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Anyone telling you there is a clear and simple strategy for saving US consumers from the volatility and uncertainty of global energy markets is selling you something, doesn’t understand economics or both. Basic economics tells us why just drilling more won’t save us from Putin. It’s not complex economics either… It’s really 101 type of stuff. 

In order to insulate the US consumer from oil shocks due to geopolitical instability we’d have to:

1.) drill enough to supply the US and all its allies with all of our energy needs.

2.) We’d then also need to shut our markets entirely to all other oil and ban the export of any oil/gas to other non-allied markets.

Think about that last part for a minute. Encourage massive drilling (not even sure there’s enough total resources to supply all of the western world from US oil and gas) and then cut ourselves and the private companies which did all of that drilling off from the volatile and high prices on the global market. What are the odds of that happening?

Energy is the core of western economies. Oil and gas is a fungible commodity that, given enough transportation and storage capacity, will be transported to higher price markets until market price equilibrates. So long as it is sourced from oil and gas, and we participate in the same oil market with volatile sources, such as Russia, The Middle East, Venezuela, etc., we will be exposed to crippling economic and geopolitical weakness at the whim of disasters and madmen globally.

To be clear – this is not to say we shouldn’t do all we can to boost short term production to ensure we have capacity for our own security and to help our allies. Moreover, investment in our capacity to export oil and gas, especially LNG to Europe, would be an even better investment in the security of the US and its allies. But neither of these things will help US consumers in the near-term and we are doomed to see this cycle again, if we don’t act with the long-term in mind. Electrification and a transition to clean commodities produced from America’s abundant clean energy can significantly reduce price volatility. It is likely that much of the transportation, consumer and smaller commercial and industrial loads will be fully electrified, thus delinking most US consumers and smaller businesses from market whims.

However, it will never be as simple as many would have you believe. As I’ve written about at length, we are entering an era of clean energy products and commodities such as green hydrogen, e-fuels, desalinated water, and others – some of which are already bound to be globally traded commodities. For this limited subset of largely industrial clean commodities, prices may continue to be set globally unless we completely isolate ourselves from these markets and produce all we need. The United States’ capacity to export these new clean commodities will eventually become a means of projecting power globally and defending our allies in much the same way as LNG export can today, sustaining our ties to global energy markets. However, I believe that the major suppliers of these new clean commodities will include regions such as the US, Australia, Chile and Northern Europe which happen to be more democratic and stable regimes than the current producers of petroleum worldwide. 

A dramatic move towards a renewable and electrified US economy will shrink the total share of our energy tied to global markets and redefine who the major suppliers are for that limited subset of energy products. I believe this path is a far more secure path than continued dependence on the global oil markets that have roiled our economy many times over the past 100 years. All this and we avoid a global climate cataclysm while creating millions of good paying jobs. Pretty good deal if you ask me.