Energy Policy Meets Reality

Public policy is becoming more important to energy investors. Democrats now own the climate change issue. The desire of progressives to advance a world of solar panels and windmills is confronting pragmatists who’d like to keep the lights on. 

Windmills, Rainbow, Fields

Rising oil and gas prices are helpful to the energy transition, by improving renewables’ competitiveness. But $4 gasoline would have political repercussions. So the spirit of St. Augustine prevails (“Give me chastity, just not yet”). Last week U.S. Energy Secretary Jennifer Granholm reported “a productive call with Saudi Energy Minister Abdulaziz bin Salman al-Saud” to “ensure affordable and reliable sources of energy.”

The Administration’s proposed $2TN infrastructure plan is likely to rely on reconciliation to get through the Senate, which means it has to look like a tax/spending plan rather than new laws. Eliminating the filibuster would allow more expansive policies, including on climate change, to be passed with a simple majority rather than the 60-vote filibuster-proof margin.

West Virginia Senator Joe Manchin’s (D) power stems from his less than perfect fealty to Democratic ideals. He is against changing the filibuster, which limits the prospects for new laws including on energy. Manchin wants to, “…usher a new era of bipartisanship where we find common ground on the major policy debates facing our nation.” Hence, Congress can spend money on building an electric vehicle charging network, but can’t impose a carbon tax, even though it’s supported by the American Petroleum Institute.

The Administration’s desired path is to show progress without imposing visible costs, since numerous polls show voter concern about climate change stops once the monthly cost competes with their Starbucks budget. Hence the call to the Saudi oil minister.

Energy investors should welcome the increased political debate. It forces the shrill rhetoric of climate extremists to confront reality. For example, the Texas legislature is considering passing the costs of windmill intermittency back to windmill operators. Texas has enjoyed great success in using more windpower, but the grid’s vulnerability to calm days increases with dependence on wind.

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Disclosure: We are invested in all the components of the American Energy Independence Index via the ETF that ...

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