On Oct. 5, 2022, the news that the Organization of the Petroleum Exporting Countries (OPEC) would be slashing oil production by 2 million barrels dealt the global energy sector a tough hand. The current administration voiced its disapproval of the decision, yet there are positives to be taken away as it presents the U.S. with a unique opportunity for domestic energy industries. With the passing of the Inflation Reduction Act comes a push for more concerted efforts to adopt electric vehicles (EVs) and advance renewable energy.
Foreign Oil and Natural Gas Decline
The U.S. has already become less reliant on foreign fossil fuels, but the decision by OPEC has put forward the need to embrace clean energy. Fuel prices are likely to increase again, especially when factoring in the war in Ukraine and the embargo on Russian oil, so alternatives can be vital to keeping energy costs low in America.
The country has mostly been running on natural gas, which is beginning to fade as the dominant energy source. According to Guggenheim Securities, utility-scale solar power is 33% cheaper than oil and gas power. Offshore wind is even less expensive at 44%.
“Solar and wind now present a deflationary opportunity for electric supply costs,” Guggenheim analysts stated in a note to clients. “This supports the case for economic deployment of renewables across the U.S.” Not only are wind and solar massive money-savers, but they are also unlimited in supply and not subject to global conflict, supply chain issues, and other international events.
Gas Prices and EV Adoption
The biggest squeeze from OPEC’s decision will be at the gas pump. Gas prices are still high, even with some relief being felt. This situation could be the impetus needed to increase American EV adoption. The tax credits offered by the Inflation Reduction Act could save consumers more money in the long run.
Increasingly, car manufacturers are producing more affordable American-made EVs. While not everyone can afford a Tesla or a Rivian truck, they might be able to buy a Chevy Bolt or the upcoming Equinox. Cadillac, GMC, and Buick will also have lower-priced EVs in the near future.
EV charging infrastructure also continues to expand in communities nationwide. Many chargers are equipped with solar-panel technology and storage for overnight and longer-duration powering that runs independently from a central electrical grid.
Many companies also supply customers with adapters to use on any available charger. We’re already seeing more interconnected networks like BP Pulse stations that Hertz rentals will use for its electric fleet.
“Electrification, while we certainly think the tide is turned, that’s where customers will go,” said Jeff Nieman, senior vice president of operations initiatives at Hertz.
Clean Energy Options
The OPEC decision also coincides with a return to other renewable and clean energy sources. Though considered an older method, hydropower is a risk-free, all-natural way of creating electricity. It’s similar to wind power, as water in dams pushes a turbine generator and is emission-free. The Hoover Dam already supplies a lot of the Southwest’s energy; similar technology can be reintroduced all over the nation.
Nuclear power is another option American energy suppliers are reconsidering as it can sustainably and safely support a whole region’s power needs. Nuclear power plants can create energy continuously and have longer viability, whereas an oil tank needs to be refilled every so often. With a byproduct of clean steam, nuclear power is one type of energy we could see a return to prominence on American soil.
More domestic clean-energy projects and adopting American-made EVs can mitigate some of the fallout from the oil production cut. With federal tax credits at an all-time high for clean tech and EVs, the OPEC decision can motivate citizens and companies to switch to renewables.