You Paid WHAT for Gas?

and

Jun 10, 2022

I was just in California over the weekend, where I filled up the tank for my rental car at a soul-crushing, $7.29 per gallon of regular old unleaded. While California is an extreme, most Americans are now paying about $5 per gallon of gasoline[1].

What is Going On?

Russia’s invasion of Ukraine, which highlighted risks around energy security, as well as economic pressures catalyzed by the pandemic in 2020 and compounded by the broader macro, have resulted in what Bloomberg aptly refers to as an “Energy Shock”[2]. The markets for energy are global in nature, so shocks to supply and demand (such as those that result from sanctions by the US against Russia) impact consumers across the world. This impacts consumers like all of us through our monthly energy bills (which rise as natural gas prices surge) and retail fuel prices (the price you see at the pump).

Beyond the Pump

Beyond just impacts on the monthly cost of living, the strain on global power grids could lead to blackouts. Summer is a typical peak for energy use, as sweltering weather causes people and businesses to crank up the AC. War and sanctions, along with rising global temperatures and extreme weather events, are disrupting the supply and demand for energy. One of the biggest problems is that, because the supply is so strained, power blackouts and rolling outages will put lives at risk.

What is the US Doing?

For the last couple of decades, whenever a geopolitical crisis has led to higher oil prices, policymakers start by (1) getting more oil as soon as possible (largely from the Middle East, (2) investing in the concept of “energy independence” for the US, and (3) recognize that the US must invest in renewable technology. However, despite being one of the world’s largest producers of oil and gas, we are still vulnerable to disruptions in supply and demand.

In March 2022, President Biden invoked his authorities in the 1950 Defense Production Act (DPA) to bolster U.S. investment in clean energy technology[3]. By doing so, Biden declared that clean energy is essential to national security.

This may not be enough though. According to Teri Viswanath, lead economist for CoBank ACB, “the US is experiencing more outages globally than any other industrialized nation because about 70% of our grid is nearing the end of its life”[4].

The American Security Project States that the US can ensure energy security by “diversifying energy sources” (investing in traditional sources as well as solar and wind farms, geothermal plants, and advanced nuclear plants), “ensuring domestic production” (rather than purchasing from the Middle East or Europe, especially during times of crisis), and “securing distribution and access” (investing in updating our power grids and developing new models like microgrids)[5].

Hot Tea

Our hot tea for the week continues with themes identified last week including economic issues and the fashion industry’s impact on the environment.

President Biden Takes Bold Executive Action to Spur Domestic Clean Energy Manufacturing

Lululemon and H&M lead funding for a new Fashion Climate Fund

Additionally, if you want to learn more about the outlook for US summer blackouts:

Vast Swath of US at Risk of Summer Blackouts, Regulator Warns

Sustainability Movers and Shakers

Over 51 billion tons of greenhouse gas (GHG) emissions are emitted every year and, not surprisingly, transportation is one of the biggest sources of emissions. While cars and trucks make up over half of these emissions airplanes and cargo ships are coming in second. One might wonder why we can’t replace jet or cargo fuel with batteries and biofuels. As of where we are today, these alternative energy sources are less energy-dense than traditional fuels meaning planes and cargo ships can go faster, travel longer, and carry more weight with fewer fossil fuels than if they were powered by cleaner energy sources like batteries or biofuels. Cargo ships run on some of the most carbon-intensive fuels called bunker fuel, but this fuel can carry 200 times more cargo and can run 400 times longer than a ship run on batteries[6].

While alternative energy sources are still being improved there are other ways to help reduce emissions. Our Mover and Shaker this week is Seabound, a company that focuses on developing technology to capture CO2 emissions from cargo ships. Carbon capture hasn’t caught on for ships yet, but this London-based company is currently raising capital and prototyping carbon capture equipment that could help decarbonize the shipping industry. The company secured $4.4 million in a seed round led by Lowercarbon Capital. The technology connects to the ship’s smokestack to collect emissions which can help cut emissions by as much as 95%[7].

The Green Tea

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