Biden's Russia problem reveals political landmines in energy policy

January 31, 2022

President Joe Biden's messaging on the clean energy transition is showing some cracks amid the threat of armed conflict in Eastern Europe.

Biden's plans to move away from fossil fuel and put the U.S. on a path to cut greenhouse gas emissions by half by 2030 have been undercut by Russia's buildup of troops on the Ukrainian border. That fear of invasion has contributed to a surge in oil and natural gas prices, and the White House has moved to marshal energy supplies for its allies there.

For clean energy advocates, the spike in fossil fuel prices and worries about the disruption of Russian shipments simply illustrate the need for the U.S. and other countries to quickly reduce their dependence on those energy sources. But the Biden administration's diplomatic efforts to divert liquefied natural gas cargoes to Europe are a stark reminder that despite the rapid growth of renewable energy sources, they haven't displaced oil and gas.

The tensions were apparent in a single press release the White House issued Friday.

“We are collaborating with governments and market operators on supply of additional volumes of natural gas to Europe from diverse sources across the globe,” the White House said in the statement.

But the same statement sought to keep Biden's climate goals in focus, noting “the EU’s and the United States’ commitments to meet the goals of the Paris Agreement, through clean energy, in particular renewables, energy efficiency, and technologies, provide a path to energy security and reduced dependence on fossil fuels.”

Experts doubt Moscow will curb its gas deliveries that provide Europe with a third of its supply — though some analysts have already speculated it may have throttled back some last year to show its market power.

The complexities — and some say contradictions — in the U.S. message point to the political challenge Biden faces in addressing consumers' pain in paying high fuel prices and progressives' demands for steep cuts in U.S. oil and gas production to curb climate change.

“It rips at the seams of the Democrat party on energy and climate policy,” said Bob McNally, president of analytics firm Rapidan Energy and a former senior international energy director for the National Security Council during the George W. Bush administration. “You want to inhibit, disinvest, regulate fossil fuels, but on the other hand you have the president begging OPEC+ for more oil, begging Qatar for more gas and promising to look under every rock for oil and gas” in the United States.

The White House did not respond to emails seeking comment.

The Biden administration and its allies have said fossil fuel production will remain important to keep energy affordable until more people and companies switch to renewables, which they hope will insulate consumers from the wild price swings in the oil and gas markets.

Rep. Jared Huffman (D-Calif.), a climate hawk, defended the Biden strategy and said he sees no inconsistency in the White House’s approach.

“At the surface there might appear to be some dissonance between this very necessary short-term action and our climate goals, but it’s just the reality we find ourselves in the transition,” Huffman told POLITICO. “We are not there yet on clean energy infrastructure, and until we get there, you are going to have to do some of these things like shipping a bunch of U.S. natural gas to prevent Putin from leveraging the vulnerability of Germany and others in Europe.”

But the White House’s messaging on energy during the Russian crisis is a stark departure from the past, said Sen. Kevin Cramer (R-N.D.), a Republican from the oil-rich state of North Dakota who has joined the Congressional Ukraine Caucus.

“My hope is they are learning a lesson, even if it’s a late lesson,” Cramer said. “I don’t want to be the guy who gets accused of beating up a Democrat president in the public arena. I am for the President. But I have pointed out from time to time his confusing messaging is a problem.”

That White House energy strategy also doesn’t please two groups that between them may sway mid-term election results: Oil and gas companies and environmental groups.

For greens, the Biden administration's reluctance to try to shrink U.S. oil and gas production and the new calls to bolster supplies to Europe show a business as usual attitude.

“The biggest question is whether climate will ever outrank geopolitics as a concern," said Collin Rees, U.S. program manager with Oil Change International. "We will have to confront how we get the world off fossil fuels. Regardless of the excuse of the month, what we are seeing is a massive build out of long-lived fossil fuel infrastructure that is extremely inconsistent with Biden’s climate goals.”

The Biden administration has approved more permits to drill for oil on public land than even the Trump government had in its first year. Biden also signed into law the infrastructure package that gives the industry billions of dollars to develop carbon capture technologythat Exxon Mobil and others say will reduce its carbon emissions.

But Biden’s Interior department held a nearly year-long pause on leasing new public land for fossil fuel development. Industry officials complained that the agency didn’t do enough to defend in court its November 2021 lease sale that a judge knocked down last week for lack of proper environmental review.

That sale included Exxon’s leasing nearly a hundred parcels in the Gulf of Mexico that analysts said the company could use to store greenhouse gas it captures using the same technology Biden’s infrastructure bill funded.

Exxon did not respond to an email seeking comment. But oil companies are “disappointed in the apparent lack of fight that the Department of Interior put up in the case,” an industry official told POLITICO.

All of this is coming as tensions over possible war in Europe are helping to raise energy prices. Increased oil and gas prices could feed into Biden’s most immediate political threat: inflation.

Prices for goods and services have risen at the fastest pace in decades as global economies rev back up, and as manufacturers struggle to keep up. Oil prices reached new seven-year highs on Friday as geopolitical risks stemming from the Russia-Ukraine standoff continue to raise supply concerns.

Analysts are skeptical Russia would actually cut off a significant amount of gas to Europe, let alone oil, given that its own economy depends on fossil fuel sales. And while European natural gas prices have skyrocketed due to supply constraints, raising costs for home heating and forcing industrial manufacturers to slow or shutter operations, that’s less of a problem in the U.S. given its largest domestic gas output.

But Russia even cutting off some fossil fuel exports will further pinch energy prices at a time the administration is trying to keep pump prices down. Russia accounts for nearly 5 percent of the world's energy supply, analysts said.

“It’s a touchy situation,” said Richard Morningstar, former U.S. ambassador to the EU and State Department special envoy for Eurasian energy. “How do you balance geopolitical necessities with economic concerns if energy supplies were cut off? Geopolitical necessities may require sanctions, but there are huge commercial risks.”

High oil and gas prices are likely to linger as a problem for Biden beyond the midterm elections, analysts say. The International Energy Agency recently warned energy will face more “turbulence” and price shocks this decade due to inadequate investments.

Oil and gas investment has dropped in recent years as companies face pressure from investors to reduce their climate impacts, and as some predict demand for fossil fuels may decline as renewables grow. But the pace of clean energy investments has not kept up to offset that, and the world’s thirst for fossil fuels is showing little sign of slowing down.

“If you are worried about inflation, this isn’t a one and done,” McNally said. “High energy prices are here to stay and not going anywhere.”

By:  Josh Siegel, Ben Lefebvre
Source: Politico Pro