Energy Complexity

Inflexible, Fragile, and Vulnerable

Imposing Pain

Gradual Transition

Reliable Energy Needs Reliable Financing

New York, Dallas, and Lake Granbury

If I had to describe my last 500 letters in one word, it would be “complexity.” The older I get, the more I realize problems I once thought had reasonably straightforward solutions are, in fact, hideously complicated. That doesn’t make them unsolvable but it reduces the odds they will be. Often we start with good intentions and end up with unintended consequences, not all of which are good.

One such problem: supplying sufficient energy to maintain global economic growth while also raising living standards for billions in China, India, the entire continent of Africa, and other developing countries. And doing so in a sustainable way that doesn’t cause permanent environmental harm for everyone.

Energy prices affect everything. They are a necessary input to all other production. Some things are more energy-intensive than others, but without it we are all back in the stone age. The price matters for the same reason tax rates matter. Both are unavoidable costs, so we can produce more of everything if they’re low or at least stable.

This problem is both intensifying and interacting with other challenges. Fuel prices have been rising worldwide, and may soon rise further. This week Bank of America raised its Brent crude oil forecast to $120 by mid-2022. That would be a price unseen since 2012. Natural gas is similarly spiking, as was coal until a recent retreat. The average US gasoline price is now $3.42 per gallon.

Source: Bloomberg

We have plenty of other problems and don’t need more, especially rising energy prices as the economy slows. Nonetheless, that seems to be what we will get. Today I’ll dig into what’s happening and what I think would be better.