The solution to high energy prices is a swift and urgent transition to clean energy—not further reliance on dirty fuels controlled by dictators and profiteering oil corporations.
Vladimir Putin’s unjustified attack on Ukraine has upended the global fossil fuel market. The United States and its allies have responded with devastating sanctions, including a recent action from President Joe Biden to ban Russian oil, natural gas, and coal imports to the United States. Because international energy markets have been tied to fossil fuels for decades, this ban could result in higher gas prices for American households and supply disruptions for our European allies. The solution to this price crunch is a swift and urgent transition to clean energy—not more leasing, drilling, or investments in the same volatile fuel sources that are contributing to the current energy crisis.
Despite the oil and gas industry’s vigorous and incorrect public relations campaigns aimed at convincing people that their opportunism to drill more is a legitimate policy solution, the United States is already the world’s largest producer of oil and gas. Domestic oil production is at 90 percent of America’s all-time, pre-pandemic high, and the United States is producing more than twice as many barrels of oil per day as it produced in 2008. But energy independence won’t be found at the bottom of a well. We can never be energy independent while we rely on a fuel source that is both controlled by the global market and highly susceptible to international conflict and manipulation by autocratic regimes.
The fossil fuel industry’s wish list—more taxpayer subsidies, more land opened for dirty drilling, and fewer environmental and health safeguards—will not help people struggling with the price of gas today. But granting them free rein will lock the United States into decades of higher and more volatile energy prices; higher toxic emissions; and greater climate destruction. Now is the time for the United States to finally achieve real energy security by reducing our dependence on fossil fuels.
The oil and gas industry already has plenty of land and ocean ready to be used
The oil industry can decide to produce more oil whenever it wants. In fact, the oil industry already possess more than 9,000 approved—but unused—drilling permits on federal lands. Nearly 5,000 of those permits were approved in 2021 alone—the highest figure since the second Bush administration.
The number of permits already approved is about six times the average number of wells drilled annually in the past five years. Over the past 10 years, permits and wells drilled have followed a similar trajectory—except for now, when permits have increased and wells drilled have decreased. The oil industry has all it needs to increase production but has chosen to profiteer off the current crisis rather than act.
Industry CEOs are profiting hand over fist while average families suffer
Meanwhile oil and gas executives are raking in windfall profits while consumers suffer at the pump. Last year, four of the major oil companies—Shell, Chevron, BP, and ExxonMobil—posted record profits, totaling $75 billion. In the fourth quarter alone, ExxonMobil was bringing in $97 million dollars in profit every day.
The reason that U.S. oil companies haven’t increased production is simple: They decided to use their billions in profits to pay dividends to their CEOs and wealthy shareholders and simply haven’t chosen to invest in new oil production. According to Bloomberg, “U.S. oil companies generally have been reluctant to pump more, preferring to steer cash flows back to investors instead of spending it on new drilling that could flood the world with cheap crude.”
The oil industry is sitting on 10 years’ worth of unused leases
The oil industry already has at least 10 years’ worth of unused leases at its disposal. They are only producing oil or gas on roughly half of the area they have already leased. There are nearly 14 million acres onshore and more than 9 million acres offshore that are currently under lease but are not being used for oil production. At least one-quarter of these unused leases are sitting on lands that the Bureau of Land Management has deemed to have a medium or high potential for oil. What’s more, only 10 percent of U.S. oil and gas production occurs on federal lands and waters, limiting the federal government’s ability to impact leasing decisions—the other 90 percent is done on state and private resources.
New oil projects won’t bring down prices or increase supply in the short term
Nothing on the industry wish list is a silver bullet to solve the short-term crisis. According to the Government Accountability Office, on average, it takes more than four years for companies to begin producing on the federal lands they lease. Offshore production takes even longer, as it takes at least two to three years to build the needed rigs. This delay is not due to drilling permit review, which—at most—takes fewer than 200 days. Even oil and gas industry executives themselves are saying it: Launching more oil and gas projects now will have no effect on short-term global energy markets.
The United States is now in the era of extreme fossil fuel energy: The opportunities that exist for big new oil projects are not fast, not safe, and are not long-term solutions. Projects such as ConocoPhillips’ Willow in the Western Arctic; calls to drill the Arctic National Wildlife Refuge; or ultradeep offshore drilling are several years if not a decade away from producing oil and only set the country up to continue on the unstable path of a fossil-fuel-dependent future.
The bottom line is that investments today—whether in fossil energy or renewables—are about our energy systems in a decade. Now is the time to invest in the energy system that will make the United States truly energy independent.
Renewables are winning the free market
For the long-term transition, the market is pointing away from new drilling investments and toward renewables. Take this latest example: In November 2021, the Bureau of Ocean Energy Management held the largest oil and gas lease sale to date and offered 80 million acres in the Gulf of Mexico. The sale has since been rejected by the courts, but the sum of high bids was $192 million—just $25 per acre—and about 97 percent of the bids were uncontested. Compare that to 488,000 acres in the New York Bight region offered for potential wind energy development in February, which drew competitive winning bids from six companies totaling approximately $4.37 billion—about $9,000 per acre.
The United States—and the world—cannot drill its way out of oil price volatility or into real energy independence. Energy prices are high because fossil fuels are a global market highly influenced by conflicts around the world. Increasing leasing and permitting rates even beyond their current historically high levels won’t change that, but it will lock the United States into fossil fuel dependence for decades to come. For true energy independence, for lower energy prices, and for our own health and well-being, we must urgently invest in clean energy.
The authors would like to thank Will Beaudouin for his contributions to this piece.
March 10, 2022
Originally published by Center for American Progress.