War. What is it good for? Not global energy markets, that is for sure. It is more apparent in today’s global economy that national dependency on fossil fuels can undermine the security and independence of a nation, a people, and a region.
Case in point, look at the current conflict in Ukraine. Kremlin officials have reportedly threatened that the Ukrainian people will only see improvements in their energy supply if they capitulate to Russia’s demands as part of its “special military operation.” Comments like this amount to energy blackmail. And, as the EU is so deeply dependent on Belarus and Russia for petroleum, such talk is plainly concerning.
Some economists might (rightly) argue that a diverse global exchange of goods and services lowers costs and drives production efficiency. On the surface, yes. This is true. From a purely economic perspective, free market movement and cheap foreign energy production do indeed create economic value. But economics “in practice” is as much about psychology and sociology as it is about mathematics and finance. This is why consumer confidence (the degree of optimism, personal attitudes, and sense of security) remains a top driver of economic activity.
Lower prices and greater productivity might mean more economic opportunity, but when purchased at the cost of freedom and security such co-dependent relationships have declining long-term benefits. This is why a mutually beneficial exchange of goods and services across borders only works well during peacetime, and when power dynamics are equalized. Energy independence provides regions with confidence that services and operations will continue despite outages or supply shortages. Furthermore, because energy prices often fluctuate based on demand and supply, energy independence can lay the groundwork for budget stability. These assurances are extremely important to a nation, especially to one whose trade and commerce runs on the backs of its workers, entrepreneurs, and businesses.
Opponents might believe the low cost of fossil fuels still makes them more competitive since low pricing for energy frees up resources which are otherwise tied up in technology. When renewables were new, and the return on investment was low, this might have been true. But this is changing. Standardization of renewable practices, increased global production, and engineered efficiency is making renewables more competitive than their carbon-based counterparts. Already, power from renewables in many regions across the globe can be procured more cheaply than power from fossil fuels. And the levelized cost of electricity (LCOE) for both solar and wind power technologies continue to fall year-over-year. So much so, in fact, that energy experts now discuss with more regularity a horizon in which green energy will eclipse carbon.
At a personal (i.e., consumer) level, the low cost of green energy might feel far away. I still keep my thermostat locked and I don’t drive (nor can I afford) a Tesla. But wholesale-level renewable energy rates are indeed coming. As renewables overtake fossil fuels in the marketplace, the gap to the consumer market closes more quickly. And once closed, the financial benefits to consumers and businesses resulting from renewable energy will free up capital to allow for expenditure on additional investments, goods and services.
Until then, we should not stop seeking alternatives to costly energy imports, nor limit our creativity and appetite for clean domestic energy production. Seeking energy independence, building energy resilient infrastructure, and weaning from foreign energy supply cannot be oversimplified as imports equal bad. Rather, lessening the dependence on the exchange of energy resources, and making clean and affordable energy available at the place where people are (live, work and play) is good for all societies and nations, not just ours.
It has been said “when goods don’t cross borders, soldiers will.” Inherent in this remark is the notion the soldier can no longer procure said goods at home. Therefore, there is no other alternative for the soldier other than crossing a border and taking it. Imagine what better uses our soldiers can be applied to when energy resources need not be traded or bartered but are cheaply and easily obtained at home. We have better ways to spend our limited resources and put our capital to work. Thus, helping each other to be resilient and independent is not a threat to commerce. It is the evolution of it.
Scott Adair is the director of economic development for Humboldt County.