Our Addiction to Fossil Fuels Is Driving Inflation
To break free of price volatility, we need to break free from volatile fossil fuels
If you’re like most people, you’re feeling the sting of price inflation these days. From groceries to monthly utility bills, higher prices are taking a bite out of everyone’s budget—causing economic strain for all of us, especially those already struggling to make ends meet.
In trying to explain higher costs, the media and politicians have largely focused on disruptions related to the pandemic: interrupted supply chains, a lack of workers in key sectors, and increasing demand from consumers who were able to save during the lockdowns. And it’s true that this current wave of inflation has multiple causes. But many of the price spikes we’re all experiencing are symptoms of our long-standing dependence on fossil fuels. Oil and gas are especially volatile commodities, and they are a major cause of the current price volatility rippling through the economy. All of which is a reminder that the more that we power our economy with clean, renewable energy, the more we can insulate ourselves from price shocks.
While prices are up across the board this year, nothing inflated faster than the costs of fossil fuels. According to the US Bureau of Labor Statistics, Americans are now paying about 6 percent more for food and clothing compared to this time last year. Electricity prices increased at a similar rate—up 6.3 percent this year. But those price hikes are all fairly minor compared to changes in fossil fuel energy prices. The cost of methane gas (a.k.a. “natural” gas) for home heating has spiked 24.1 percent. And retail gasoline prices are up a whopping 49.6 percent. Today, the average price of a gallon of gasoline is $3.73; a year ago it was $2.67.
Those numbers may create sticker shock for many Americans, but they shouldn’t come as a surprise. While pandemic-related interruptions affected fossil fuels just as much as any other industry, price volatility is a fundamental part of building so much of our lives around the need for oil and gas. There are several reasons for this.
For starters, new oil and gas wells produce much less as they age. This natural diminishment of supplies leaves the industry in a constant search for new places to drill. Reduced output from aging wells is particularly a problem in shale formations and extraction through hydraulic fracturing, or fracking, which has represented a majority of new projects in recent years.
Second, global energy markets are easily and often manipulated. Sometimes it’s for political gain: Just ask Europe, which is experiencing record-high prices for gas as Russia threatens to withhold its oil and gas supplies amid the Ukraine invasion. Sometimes energy markets are manipulated for private profit. Federal regulators here in the United States are investigating whether gas pipeline companies withheld supply in order to charge higher prices in the aftermath of Winter Storm Uri in February 2021. Pipeline companies took home billions in extra profits in the days after the event, as almost 10 million people were without power for multiple days and hundreds of Texans died in their homes.
The war in Ukraine underscores how vulnerable energy markets are to geopolitics; the global price of oil skyrocketed to more than $100/barrel as Russia began its invasion. And US efforts to insulate European allies from further price shocks due to Vladimir Putin’s aggression has further roiled energy markets.
US gas exports are also driving up the price of gas, which nearly half the country uses to heat their homes. Close to 20 percent of US gas is now exported, primarily through liquefied gas terminals on the Gulf Coast, which means lower supply and higher prices at home. A group of 10 senators led by Senator Jack Reed, a Democrat from Rhode Island, and Senator Angus King, a Maine independent, recently urged the Department of Energy to halt permits for new gas export projects and study the role of exports on domestic prices.
And, finally, there’s climate change. As we continue to burn fossil fuels, we further destabilize climate systems, which—in a twisted irony—puts fossil fuel production at greater risk. Last September, for example, Gulf Coast oil production was taken offline for weeks due to Hurricane Ida.
For fossil fuel executives and shareholders, these volatile energy prices mean record profits. But for many Americans, the higher energy prices are often the difference between putting food on the table or paying rent, and people of color are disproportionately impacted due to the legacies of systemic racism. As long as we remain dependent on volatile global commodities like oil and gas, regular people are at risk of continuing to be price gouged while a handful of wealthy people get wealthier.
The Russian invasion of Ukraine has prompted calls for increasing oil and gas production as a way of boosting supplies. But that’s a short-sighted solution—and a false one. There will always be some kind of geopolitical crisis that risks destabilizing energy prices. The real, lasting solution to energy-exacerbated inflation is to break our addiction to fossil fuels once and for all.
The good news is that we have clean, renewable energy sources available right now that aren’t prone to the same kind of price gouging and volatility. The price of oil and gas can go up at any moment due to geopolitical instability, a pipeline explosion, or the arbitrary decisions of fossil fuel executives. But the wind and the sun are free—and, just as important, the wind and the sun know no political boundaries. Renewable energy sources are widely distributed, unlike the fossil fuels that are concentrated in a few key regions.
The work is well underway to build our electric grid around more affordable wind and solar power. Renewables are increasing year by year, and we can harness that clean energy to power our homes with ultra-efficient heat pumps, electric water heaters, and induction stoves. And we can use the same clean electricity to charge electric vehicles. This isn’t just wishful thinking: Research shows that in the United States, the price of electricity is relatively stable year to year, while the price of methane gas for home heating varies wildly. Continuing to build an economy fueled by clean electricity allows for stable, predictable energy prices. It will mean no more wild fluctuations in monthly energy bills or sticker shock at the gasoline pump.
Everyone is feeling the impact of higher prices right now. And everyone benefits from a world powered by affordable and predictable clean energy, free from the boom and bust cycle of fossil fuels. Building the renewable energy economy would be a great step toward getting off the inflation roller coaster.