By Katie Mehnert, CEO and founder, ALLY Energy
The latest raging battles over energy prices, with a slew of attacks coming from all sides, serve as a powerful sign. Mass confusion leads to a lot of bitterness and too few solutions.
Rather than dealing in reality, politicians all too often seek to tap into the competing desires of the American public and make promises they can’t keep. People want cheap gas but a cleaner planet. They want to boycott Russian oil without seeing an impact on oil markets. They want to go after gas companies for raking in profits, but to celebrate big returns on Wall Street as signs of a strong economy.
The result is endless finger pointing. As a leading analyst explained in the New York Times, “The narrative from the Republicans is it’s all Biden’s fault, and that’s not true. But it’s also not true that refiners have conspired” to raise prices.
On Thursday, oil industry executives met with the Biden administration, and the two sides praised the meeting afterward. That's a hopeful sign. Still, this problem goes far beyond the immediate challenges. It’s something America has grappled with for decades.
Having grown up as the daughter of an oil engineer in Louisiana and built a career in energy myself in Houston, I’ve long seen how people in the industry feel unfairly maligned when prices are high. Running a company focused on leading the energy transition, and having lost my home and office in Hurricane Harvey, I’m keenly aware of the need to reduce carbon emissions and tackle climate change.
And serving in federal agencies under both the former and current presidents, I see the political realities up close. It has become clear to me: Until the American public is educated about how energy markets work and their role in consumption, we will lack sound policy that addresses the root causes of these problems.
What savvy investors understand
To be fair, the energy markets are extremely complex and volatile. This is especially true for crude oil. For those who don’t follow closely, it’s easy to think that lowering prices is as simple as increasing domestic production.
But the United States has produced the majority of its oil for nearly a decade, and is the world’s largest oil producer. That does not free us from the reality that the markets themselves are global and are driven by the same forces of supply and demand that all markets have to face. As Investopedia explains, “Crude oil is the most widely traded global commodity and among the most widely used. Crude prices trade in deep and liquid global markets.”
Prices at the gasoline pump, where most people become aware of all that volatility, are the result of a big mix of forces, including refining, transportation, taxes and more.
Despite two-dimensional stereotypes, oil executives are not sitting around trying to devise ways to gouge consumers to line their own pockets. They are responding to market forces that set prices for everything. They’re also investing profits into new, cleaner energy projects. In surveys, most oil executives say they’re creating and implementing decarbonization strategies. This is a major reason they’ve been rebalancing their portfolios and divesting fossil fuel assets. Hydrogen, nuclear and renewable energy are widely seen as major parts of the energy mix of the future.
Investors are also having a strong impact on the environmental, social, and governance efforts of public companies, both inside and outside the energy sector. Numerous public corporations, including some oil and gas companies, are even linking executive pay to ESG goals. Shareholders are expected to have an even bigger effect in advancing corporate climate initiatives in the years ahead.
Nonpartisan leadership needed
It’s time for a change in how the nation’s energy policies are determined. We need a nonpartisan council of experts, representing stakeholders from across the spectrum, who agree on key goals: keeping energy affordable and accessible while investing and transitioning to renewables. This isn’t going to happen with the flip of a switch.
There's an important place for investors and market experts as part of this. Those who understand the ins and outs of energy trading and commodities could serve as crucial voices.
I launched ALLY Energy because it’s time for the entire energy sector, and all stakeholders, to come together to act as allies. To join as one community dedicated to making positive change.
There's also another step we can all take and that is educating our fellow Americans about energy. We need to dispel myths, open people’s eyes to the complex realities of energy prices and consumption and, once and for all, stop the bickering so we can tackle these huge challenges together.
Katie Mehnert is CEO and founder of ALLY Energy, ambassador to the U.S. Department of Energy, and an appointee of the National Petroleum Council.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
