Biden’s spending spree and Fed blunders started the bank crisis.
Alarm on Energy
The Second October War should wake America up to crucial geopolitical realities.
Fifty years ago, in the wake of the Yom Kippur War, the Arab members of OPEC initiated an oil embargo against the United States. The boycott was retribution for America’s support of Israel during its brief war against Egypt and Syria.
What was true in 1973 remains true in the wake of Hamas’s brutal terror attack on Israel on October 7: America’s national strength depends on the availability of cheap, abundant, reliable energy.
Our national security, and that of our allies, depends on energy security. Energy is the economy. We forget these realities at our extreme peril.
Fortunately, some things that were true a half-century ago are no longer so. Over the past decade or so, the geopolitics of energy have shifted dramatically in favor of the U.S., due mainly to the shale revolution. Instead of relying on oil imports, the U.S. has become a huge exporter of both oil and natural gas. We are now exporting about four million barrels of crude oil per day and record amounts of natural gas (about 20 billion cubic feet per day).
Even more remarkably, the U.S. is leading the world in energy efficiency and CO2 reductions. According to the latest Statistical Review of World Energy, per-capita energy consumption in the U.S. fell by about 20 percent between 1973 and 2022. In addition, U.S. CO2 emissions have dropped by about 915 million tons since 2000, the biggest reduction of any country on the planet.
But this progress is being threatened by climate-focused NGOs who are relentlessly promoting “net-zero” schemes that will bankrupt our economy and spell disaster for low- and middle-income Americans, as author Ruy Texeira explains in a trenchant essay, “The working class Isn’t Down with the Green Transition.” Indeed, the grassroots opposition of farmers, factory workers, truck drivers, and construction workers in North America, Europe, and Oceania is already leading to a reassessment of alt-energy policies, most notably in the United Kingdom and Germany.
The Middle East crisis suggests that the net-zero energy scheme is becoming a national security risk. In the seventies, domestic oil production was faltering, and the U.S. was becoming more reliant on oil from the Middle East. Today, a major threat to America’s energy security is the $4.5 billion-per-year NGO-corporate-industrial-climate complex, an interconnected group of activists who are raking in hundreds of millions of dollars from some of America’s richest people, including Michael Bloomberg, Laurene Powell Jobs, Jeff Bezos, and John Doerr.
The all-renewable agenda pushed by NGOs and the Biden Administration’s EPA threatens the reliability and resilience of our electric grid. Regulators and policymakers have repeatedly warned about the looming crisis. For instance, in May, members of the Federal Energy Regulatory Commission delivered stark warnings to the Senate Energy and Natural Resources Committee. The agency’s acting chairman, Willie Phillips, told the senators, “We face unprecedented challenges to the reliability of our nation’s electric system.” FERC Commissioner Mark Christie echoed Phillips’ warning, saying the U.S. electric grid is “heading for a very catastrophic situation in terms of reliability.” Commissioner James Danly warned of a “looming reliability crisis in our electricity markets.” Danly continued, saying that policies and subsidies “designed to promote the deployment of non-dispatchable wind and solar assets” are causing reliability concerns because the subsidies are helping “drive fossil-fuel generators out of business.”
Given the uncertainties roiling global energy markets, what should the U.S. do now to ensure its energy security? First and foremost, the U.S. should embrace increased domestic energy production. The administration and Congress should immediately begin encouraging domestic mining and enrichment of uranium as well as domestic mining and refining of critical metals and minerals, including copper, graphite, rare earth elements, and high-strength magnets. They should also immediately begin refilling the Strategic Petroleum Reserve. Finally, they must recognize that the energy provisions in the Inflation Reduction Act make us, and our allies, more vulnerable to the impacts of the war in Gaza, which has already changed energy geopolitics.
Even before the war, Iran was emerging as a winner due to its crude oil exports, particularly to China. According to Bloomberg, Chinese imports of sanctioned Iranian oil are at their highest level in a decade. Iran backs both Hamas and Hezbollah. Thus, Iran is using its energy wealth to help fund terrorist organizations that are murdering civilians. Further, there’s little doubt that the war will bring Iran even closer to China and Russia.
The war has also destroyed prospects for long-term peace deals in the Middle East. Any hope for closer relations between Saudi Arabia and Israel is, for now, moribund.
The big losers in this conflict––aside, of course, from the civilians who are most directly imperiled––are Egypt and Europe. On October 10, Israel shut down the gas flow from the offshore Tamar field. That resulted in a significant reduction in the amount of gas Israel is shipping to Egypt, which turns that fuel into liquified natural gas that it sells to customers in Europe. If the war drags on, it will not only reduce Egypt’s LNG sales to Europe, but also hinder the development of Israel’s massive offshore gas resources.
The effect of the war has already affected European natural gas prices. Since October 6, prices at the benchmark TTF gas hub in Holland have soared more than 30 percent. Gas at TTF is now selling for about $51 per million Btu. By comparison, that same quantity of gas at Henry Hub in Louisiana sells for about $2.90.
Where will Europe turn for future gas supplies? The answer is the U.S., now the world’s biggest LNG exporter. That assumes, of course, that the Biden Administration does not find new ways to stifle production.
There’s little doubt that the Biden Administration is the most anti-hydrocarbon administration in U.S. history. But the Second October War requires a rethinking of priorities. American oil, gas, and coal are now more critical than ever in the global marketplace. That means Biden and his advisors must reverse course and encourage more hydrocarbon production.
Western energy production must remain robust to counter leading oil producers Saudi Arabia, Qatar, and Iraq, all of which have declared solidarity with the Palestinians. Qatar, a key financial backer Hamas, and Russia are likewise important exporters of gas. It would be folly to cede the global oil and gas markets to OPEC and Russia.
The U.S. must also get serious about nuclear energy. There is no reasonable path forward on climate change that does not include a massive increase in the development and deployment of nuclear energy. This is particularly true for carbon-hostile Europe, as the French are belatedly relearning.
But Russia dominates the global uranium market. Over the past four decades, the U.S. went from being the world’s biggest exporter of nuclear fuel to its biggest importer. And much of that fuel, about 14 percent, comes from Russia, the world’s biggest enricher of uranium. Russia also controls 46 percent of the world’s enrichment capacity. The U.S. must not cede the development and deployment of nuclear energy to Russia. Nor should it cede leadership to China, which has 21 reactors under construction.
The U.S. must also work to slash its dependence on China for critical metals, minerals, and magnets. While China’s dominance of the copper, graphite, and lithium markets is concerning, its near-monopoly on the rare earth magnets needed for wind turbines, EVs—and numerous defense applications—leave America at the mercy of our most powerful, relentless competitor.
Last year, the Department of Energy issued a report that warned about our dependence on neodymium-iron-boron magnets. The report, “Rare Earth Permanent Magnets: Supply Chain Deep Dive Assessment,” notes, “Nearly all supply chain stages are concentrated in China and the chemistry associated with processing rare earths is challenging, expensive, and hazardous. Furthermore, substitution is difficult through the supply chain due to the unique characteristics and technical advantage of rare earth magnets.” Here’s the key sentence: “Based on the findings in this report, the Secretary concludes that the present quantities and circumstances of NdFeB magnet imports threaten to impair the national security.”
The Strategic Petroleum Reserve was foolishly drawn down by more than 40 percent last year by the Biden Administration in an effort to reduce oil prices. We need the SPR as a backstop in case a broader conflict emerges. It must be replenished.
Finally, it has become clear that the alt-energy schemes central to the Inflation Reduction Act are an insanely expensive sideshow. As Travis Fisher of the Cato Institute recently noted, the energy-related provisions of the IRA won’t cost $369 billion as President Biden claimed last year. Instead, they could cost more than $2.5 trillion. Wind and solar are politically popular, but they cannot replace America’s need for hydrocarbons and nuclear power, which together provide nearly 79 percent of all U.S. electricity. Nor will they make a significant dent in the transportation sector, which runs almost exclusively on gasoline, diesel, and jet fuel.
Countries that can provide cheap and reliable electricity, refined oil products, and natural gas will survive and thrive in the aftermath of this conflict. The countries that rely too heavily on imported energy will continue to be vulnerable to the vagaries of the market and ever-changing geopolitics.
This is not an argument for “energy independence.” We live in an interdependent world. We cannot divorce domestic energy markets from global ones. That said, America is positioned again to be not only the arsenal of democracy but a primary energy provider to democracies. To make that happen, we must be clear-eyed and recognize the urgency of the issue.
The ongoing war in Gaza is a wake-up call. We live in a dangerous world. Energy security is national security. It’s time for the Biden Administration and Congress to get serious about both.
The American Mind presents a range of perspectives. Views are writers’ own and do not necessarily represent those of The Claremont Institute.
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