The war in Iran is driving up fossil fuel prices and highlighting the risks of depending on oil and gasoline. Meanwhile, the Trump administration has unwound policies that would boost alternatives.
The war in Iran is driving up fossil fuel prices and highlighting the risks of depending on oil and gasoline. Meanwhile, the Trump administration has unwound policies that would boost alternatives.If you've opened your natural gas or electric bill lately and bit back a scream, or watched the numbers tick up and up at the gas pump, you're not alone.
For many Americans, energy prices feel uncomfortably high right now. The second Trump administration has worked to unwind policies that would promote a wide range of alternatives to fossil fuels, like renewable energy and electric vehicles. And that policy shift started long before the war in Iran disrupted the flow of oil and natural gas from the Middle East. How do those changes affect what Americans pay for energy now, and how easily the country can adapt to future shocks in oil supply?is pretty straightforward. The war in Iran has disrupted the traffic of crude oil through the Strait of Hormuz, a pivotal waterway through which about 20% of the world's oil and liquefied natural gas usually transits. That's pushed crude prices up to about $100 per barrel, from around $70 before the war. And because crude oil is most of the cost of gasoline, prices at the pump are up, too.A switch to summer gasoline — a blend that pollutes less in warm weather — and a typical seasonal rise in demand aren't helping prices either, but they play a much smaller role than the war. Power bills, on the other hand, have been rising for other reasons. Utilities are having to invest a lot of money upgrading old infrastructure and protecting their systems from more-extreme weather and wildfires, which are becoming bigger threats because of climate change. Natural gas is also burned in many power plants, and in the U.S. natural gas prices have been rising. That'sto extreme cold this winter that boosted natural gas demand for heating and electricity, as well as increased exports of liquified natural gas. But while the crisis in the Strait of Hormuz has sent natural gas prices spiking in Europe and Asia, American markets are still relatively insulated and have not soared because of the war.For decades, policymakers have encouraged both the manufacture and purchase of electric vehicles and required automakers to roll out more-efficient gas vehicles. That was not only for the sake of the climate and human health, but also to reduce dependency on oil and make the U.S. less vulnerable to price spikes. In fact, energy security was the primary reason the federal government's fuel economy standards were put in placefor automakers that don't comply with them, which allows them to make as many gas-guzzling large SUVs and trucks as they can sell. Instead of efficiency, the administration emphasizes higher oil production as a buffer against supply shocks. In a statement emailed to NPR, a White House spokesperson wrote that"President Trump's energy dominance agenda is focused on unleashing reliable, affordable, and secure energy sources so that we do not have to rely on a chokehold like the Strait of Hormuz for our oil and gas supply." The U.S. is the world's largest producer of oil, which does protect the country from experiencing outright shortages, but does not insulate consumers from higher global prices.President Trump is a vocal critic of renewable energy; in the same statement, the White House spokeswoman called wind and solar power"unreliable and unaffordable." While those energy sources are intermittent — which means they require additional resources like batteries to store energy in order to make it constantly available — wind and solar projects themselves are some of the cheapest and fastest ways to add power to the grid.The administration's hostility toward renewables is having an effect. The administration has attempted to slow or stop permitting for new wind and solar projects, and even tried — unsuccessfully — to stop development of a handful of offshore wind projects that were already under construction.they expect electricity generated at wind farms and large solar plants to increase by about 10% this year and more than 13% next year. That's a lot more than the growth they're expecting in natural gas generation.Policies on EVs and green energy will play out over decades Recent shifts in vehicle and energy policy are not necessarily having a material impact on the average person's wallet today. It takes years to design new vehicles, and of course, most drivers do not buy a new vehicle every year. Power plants, similarly, take time to build and remain in use for decades. Somewhat ironically, drivers today are actually reaping the benefits of past decades of stringent fuel economy rules, precisely the rules that the Trump administration has now rolled back. Today's vehicles are significantly more efficient than those in the '70s, making the U.S. economy less dependent, dollar for dollar, on gasoline and diesel. That's one reason — along with the rise in U.S. oil production – why a sudden shock to oil supplies hasn't yet triggered a 1970s-era economic crisis.Over the long run, though, Trump's policies will mean fewer EV sales and more gas-hungry SUVs and trucks. That adds up to indirect costs to consumers, through the health and climate effects of burning more fuel, and direct pocketbook costs too; buying more gasoline magnifies the effect of price hikes. Meanwhile, in the power sector, Congress decided last year to get rid of tax credits for the renewable energy industry. That won't kill the industry but will make projects more expensive, which analysts say willAs the war pushes up the cost of crude, which pushes up the cost of gasoline, U.S. shoppers have had noticeably more interest in electric vehicles. The car shopping site Edmunds reports that the share of shoppers considering EVs and plug-in hybrids on their site rose from 20.7% at the start of the month to 23.8% two weeks later, a 15% jump. Considering a vehicle is not the same as buying one, and analysts say high prices would need to be sustained for a lengthy period of time to have a material impact on sales. But there is a clear relationship between prolonged high gasoline prices and consumer interest in fuel-efficient or fully-electric vehicles. On renewables, though, it's a more complicated picture. What matters for the power sector is not the price of gasoline, but the price of natural gas. And because those prices in the U.S. have not spiked like they have in Asia and Europe, the current price hikes may not provide a boost to those alternatives to fossil fuels. Not in the U.S., at any rate — the rest of the world may be
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