The Biden administration’s progressive climate change agenda is running into obstacles on multiple fronts – in Congress, in the courts, and in energy markets.
The President should take heed before rising energy prices undo his political hopes completely.
Put simply, Biden’s pledge to cut U.S. greenhouse gas emissions by 50 percent by 2030 and have a carbon-free power system by 2035 look too aggressive given the razor-thin majority Democrats hold in Congress and the importance of America’s oil and gas industry to the economy.
A plan to halt new oil and gas lease sales in federal lands and waters was shot down by a district court after states that rely on energy revenues like Texas, Oklahoma, Louisiana, and Mississippi challenged the controversial measure.
The administration was also unable to get the vast majority of its climate initiatives to reduce emissions into a bipartisan $973 billion infrastructure bill. It now hopes to advance these plans using the reconciliation procedure, which allows Congress to pass budget-related matters through a simple Senate majority, avoiding the 60-vote supermajority required under filibuster rules. But this now looks like it could backfire as Republicans threaten to walk away from the infrastructure deal if Biden goes big on climate during reconciliation.
Even a more modest climate program will struggle to get the 51 votes needed in the Senate given the misgivings of Democratic Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona. Both Democrats have balked at voting for a reconciliation bill that has no Republican support. And Manchin, who represents a coal-rich state, is unlikely to support a plan designed to end demand for coal, such as the clean energy standard that the Biden administration is pursuing.
The limits of Biden’s power can be seen at the local level, too.
Several states are adopting more protective stances around restricting what can be done locally that adversely impacts oil and gas development. At least nine states have enacted measures to bar municipalities and local governments from banning natural gas connections in new and existing buildings. Other states considering similar legislation include Arkansas, Florida, Georgia, Missouri, Utah, North Carolina, Ohio, and Pennsylvania. The latter two are home to the giant Marcellus Shale gas formation as well as critical swing states in national elections.
Divestment maneuvers are also becoming popular among states looking to shield their oil and gas industries. For instance, Texas legislators have advanced a bill aimed at forcing state funds to divest from investment funds that discriminate against fossil fuels.
Meanwhile, oil prices continue to skyrocket under Biden’s watch as traders fear a supply crunch from low industry investment under an administration that is hostile toward fossil fuels. Benchmark West Texas Intermediate (WTI) is trading near $75 a barrel, and many oil executives think prices are on their way to $100.
That’s the market’s way of saying that more supply is needed. But U.S. shale producers, who in the past have served as an important “swing” supplier in global oil markets, may sit back this time amid mounting energy transition pressures — notably the policies coming out of Washington.
All this pushback suggests Biden’s climate agenda is a massive overreach.
Indeed, most Americans likely don’t realize what exactly is at stake. Biden can’t achieve a 50 percent cut in emissions by 2030 by attacking coal and cleaning up the power sector alone. It must tackle the transportation sector, which comprises about 30 percent of domestic emissions, and that means hammering consumption of gasoline and diesel.
Even if U.S. utilities stopped burning coal entirely, meeting Biden’s goals could spell the equivalent of a 6 million barrels a day drop in oil consumption by 2030, notes oil economist Philip Verleger.
Consultancy Rystad Energy has devised a U.S. road map to a 50 percent cut in emissions and come to a similar conclusion. Its scenario includes a reduction in U.S. oil consumption by 32 percent versus estimated 2021 levels of 19 million barrels a day, or about 6.08 million barrels a day.
That’s not an energy transition; it’s a revolution. And it assumes a pace of electrification in the transportation sector that is unrealistic. Verlerger, for instance, says it would require a 55 percent drop in gasoline and a 35 percent cut in diesel use from 2019 levels.
Some perspective is needed. In each of the past three years, electric vehicles (EVs) accounted for just 2 percent of the U.S. new-car market.
Perhaps this explains why the Biden administration has been so sanguine about rising oil prices. Higher gasoline prices could make EVs look better to consumers. Pump prices are already comfortably above $3 a gallon — their highest level in over six years.
Rising energy prices will be a recipe for disaster at the polls. If Biden wants to maintain Democrats’ slim majority in Congress in the 2022 midterm elections and harbors any hope of getting re-elected in 2024, he will read the writing spelled out clearly on the walls across America.