Stable, Reliable Renewables

How A Clean Energy Future Can Protect Consumers From Fossil Fuel Price Volatility

Even though Donald Trump pulled out all the stops to bail out the oil & gas industry in 2020, he couldn’t overcome two key facts: 1) fossil fuel prices are set on the global market, and 2) fossil fuel executives were “far more focused on returning cash to shareholders” instead of protecting their employees or consumers. The end result has been a year of energy markets in chaos after oil companies laid off employees and cut production capacity, then failed to keep up as demand returned.

While oil and gas lobbyists and their allies in Congress would love to blame environmental protections as the reason for all of their self-inflicted problems, the truth is that developing a clean energy future can actually help save consumers from the kinds of price shocks & political turmoil known to roil international oil & gas markets.

Key Points:

  • Oil & gas companies were “far more focused on returning cash to shareholders” in 2020, and now we are paying the price as they struggle to bring production back online after having laid off so many employees.
  • Fossil fuels have always been vulnerable to global market disruptions that have tremendous impacts on our economy.
  • The head of the International Energy Agency recently warned that extreme volatility in energy markets will present a continued risk unless investment in clean power is tripled in the next decade.
  • Renewable energy prices are generally cheaper and more stable, and the Build Back Better Act’s investments in clean electricity and energy efficiency can help households save $500 a year.
  • This year, U.S. oil and gas production has been hit by extreme weather. A deep freeze in Texas hampered gas production, summer heat waves across China, Europe, and the US boosted demand for electricity for cooling, and Hurricane Ida in September cut offshore energy production in the Gulf.


Get The Facts:

What’s Behind The Recent Spikes In Fossil Fuel Prices?

Increases In Natural Gas & Gasoline Prices Are Due To Rising Demand As The World Re-Opens From The COVID-19 Pandemic: 

  • As restrictions put in place to curb the spread of COVID-19 are loosened globally, there has been a rapid recovery in demand for crude oil that has exceeded expectations, leading to a tightening of global crude markets.
  • The head of the International Energy Agency attributed current market disruptions to a combination of factors, including an “unsustainable recovery” from the pandemic, severe weather conditions and significant gas supply outages.
  • According to the EIA, domestic crude production fell by 8% in 2020, the largest annual decrease on record.
  • Despite recovery elsewhere in the economy, domestic oil production is predicted to continue to decline in 2021 as the industry recovers from last year’s low prices.

Oil Production Shortages Were Self-Inflicted:

Unstable Fossil Fuel Markets Can Upend Our Economy

Fossil Fuels Will Always Be Vulnerable To Pricing Volatility:

  • Oil and gas prices have long been subject to wide fluctuations.
  • Historically, prices of fossil fuel-based electricity have been wildly volatile  – with price spikes hitting at unanticipated times.
  • Energy prices everywhere are set in a global market, so the US will never be free from oil and gas price fluctuations no matter how much oil we produce. 
    • If the price of oil jumped anywhere in the world, US companies would begin exporting oil there, which would lower the domestic supply and raise the price of oil in the US.

Unabated Climate Change Will Cause Even More Disruptions In Energy Markets:

  • Climate change poses risks to virtually every aspect of the energy system. Extreme weather events and extreme temperatures tied to climate change are both drive up demand and hamper global oil and gas production:
    • The deep freeze in Texas hampered gas production, resulting in lower liquefied natural gas exports to Asia and elsewhere during February. Subsequently, summer heat waves across China, Europe, and the US boosted demand for electricity for cooling.
    • Hurricane Ida cut offshore oil and gas production for over a week, with shutdowns cutting production by as much as 30 million barrels. 
    • Drought conditions in China and South America have led to reduced hydropower output, drawing gas supplies into those markets instead.
    • Recent heat waves caused record demand for electricity as households turn to air conditioning to escape warming temperatures. In parts of the Pacific Northwest, electricity prices briefly shot up by more than 400%
    • If we fail to address climate change, electricity costs for residential and commercial ratepayers will go up by as much as $30 billion per year by mid-century as temperatures continue to rise.

Wild Swings In Fossil Fuel Markets Can Cause Major Economic Instability:

  • For countries, rapid swings in oil prices can blow a hole in government budgets, prompt wholesale economic reform, and even alter geopolitical priorities. 
    • Formulating national budgets becomes increasingly difficult, with importing countries facing uncertainty on import costs and fuel subsidies levels, and exporters facing volatile revenues.
  • Countries who rely on a high fossil fuel share in their energy mix, or on energy intensive industrial production, are more vulnerable to economic volatility.
  • Changes in the price of oil have significant effects on economic growth and welfare around the world. 
    • Volatility disproportionately impacts the poor through higher costs of living as prices for gasoline and electricity increase.
    • Oil price volatility reduces planning horizons, investments to be postponed, and may even require expensive reallocation of resources.
  • Current financial stresses within the oil and gas industry, including volatile revenues, limited growth opportunities, and a negative outlook, will only intensify
  • At a local level, a 2014 study linked oil and gas development with overburdened municipal services, upended social and cultural patterns, and volatile economic growth.

Renewable Energy Is More Stable And Reliable

Renewables Offer A Path To Economic Stability:

  • The head of the International Energy Agency recently warned that extreme volatility in energy markets will present a continued risk unless investment in clean power is tripled in the next decade.
  • Renewable energy generation facilities can be constructed in a very quick time frame. Installing a solar power farm or a wind power farm can be completed in a few months, whereas constructing a new coal power plant could take upwards of 4 years. 
  • Clean energy generation is more price stable than fossil fuels. 
    • Renewable energy sources— the sun, wind, and geothermal energy— are inexhaustible. In fact, the US has enough access to solar and wind power to power the nation’s energy needs many times over.
    • The “known pricing” of renewables allows for long-term energy contracts that don’t present the same risk as fossil-fuels. 
  • Diversifying energy portfolios hedges against the risk of future fossil fuel price fluctuations, and increases grid reliability

Renewables Are Less Subject To Global Disruption:

  • Renewables are more geographically dispersed, and so less vulnerable to acts of terrorism. 
  • It is hard to export clean energy to most countries, so the price of clean energy is not vulnerable to global market fluctuations.

Renewables Are Reliable:

  • Renewables can supply energy at the point of use, which can enhance resilience when the grid is stressed from severe weather events and can increase stability
  • An analysis from the Congressional Research Service (CRS) found that electric reliability with renewables integrated was stable from 2013-2017, and that wind and solar did not contribute to any instability issues of the grid at the national level. 
  • According to the American Council On Renewable Energy (ACORE), “the most pervasive forms of renewable energy generation, wind turbines and solar photovoltaic (PV) panels, have fundamental characteristics that make them uniquely capable of withstanding many of [the most common threats to the supply of electricity].”
  • A robust renewable energy economy will be more politically stable as supply will be diversified, geographically and technologically. 
  • Renewables do not pose a risk of dangerous leaks or explosions that threaten human health and public safety.

Switching From Fossil Fuels Will Save Households Money

Investments Under The Build Back Better Act Would Shift Households’ Reliance On Natural Gas For Heating And Appliances:

  • The Build Back Better Act will turbocharge investments in clean energy, including tax credits for production and investment tax credits for the industry. 
    • The package includes spending for clean energy projects and lending funds for clean energy generation, energy storage and transmission projects in rural communities.
  •  Wind and solar are already the cheapest sources of electricity in the United States, and additional investments will reduce costs further.
    • A 2020 BloombergNEF study found solar PV and onshore wind are the cheapest sources of new-build power generation for at least two-thirds of the global population – including the U.S. 
    • An International Renewable Energy Agency report showed renewable power is increasingly cheaper than any other new electricity capacity based on fossil fuels.
  •  Switching to Clean Energy Can Save Households Money
    • A study from UC Berkeley found that a future of 90% renewable energy by 2035 would cut wholesale electricity costs by about 10% from today’s prices, though they would remain slightly higher than if no policy actions were taken.
    • Under a transition to 100% clean energy in the electric, transportation, building, and industrial sectors by 2035 , each American household stands to save on average between $1,050 and $2,585 ​annually on their energy bills.
    • Home weatherization can reduce the energy burdens of low-income households by about 25%.
  • Specifically, the Build Back Better Act will lower household energy costs by investing in clean energy, energy efficiency and home weatherization programs. 
    • An October 2021 report from the Rhodium Group found that the average U.S. household would save roughly $500 a year in energy costs under the Build Back Better Act.