Why higher oil prices may not change US energy policy
As military actions between Iran and Israel continued, two tankers collided Tuesday, caught fire and spilled oil in the Gulf of Oman. The incident briefly sent shock waves through the oil market as investors contemplated a closure of the Strait of Hormuz.
One estimate found that a closure in the crucial shipping route could result in oil prices soaring to $120 a barrel.
So would higher oil prices push more people, or governments, to move away from fossil fuels?
Short-term spikes in oil prices might translate into temporary changes in consumption patterns, analysts have said. But they are not likely to have a significant impact on long-term oil production or consumer habits.
Oil shocks, often accompanied by increases in gasoline prices, have bedeviled presidents since the Nixon era. But while no one likes paying more for gasoline, big price spikes have not translated into sweeping, long-term changes to domestic energy policy in the United States.
To understand why, Meg Jacobs, a historian who teaches at Princeton University and the author of 'Panic at the Pump: The Energy Crisis and the Transformation of American Politics in the 1970s,' pointed to two lessons from the energy crisis of the 1970s.
Energy crises and policy change
The first lesson from the energy crisis, Jacobs said, is that even though it worried voters, it didn't lead to the development of a more robust domestic energy policy in the United States.
In the 1970s, after supply shocks led to high gas prices, long lines at the pump and even rationing in some states, many politicians agreed that the United States should reduce its dependence on foreign oil. Then-President Jimmy Carter flirted with fixes like supporting renewables as he encouraged consumers to conserve energy.
But big promises to fix the energy crisis fell flat. 'The lesson of the 1970s was that if Watergate and Vietnam taught Americans that governments lie, then the failure to solve the energy crisis taught them that government was ineffective,' Jacobs said.
Instead of reducing reliance on foreign oil by rethinking domestic energy policy, Jacobs said, the United States under President Ronald Reagan stepped up its military presence in the Middle East.
Congress is currently debating the rollback of many of the renewable energy tax credits in the Inflation Reduction Act, President Joe Biden's signature climate law. The fate of this policy may prove far more consequential for the energy transition than an oil supply disruption in the Middle East.
Voters and higher prices
The second lesson, Jacobs said, is that sacrifice is not popular. In 1979, Carter angered voters when he made a speech suggesting people should use less energy. He lost his bid for reelection.
'Americans would not tolerate increases at the pump,' Jacobs said. 'They were not willing to make short-term sacrifices for long-term gains.'
Biden and President Donald Trump both came of age during the energy crisis, Jacobs pointed out. And both have prioritized low costs for consumers with their energy agendas. During his term, Biden decided against proposing a carbon tax in favor of the tax breaks featured in the IRA, and Trump promised to slash energy prices on the campaign trail.
So what's the long-term prognosis for America's energy mix? As domestic policies come and go, the past decade or so has seen a crucial shift in energy economics. Even if clean energy subsidies go away, solar and wind have gotten so cheap that those industries are now here to stay, Jacobs said.
And domestic politics aside, oil may be fading in importance, albeit slowly. A Tuesday report from the International Energy Agency found that despite geopolitical uncertainties, oil demand is projected to plateau by 2030.
This article originally appeared in The New York Times.
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