Energy Policy: Inconsistent Policies Send Mixed Signals

Our inconsistent policies are not addressing our energy crisis. The path to lower U.S. energy prices and greater energy security begins and ends right here at home, writes Jack Belcher, principal at Cornerstone.

U.S. Capitol building silhouette and United States flags around Washington Monument at sunrise. (Source: Shutterstock.com)

[Editor's note: A version of this story appears in the July 2022 issue of Oil and Gas Investor magazine.]

The world today is facing amazingly complex issues: high inflation, war on the European continent, a prolonged pandemic, supply chain meltdowns, food shortages, political turmoil, the threat of climate change and skyrocketing energy prices. While the degree to which these crises can be managed by public officials varies significantly, energy pricing is one area where government action can indeed make a difference, for better or worse.

Let’s take a closer look at what the government is and is not doing to help us meet today’s energy challenge. In March, the Biden administration began the largest release ever of the Strategic Petroleum Reserve (SPR) by committing to withdraw 1 MMbbl/d for six months. Although the notion of flooding the market with additional oil might make for a good headline, the reality is that the SPR exists to supply the U.S. with oil in the case of a national emergency. SPR releases are merely increasing our vulnerability to an actual supply emergency at home without offering any relief at the pump. To that end, by May, the SPR dropped to the lowest level since 1987.

Meanwhile, in response to the loss of Russian gas supply to Europe, the U.S. committed 15 billion cubic tons (Bct) of LNG to Europe through the end of this year and an additional 50 Bct through 2030. If we follow through and put the right policies in place to make it happen, and the investment capital follows, Europe and the U.S. will greatly benefit. Yet, despite pushing the U.S. oil and gas industry to increase production and communicating support for American energy exports to allies in Europe, the administration continues to send mixed messages.

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