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Here’s the climate case for the Department of Energy buying millions of barrels of oil.
This might sound like heresy from a climate-change reporter, but here goes: President Joe Biden should start buying oil soon. A lot of it.
Specifically, he should begin refilling the Strategic Petroleum Reserve, or SPR, a set of subterranean salt caverns that line the Gulf Coast and can store hundreds of millions of barrels of oil. Over the past year or so, Biden sold 180 million barrels of oil from these caverns, but now it’s time to start buying that oil back. Doing so would help Biden’s domestic agenda and allow him to execute the trade of the century, generating billions of dollars in profits for the federal government.
But it would also help the climate. And every day that goes by without refilling that oil, Biden squanders his credibility and loses his clout. It’s time for the president to seal the deal.
But let’s back up.
Last year, Biden did something that — at least according to experts — should have been impossible. He tried to lower gas prices. And then he did it.
The SPR was key to the magic trick. After Russia invaded Ukraine in February 2022, oil prices spiked. By mid-March, the U.S. benchmark price for a barrel of oil — which had lingered in the $60 range for much of 2021 — reached $110. Gas hit $4.14 a gallon.
So Biden announced that the government would sell 180 million barrels of oil from the SPR over the course of six months. Despite initially rising, oil prices eventually dropped. In October, Biden formalized the SPR strategy and promised to keep oil in a goldilocks window. When oil hit $67 to $72 a barrel, he said, the Energy Department would begin refilling the SPR. That number was chosen because it’s slightly above the “breakeven” price, the price-per-barrel that American drillers need in order to turn a profit.
This pledge virtually guaranteed that the government would profit from Biden’s trade: It sold high in 2022, then it would buy low in 2023 and beyond.
There’s only one problem: It hasn’t started buying yet.
In March, oil sank below the $72 mark for two weeks, but the Energy Department didn’t start refilling the SPR. Instead, Energy Secretary Jennifer Granholm offered excuses as to why the department needed more time to start repurchases. Eventually, the OPEC+ cartel — annoyed that Biden hadn’t taken action yet — cut production and brought oil prices out of the refill range.
That was a profound missed opportunity — but now the White House has another chance. Earlier this week, oil fell back into the $67 to $72 range.
Here are three reasons that Biden needs to be as good as his word and buy oil — for the climate’s sake, for the country’s, and for his own.
1. When gasoline gets too cheap, the climate suffers. When oil is inexpensive, people use more of it, and they think less of using it in the future. They let their car idle longer in the driveway, and they choose to drive places that they might otherwise walk or bike to. All of that, of course, results in more carbon pollution.
Yet the real danger happens as people integrate cheap gasoline into their plans for the future. Then consumers and businesses buy bigger, more inefficient trucks and SUVs to drive around town, or they put off buying hybrids — or electric vehicles — because the fuel savings aren’t worth it. Even if the oil price eventually goes back up, those gas-guzzling vehicles remain in the fleet for years, contributing to a higher baseline of oil demand than would otherwise exist.
That’s how persistently cheap oil could drag down Biden’s climate policy. Energy Secretary Jennifer Granholm has argued that even though electric vehicles cost more upfront, they’re “cheaper to own” than gas cars; the Environmental Protection Agency has made a similar case about its clean-cars proposal, which aims for EVs to make up two-thirds of new car sales by 2032. Those calculations are true right now, but they depend on oil prices remaining in a certain window: If gas gets too cheap, then all bets are off about EV affordability — especially if the price of lithium or another important mineral spikes, as some analysts expect.
I should add: This argument is, like, the opposite of counterintuitive. Virtually every climate-policy proposal from across the political spectrum — whether it’s implementing a carbon tax or blowing up pipelines — aims to make fossil fuels more expensive. Because if fossil fuels are more expensive, fewer people will use them. That’s the whole idea.
And refilling the SPR would certainly raise oil prices, in the same way emptying it lowered them. Which brings me to:
2. The federal government is squandering a rare moment to assert its authority in the global energy market. Since 2010, fracking and the shale revolution have turned America into the world’s largest oil producer and a net-oil exporter. Last year, the United States produced 20% of the world’s oil, more than Saudi Arabia and Iran combined. On paper, at least, the long-held dream of multiple presidential administrations — that the U.S. achieve “energy independence” — has come true.
But it’s not true in reality. That’s because power within the global oil market rests not with the biggest producer per se, but with the biggest swing producer: the country or countries that can ramp their oil production up or down at will. Right now, an informal cartel of countries called “OPEC+” — made up of the traditional OPEC countries plus Russia — has that power.
In a way, you can think of the global oil market as a giant, very fancy bathtub. Water can only enter the tub from a few dozen big faucets. (These are the oil-producing countries) And the water exits the system as it runs down a giant drain. (Oil exits the market when it’s refined into a fuel and burned, or when it’s turned into a chemical or plastic.)
In such a system, who gets to decide how full the tub is? It’s not the person with the biggest faucet, but whoever can turn their faucet on or off.
That’s what makes OPEC+ so powerful: It can turn its tap on and off. When OPEC+ decreases the flow of oil, oil prices rise; when it opens the tap, they fall. It helps, yes, that OPEC+ produces 40% of the world’s oil, but what really matters is that it can adjust its own faucet.
The United States, meanwhile, has the world’s largest faucet, but no ability to turn it on or off. In the OPEC countries, state-run companies produce oil, so governments can decide to ramp up or ramp down their country’s production as need be. But in America, hundreds of private companies and investors decide when to open new wells and increase production. Our faucet goes on and off in response to circumstances outside anyone’s control.
That was why the White House’s SPR gambit was such a neat trick. In essence, the Biden administration found a way to turn up the United States’ faucet, refilling the world’s tub and lowering oil prices for Americans. It has the opportunity to do the opposite now. By filling the SPR immediately, Biden can use the bathtub, in effect, like turning down a faucet — and therefore establish a floor under the global oil price. (Because the SPR would buy oil specifically from American producers, he would do so in a way that helps the domestic economy.)
But Biden must act now to do so. Oil is a physical thing; it can’t be delayed and appealed like a legal deadline. If Biden doesn’t seize the moment now, while oil is in this price window, then OPEC+ could cut supply again, boosting the oil price and robbing Biden of any clout and leaving America at the whim of international price setters. (This isn’t a hypothetical concern: Paranoid Democrats should consider what Biden would do — and whether he’d be able to act — if Saudi Arabia and Russia decided to, say, slash oil production a month before next year’s presidential election.)
3. Yet these wonky arguments are somewhat beside the point. There’s one overriding reason why the government must refill the SPR immediately: because President Biden said that it would.
President Biden — and the Department of Energy — are engaged in a once-in-a-generation experiment to revive “a modern American industrial strategy.” Biden wants to reshape markets, make big public investments, and push American companies to make productive and innovative decisions that help the middle class and better the planet. This is going to be hard. It’s going to be fraught. And no matter what, it’s going to require credibility: Business leaders must believe that Biden will do what he says — and that he won’t renege on commitments when politics intervene.
If Biden squanders his credibility on the SPR, the effect will be neither immediate nor dramatic. But the SPR failure will seep into his policymaking and eat away at his authority. Executives will second-guess the president’s commitment to labor, childcare, or renewables.
Presidents are said to have a “bully pulpit,” but Teddy Roosevelt coined that term to describe how the president’s words can shape economic outcomes that the Executive Branch has no explicit power over. The bully pulpit, in other words, is a major tool of industrial policy. If Biden doesn’t practice what he preaches, his will cease to exist.
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On the presidential debate, California’s wildfires, and the nuclear workforce
Current conditions: Hurricane Francine is approaching Louisiana as a Category 1 storm • The streets of Vietnam’s capital of Hanoi are flooded after Typhoon Yagi, and the death toll has reached 143 • Residents of Nigeria’s northern Borno state are urged to watch out for crocodiles and snakes that escaped from a zoo due to flooding.
Former President Trump and Vice President Kamala Harris squared off on the debate stage in Philadelphia last night. Here are some important climate and energy highlights from the evening:
Three large wildfires – the Line fire, the Bridge fire, and the Airport fire – are burning in Southern California, fueled by intense heat and thick, dry vegetation. Already more than 100,000 acres have been scorched. The Line fire is closing in on the popular vacation destination Big Bear, and is threatening some 65,000 structures. Los Angeles County Fire Chief Anthony Marrone said the scale of the emergencies is straining firefighting resources, and FEMA is sending financial aid to the state. In neighboring Nevada, the Davis Fire has grown to nearly 6,000 acres and is burning toward ski resorts in Tahoe. Temperatures in the region started to cool yesterday after a long and brutal heat wave. The weather shift could help firefighters bring the blazes under control.
The White House is launching an American Climate Corps national tour this fall to highlight the work being carried out by corps members in different communities and showcase important projects. The events will feature remarks from the administration and other officials, roundtable talks with ACC members, and swearing-in ceremonies. The tour began in Maine this week with a focus on climate resilience and urban forestry, and heads to Arizona next week. The rest of the schedule is as follows, with more dates to come:
The number of students studying to become nuclear engineers is declining as demand for carbon-free nuclear energy is on the rise, according toThe Wall Street Journal. Citing data from the Oak Ridge Institute for Science and Education, the Journal reported that just 454 students in the U.S. graduated with a degree in the field in 2022, down 25% from a decade earlier. Meanwhile, the industry’s workforce is aging. “We need nuclear expertise in order to combat climate change,” said Sara Pozzi, professor of nuclear engineering and radiological sciences at the University of Michigan. “We are at a crucial point where we need to produce the new generation of nuclear experts so that they can work with the older generation and learn from them.” The drop in new recruits comes down to nuclear’s image problem thanks to public disasters like Chernobyl and Fukushima, the Journal speculated.
Critical metal refining company Nth Cycle announced this week it has become the first company to produce nickel and cobalt mixed hydroxide precipitate (MHP) in the U.S. following the opening of its commercial-scale facility in Ohio. The company’s “Oyster” technology uses electricity to turn recyclable industrial scrap and mined ore into MHP, a key component in clean-energy technologies like batteries. “This revolutionary innovation replaces pyrometallurgy with one of the cleanest technologies in the world, and accelerates the net zero targets of the public and private sector,” the company said in a press release. It claims the Ohio unit can produce 900 metric tons of MHP per year, which would be enough to supply batteries for 22 million cell phones. The company says its process reduces emissions by 90% compared to traditional mining methods and can help EV manufacturers meet the IRA’s sourcing requirements.
A new nationwide poll of 1,000 registered U.S. voters found that 90% of respondents support President Biden’s federal clean energy incentives in the Inflation Reduction Act, including 78% of respondents who said they were Trump voters.
Maybe you’ve never heard of it. Maybe you know it too well. But to a certain type of clean energy wonk, it amounts to perhaps the three most dreaded words in climate policy: the interconnection queue.
The queue is the process by which utilities decide which wind and solar farms get to hook up to the power grid in the United States. Across much of the country, it has become so badly broken and clogged that it can take more than a decade for a given project to navigate.
On this week’s episode of Shift Key, Jesse and Rob speak with two experts about how to understand — and how to fix — what is perhaps the biggest obstacle to deploying more renewables on the U.S. power grid. Tyler Norris is a doctoral student at Duke University’s Nicholas School of the Environment. He was formerly vice president of development at Cypress Creek Renewables, and he served on North Carolina Governor Roy Cooper’s Carbon Policy Working Group. Claire Wayner is a senior associate at RMI’s carbon-free electricity program, where she works on the clean and competitive grids team. Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
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Here is an excerpt from our conversation:
Robinson Meyer: Can I interject and just ask why, over the past decade, the interconnection queue got much longer — but also over the past decade, 15 years, the U.S. grid did change in character and in fuel type a lot, right? We went from burning a lot of coal to a lot of natural gas. And that transition is often cited as one of the model transitions, one of the few energy transitions to happen globally that happened at the speed with which we would need to decarbonize. Obviously, switching coal to gas is not decarbonizing, but it is a model — it happened fast enough that it is a good model for what decarbonizing would look like in order to meet climate goals.
Evidently, that did not run into these kind of same interconnection queue problems. Why is that? Is that because we were swapping in within individual power plants? We were just changing the furnace from a coal furnace to a gas furnace? Is that because these were larger projects and so it didn’t back up in the queue in the same way that a lot of smaller solar or wind farms do?
Claire Wayner: I would say all the reasons you just gave are valid, yeah. The coal to gas transition involved, likely, a lot of similar geographic locations. With wind and solar, we’re seeing them wanting to build on the grid and in a lot of cases in new, rather remote locations that are going to require new types of grid upgrades that the coal to gas transition just doesn’t have.
Jesse Jenkins: Maybe it is — to use a metaphor here — it’s a little bit like traffic congestion. If you add a generator to the grid, it’s trying to ship its power through the grid, and that decision to add your power mix to the grid combines with everyone else that’s also generating and consuming power to drive traffic jams or congestion in different parts of the grid, just like your decision to hop in the car and drive to work or to go into the city for the weekend to see a show or whatever you’re doing. It’s not just your decision. It’s everyone’s combined decisions that affects travel times on the grid.
Now, the big difference between the grid and travel on roads or most other forms of networks we’re used to is that you don’t get to choose which path to go down. If you’re sending electricity to the grid, electricity flows with physics down the path of least resistance or impedance, which is the alternating current equivalent of resistance. And so it’s a lot more like rivers flowing downhill from gravity, right? You don’t get to choose which branch of the river you go down. It’s just, you know, gravity will take you. And so you adding your power flows to the grid creates complicated flows based on the physics of this mesh network that spans a continent and interacts with everyone else on the grid.
And so when you’re going from probably a few dozen large natural gas generators added that operate very similarly to the plants that they’re replacing to hundreds of gigawatts across thousands of projects scattered all over the grid with very complicated generation profiles because they’re weather-dependent renewables, it’s just a completely different challenge for the utilities.
So the process that the regional grid operators developed in the 2000s, when they were restructuring and taking over that role of regional grid operator, it’s just not fit for purpose at all for what we face today. And I want to highlight another thing you mentioned, which is the software piece of it, too. These processes, they are using software and corporate processes that were also developed 10 or 20 years ago. And we all know that software and computing techniques have gotten quite a bit better over a decade or two. And rarely have utilities and grid operators really kept pace with those capabilities.
Wayner: Can I just say, I’ve heard that in some regions, interconnection consists of still sending back and forth Excel files. To Tyler’s point earlier that we only just now are getting data on the interconnection queue nationwide and how it stands, that’s one challenge that developers are facing is a lack of data transparency and rapid processing from the transmission providers and the grid operators.
And so, to use an analogy that my colleague Sarah Toth uses a lot, which I really love: Imagine if we had a Domino’s pizza tracker for the interconnection queue, and that developers could just log on and see how their projects are doing in many, if not most regions. They don’t even have that visibility. They don’t know when their pizza is going to get delivered, or if it’s in the oven.
This episode of Shift Key is sponsored by …
Watershed’s climate data engine helps companies measure and reduce their emissions, turning the data they already have into an audit-ready carbon footprint backed by the latest climate science. Get the sustainability data you need in weeks, not months. Learn more at watershed.com.
As a global leader in PV and ESS solutions, Sungrow invests heavily in research and development, constantly pushing the boundaries of solar and battery inverter technology. Discover why Sungrow is the essential component of the clean energy transition by visiting sungrowpower.com.
Antenna Group helps you connect with customers, policymakers, investors, and strategic partners to influence markets and accelerate adoption. Visit antennagroup.com to learn more.
Music for Shift Key is by Adam Kromelow.
In the closing minutes of the first presidential debate tonight, Donald Trump’s attacks on Kamala Harris took an odd, highly specific, and highly Teutonic turn. It might not have made sense to many viewers, but it fit into the overall debate’s unusually substantive focus on energy policy.
“You believe in things that the American people don’t believe in,” he said, addressing Harris. “You believe in things like, we’re not gonna frack. We’re not gonna take fossil fuel. We’re not gonna do — things that are going to make this country strong, whether you like it or not.”
“Germany tried that and within one year, they were back to building normal energy plants,” he continued. “We’re not ready for it.”
What is he talking about? Let’s start by stipulating that Harris has renounced her previous support for banning fracking. During the debate, she bragged that the United States has hit an all-time high for oil and gas production during her vice presidency.
But why bring Germany into it? At the risk of sane-washing the former president, Trump appears to be referencing what German politicians call the Energiewiende, or energy turnaround. Since 2010, Germany has sought to transition from its largest historic energy sources, including coal and nuclear energy, to renewables and hydropower.
The Energiewiende is often discussed inside and outside of Germany as a climate policy, and it has helped achieve global climate goals by, say, helping to push down the global price of solar panels. But as an observant reader might have already noticed, its goals are not entirely emissions-related: Its leaders have also hoped to use the Energiewiende to phase out nuclear power, which is unpopular in Germany but which does not produce carbon emissions.
The transition has accomplished some of its goals: The country says that it is on target to meet its 2030 climate targets. But it ran into trouble after Russia invaded Ukraine, because Germany obtained more than half of its natural gas, and much of its oil and coal besides, from Russia. Germany turned back on some of its nuclear plants — it has since shut them off again — and increased its coal consumption. It also began importing fossil fuels from other countries.
In order to shore up its energy supply, Germany is also planning to build 10 gigawatts of new natural gas plants by 2030, although it says that these facilities will be “hydrogen ready,” meaning that they could theoretically run on the zero-carbon fuel hydrogen. German automakers, who have lagged at building electric vehicles, have also pushed for policies that support “e-fuels,” or low-carbon liquid fuels. These fuels would — again, theoretically — allow German firms to keep building internal combustion engines.
So perhaps that’s not exactly what Trump said, to put it mildly — but it is true that to cope with the Ukraine war and the loss of nuclear power, Germany has had to fall back on fossil fuels. Of course, at the same time, more than 30% of German electricity now comes from wind and solar energy. In other words, in Germany, renewables are just another kind of “normal energy plant.”