatic agenda based on U.S. energy security and competitiveness.
Whether Democrats and Republicans in Congress can rally around a broader energy package like this one is unclear. But the overwhelming support of the American people and officeholders of both parties for actions to support Ukraine, protect Europe, and punish Russia suggests such a compromise is far more possible today than many appreciate. It could unlock another major advancement in our national energy agenda by helping leverage our uniquely American assets in support of global security and clean energy, two issues that can work well together.
– – –
Sasha Mackler is executive director of Bipartisan Policy Center’s Energy Project.
