Who to Blame When the Next Energy Crisis Hits
As Marina and I prepare to leave for London, I am already mentally sketching out the policy situation I will face upon arrival.
At center stage, during my next two weeks of media appearances, is the European Union embargo of Iranian oil.
The embargo won’t take effect until July 1.
Still, it has spurred preemptive moves by Iran to cut exports to the U.K. and France. Additional countries could soon find themselves on that list.
Now, obviously, much of this is just for show.
Neither British nor French monthly imports from Iran are large enough that they cannot easily be replaced with volume sourced elsewhere. Aside from the show of bravado, Iran achieves very little from this decision.
The developing situation (and part of my role), however, is to help the EU develop a more concerted energy policy, especially for countries like Greece, Italy, and Spain. These three nations are more heavily dependent on Iran for their crude imports.
But no matter what happens on my trip, two things are for sure…
First, prices will appreciate for both crude and oil products such as gasoline and diesel.
Second, the price increases will be steeper in Europe than in the U.S.
Americans will still be seeing higher gasoline prices this summer than at any time in our history. West Texas Intermediate (WTI) benchmark futures contracts trading on the NYMEX could easily surpass $120 a barrel before Memorial Day.
Nonetheless, those increases will be even more acute in Europe.
Once again, too, we are witnessing a widening of the spread between WTI in New York and Brent in London.
For the past month, WTI is up 8.9%, while Brent has spiked 13.8%.
But how the United States and Europe handle rising fuel prices is another matter.
When I sit down in front of cameras for a European audience next week, the EU will already be discussing a concrete energy policy.
That is not the case here in the States.
American Energy Policy Has Stalled Out
I managed to catch what may be the last debate before the summer nominating conventions. Up there on stage were four Republicans slugging it out (at least, I think Ron Paul is now more a Republican than a Libertarian, but I’m still not sure).
Yet I realized, compared to what is going on in European energy, there was another elephant in the room. And it’s far more important than who will take the Republican nomination.
After more than three decades of working with both parties inside the Beltway, I have concluded we are no closer to a genuine national energy policy than we were when the Department of Energy was founded in the mid-1970s.
Of course, Europe traditionally holds less leverage than the U.S. when it comes to global energy decisions. Geopolitics almost always hits the European continent harder and first; the Iranian crisis is only the latest episode.
Necessity, it seems, does become the mother of invention. But it sometimes makes for a very cruel parent.
There is no guarantee that whatever they come up with at the EU headquarters in Brussels will be successful. In fact, there is little optimism back in London that the decision to stop importing oil from Iran will avoid nasty consequences at home.
The U.K. may not be in the euro zone – despite being a member of the EU – but its widening credit problems testify to how the rest of Europe impacts the British economy. That simply means the problems on the other side of the Channel will hit the English market.
Meanwhile, in the States, we move toward another election without a national energy policy and little likelihood that either party will chance one, for fear of losing votes. The decisions we have to make are very difficult, and these types of grownup conversations aren’t usually the favored pastimes of politicians.
What a Real Energy Policy Looks Like
Forget the 20-second sound blips or the cosmetic (largely both useless and insulting) campaign rhetoric. A real policy means multi-year planning, clear objectives, and sober calculations about costs and consequences.
A real energy policy requires that we bite the bullet and change more than just the types of cars that we drive. Or conversations about our tire pressure.
A real energy policy carries the absolute guarantee that some people and some interests will be hurt in the process.
Not all parts of the country will benefit the same way. Neither will they suffer to the same degree. None of this is possible in the current ideological division permeating American politics. That environment obliges culprits (almost always on the other side of the aisle) be blamed.
The wrangling will continue, and another tin can will be kicked down yet another street.
Nothing of consequence will be done until we reach our own energy crisis. Ours is likely to begin showing its face in what I have long considered the “other” national security issue.
This is not the one about defending borders from invasion.
This is about defending a way of life.
The real casualty from the coming energy crunch addresses individual expectations and uncomfortable lifestyle shifts. Keeping the house or the farm, sending the kids to college, pursuing one’s dreams, and setting aside enough to retire are about as important national security objectives as defending our territory.
Usually, we have played these goals out in our individual views of the future. Until recently, Americans were probably the most optimistic people ever to work the earth as a result.
But that is ending.
It’s time to face up to what the next oil cycle is telling us.
This will be worse than 2008. The prices will be higher, and the adverse impact on some parts of the economy more pronounced.
Nothing of consequence in the market can take place without energy.
But we have no plan moving forward on what to do about it.
And so long as we spend our time trying to convince others that the Democrats or the Republicans are responsible, that plan will never emerge.
In the end, we will have somebody to blame when the energy balance become unsustainable .