Due to supply chain constraints and the ongoing Russian-Ukraine war, oil prices have markedly increased around the world. In the United States (US), gas prices have reached an all-time high. Drivers, on average, had to pay $4.17 for a gallon of regular gas in March of 2022. [1] This is not the first time the US is experiencing surging oil prices. The leader of the free world saw something similar in 1973 – during the Arab-Israeli War, the then members of the Organization of Petroleum Exporting Countries (OPEC) decided to impose an embargo against the US in retaliation for Washington’s decision to help Israel. Apart from that, something similar happened in 1990 – when Iraq decided to attack Kuwait – and in 2019 – when Saudi Arabia’s largest oil company, Saudi Aramco, suffered heavy losses due to drone attacks and half of its oil production was disrupted. The question is now, how can the US make sure that next time, such an event will have a lesser impact on oil prices in the country?
1. Approving the Keystone XL Pipeline
One solution is to increase supply. Releasing oil from the Strategic Petroleum Reserve can increase oil supply which will decrease the price of oil; however, such a solution only works in the short term. Oil companies – e.g., ConocoPhillips, Phillips 66, Marathon Petroleum, Chevron, or Exxon Mobil – cannot significantly increase their production due to legal and financial reasons. Finally, Washington’s cooperation with OPEC countries has been anything but flawless throughout history. The most reasonable solution would be to approve the construction of the Keystone XL pipeline, which was planned to carry approximately 800,000 barrels of oil a day from Alberta to the Texas Gulf Coast. [2] Importing oil from a trustworthy partner would be a great solution. On top of that, it could be the perfect move to make from a political point of view, given that more than 70 percent of Americans think that the current administration should restart the building of the pipeline. [3]
2. Increase biofuel consumption
President Biden correctly pointed out that surging oil prices “should motivate us to accelerate the transition to clean energy,”. [4] The current administration made it clear that it aims to electrify around half the nation’s passenger automobiles by the end of this decade. However, it means that half the cars and the freight industry – goods transported in bulk by truck, train, ship, or aircraft – would still heavily rely on combustible fuel. During the complete transition to renewable energy, further decreasing dependence on fossil fuels by increasing biofuel consumption could be a great solution.
3. Adopt renewable energy-friendly policies
According to a projection by the US Energy Information Administration (EIA), by 2050, the most-consumed sources of energy will remain petroleum and natural gas. [5] Certainly, unforeseen events can change such projections as the nation is getting closer to that year. Nevertheless, the executive and legislative branches’ current and future decision-makers can help facilitate the growth of the share of renewable energy by adopting policies that incentivize their faster adaptation and usage.
Decreasing the dependence on oil is anything but easy. The reason why the US’ transportation system is able to operate smoothly is because of oil. In the short term, working with reliable partners – such as Canada through the Keystone XL pipeline – could help to decrease the volatility of the price of oil. In the medium-term, greener energy sources, like biofuels, could serve as an alternative. In the long term, the safest solution is to increase the usage of renewable energy. Adopting the above-mentioned solutions could help stabilize the price of oil in the short to medium term and ensure a smooth transition to renewable energy in the long term.
[1] https://www.cnn.com/2022/03/07/energy/record-gas-price/index.html [2] https://www.marketwatch.com/story/restarting-keystone-xl-construction-wouldnt-actually-increase-supply-of-oil-top-biden-adviser-11648845578 [3] https://nationalpost.com/news/world/majority-of-americans-support-restarting-keystone-xl-pipeline-to-make-up-for-russian-oil-ban [4] https://thehill.com/blogs/congress-blog/biden-called-for-us-energy-independence-advanced-biofuels-can-propel-us/ [5] https://www.eia.gov/todayinenergy/detail.php?id=51478By The European Institute for International Law and International Relations.
