Environmental Stewardship

Prosperity & Security from Below: America’s Natural Resources are Vital to the Economy

As inflation in the U.S. surges to 8.5%, the regulatory nightmare for two of America’s essential industries, oil and mining, is poised to exacerbate America’s economic woes. In response to increasing energy prices, the Biden administration recently announced their support for several policies that will only increase inflationary pressure while doing little to curb the actual issues.

Last week, the administration announced that it will allow the sale of the E15, which is a blend of 85% gasoline and 15% ethanol, during summer months. E15 is not sold during summer months because it has the potential to create significantly more smog when its emissions are exposed to sunlight. Proponents of this measure argue that since the price of crude oil – which is the most significant single factor in gas prices at the pump – is high, increasing the mix of ethanol will drive down prices for consumers.

This is bad policy for several reasons. 

The ethanol used in gasoline mixtures is produced from the same type of corn used for animal feed. Increasing demand on feed corn will reverberate through America’s animal agriculture industry, driving up the price of meat for consumers. Even without this particular increase in demand, the cost of producing corn is reaching all-time highs due, in part, to international instability in fertilizer markets and the rising cost of fuels for farm equipment.

Meanwhile, out of the nearly 150,000 gas stations in the United States, only about 2,300 sell E15. As a fuel, ethanol is less efficient than gasoline. Lowering gas prices by a few cents at less than 1.5% of the gas stations in America while driving up food prices and lowering the mileage per gallon by up to 5% is a nonsensical way to address the country’s needs. 

The solution to this issue is to increase the crude oil supply. Instead of dragging out cases in federal court, complying with the bare minimum required in rulingsand instituting a 50% increase in royalty demands, the Biden administration could fully open public lands to those working on putting America back on the path to energy independence.

The Biden administration’s push for energy solutions requiring batteries is also disrupting markets in ways that will have far-reaching impacts to our broader economy.

Like crude oil, the raw materials that go into battery production are extracted from beneath the earth’s surface. Lithium, cobalt, and rare earth minerals – all essential to battery production – are acquired through mining and refining. Unfortunately, mining these essential materials is not as simple as digging faster – production is, by and large, at capacity for the foreseeable future, with new mines taking years to navigate the complex regulatory requirements to come online.

As government fuel-standards mandates increase, so will the demand for materials needed to make electric and hybrid vehicles. However, given the increase in demand and relatively static rate at which these materials are acquired is having significant effects on the market for raw materials. The price of lithium – an essential material in producing EV and commercial-grade batteries – is 10 times more expensive now than it was just two years ago, while the price of copper and aluminum both doubled. According to a U.S. Geological Survey article, Evaluating the mineral commodity supply risk of the U.S. manufacturing sector, aluminum costs alone are threatening to completely upend American manufacturing of heavy vehicles. 

As inflation skyrockets and prices increase, now is not the time to wage war against the industries providing the essential raw components of goods that drive our economy. In times of economic need, the ingenuity of free markets provides better, more timely solutions than feel-good mandates handed down by federal agencies.

ALEC has two model policies for state lawmakers seeking to protect free energy markets. The Resolution to Protect Market Access calls for fully functioning free energy markets to determine where, when and how investment decisions should be made to create and maintain secure, efficient, reliable, and affordable electricity and energy system, while the Resolution Supporting Reliable and Affordable Energy calls for the end of government-mandated disincentives that increase energy costs for consumers.

In Depth: Environmental Stewardship

Listen to any news broadcast, read any press release from an environmental advocacy group or simply watch the U.S. Environmental Protection Agency (EPA) propose new regulation after new regulation, and it would be nearly impossible to not come away concerned or even fearful of imminent environmental disaster. It should come…

+ Environmental Stewardship In Depth