Oil prices are touching an altitude not seen since the spike in summer 2008, pushing gasoline prices into uncharted territory and raising other costs in their wake. The situation in Ukraine and efforts by financial markets to predict it are driving the immediate spurt in prices, but even before Russia invaded, prices were trending upward as the global economy rebounded from COVID-19 and demand rose faster than supply. 

Russia is the third-largest producer of oil (after the United States and Saudi Arabia), and the military action raises the potential for supply disruptions. In addition, because oil and natural gas are the mainstay of the Russian economy, some countries (including the United States) are just saying “no.” This action is effective in decreasing financial resources supporting Russian aggression, but it also takes a significant portion of the global supply of fuels off the market (at least for some countries for some span of time). 

The geopolitical risk of relying on Russian energy has become readily apparent, and measures should be taken to permanently mitigate the situation. The only practical path toward true energy security for the foreseeable future is supporting the development of oil and gas resources even as we address very real climate issues and foster renewable energy development. Facilitating increased supply is also the optimal mechanism to keep prices in check over an extended period.

Supply responses have lagged for myriad reasons, ranging from OPEC policy to financial recovery of firms devastated by the pandemic-driven price collapse. There have also been challenges raising necessary capital for small and medium-sized energy firms (driven in no small measure by climate-oriented requirements and policy pronouncements). Various federal policies have hampered development, discouraged capital formation, and raised perceived risks of future exploration and production. 

Simply stated, it’s time for a reality check. Renewables are critical to meeting climate goals and must expand rapidly. However, they can be implemented neither rapidly enough nor with adequate consistently to meet global requirements. In fact, the Department of Energy’s baseline forecast reveals the need for a 34% increase in petroleum resources by 2050, even as renewables almost quadruple. It’s incontrovertible that conventional fuels burned cleaner will be essential, and the Permian Basin of Texas and New Mexico has by far the lowest carbon footprint among the world’s major onshore fields. Until there is greater acceptance of this inescapable fact, we’ll see production grow slower than necessary, with the inevitable outcome being higher prices, greater uncertainty, and increased geopolitical risk. 

Rather than stifling the domestic industry, we should advance the technologies to burn conventional fuels cleaner. As the current disruption has brought home, it is imperative that this shift happen now. Stay safe!

Editor’s Note: The above guest column was penned by Dr. M. Ray Perryman, president and CEO of The Perryman Group (www.perrymangroup.com). The Perryman Group has served the needs of over 2,500 clients over the past four decades. The column appears in The Rio Grande Guardian International News Service with the permission of the author. Perryman can be reached by email via: [email protected].

Quality journalism takes time, effort and…. Money!

Producing quality journalism is not cheap. The coronavirus has resulted in falling revenues across the newsrooms of the United States. However, The Rio Grande Guardian International News Service is committed to producing quality news reporting on the issues that matter to border residents. The support of our members is vital in ensuring our mission gets fulfilled. 

Can we count on your support? If so, click HERE. Thank you!

Keep on top of the big stories affecting the Texas-Mexico. Join our mailing list to receive regular email alerts.

Sign-up for the latest news

By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact