Don't Expect Oil and Gas to Drill Us Out of Crunch

Don't Expect Oil and Gas to Drill Us Out of Crunch

A blue, white and orange flame rose from a gas burner on the cover of The Economist a few weeks ago, forming the tormented face from Edvard Munch’s “The Scream.”

“The energy shock,” was the cover line, and it summed up an autumn of $3-a-gallon gasoline, $80-a-barrel oil and deep anxiety over heating costs as winter draws near.

Consumers are upset and businesses are beset by higher costs, but for all the sound and fury, the pandemic-fueled energy price spike may not signify a rebound for fossil fuel production either in the long or short run.

“We’re undoubtedly in the middle of a big transition in the way that we power our country,” said Glen Hooks, the longtime Arkansas environmentalist and policy champion who recently moved from the Sierra Club to Audubon Delta. “There aren’t any coal plants being built anymore in the United States to generate electricity, and we’re starting to move more and more away from gas as utilities double down on solar and wind.”

OK, you might say, a clean air advocate isn’t exactly an impartial voice. So here’s Lawrence E. Bengal, director of the Arkansas Oil & Gas Commission. “The recent higher prices have not led to any new drilling in Arkansas,” or any renewed activities in oil or gas, he said. Fracking in Arkansas set off a decade-long boom, but it all went bust after gas prices plunged from near $13 per million British thermal units in June 2008 to $1.95 in April 2012.

Prices had rebounded to $5.50 per million BTU by last week, but Bengal predicted it would take far higher prices to goose production in Arkansas’ Fayetteville Shale.

The Economist also doesn’t expect Big Oil to ride to the rescue in the crunch. A few years ago, fossil fuel producers would have responded to the price surges by producing and investing more. “Not this time,” the magazine said. “Climate change has led to unprecedented pressure on oil and gas firms, especially European ones, to shift away from fossil fuels.”

That dynamic has played out closer to home, Hooks said. “Utilities are starting to double down on solar and double down on wind, and it’s becoming an issue that transcends partisan politics. We’re seeing a lot of movement toward cleaner energy in red states and blue states, and that’s just a result of good economic decisions to benefit communities.”

He noted that Entergy Arkansas had backed off plans to build a natural gas-burning electricity plant in resource plans submitted late last month to the Arkansas Public Service Commission, which regulates utilities. At the Sierra Club, where Hooks worked until this month, he and environmental allies worked hard to have Entergy reconsider.

“Entergy envisioned the construction of another large natural gas plant in Arkansas, mentioning it in their 2018 plans and in the draft” of the proposal presented in October, Hooks said. “We really showed a lot of different economic scenarios, provided a lot of forecasting. As a result, they left major gas construction out of their plans for the foreseeable future, and really doubled down on renewables.” Public opinion and corporate governance demanding action against climate change helped set the stage, but the bottom line was, well, the bottom line.

“The price of solar and wind energy continues to go down,” Hooks said. “Just as cheap natural gas kind of helped bring the end of coal, you’re starting to see cheaper solar and wind pushing gas aside.”

Most of the nation’s largest utility companies, including Entergy, have pledged to have zero carbon footprint by set dates, and they can’t get there by building new gas-fired plants. “Shareholders now want a cleaner dividend,” said Hooks. “Utilities are corporations, and stockholders and customers want sustainable operations.”

Under a legal settlement with Sierra Club and the National Parks Conservation Association, Entergy Arkansas has committed to building 800 megawatts of renewable power generation in the state by 2027. “They’re getting good at that, as are the cooperatives, as is Swepco,” which has made a major commitment to wind energy.

“This is not a situation where it’s just your usual suspects or environmentalists pushing for clean energy,” Hooks concluded. “Communities all across the state are locking in low rates for 20 to 25 years by building solar, relying on cleaner energy sources. The sea change in how we power our country is only going to mean better things for us economically, in terms of public health, and in terms of our environment.”