Like the commodity itself, the market for natural gas is notoriously volatile. Demand rises or falls whenever the weather goes off track, and supply disruptions periodically send prices soaring. In recent months, natural gas prices have shot up as demand increased and supply fell short across the globe.
Most Chicagoans think of natural gas as the stuff that heats their homes, but it’s also vital for industry. The latest gas shortages have raised the price of electricity in Europe and forced some factories to shut down, which in turn reduces the supply of gas-dependent products such as aluminum, steel and fertilizer.
Higher prices for gas can create political headaches, too, and China’s debt-laden economy is especially vulnerable. On Capitol Hill, a push is on for limiting exports of natural gas from the U.S., the world’s largest producer, to keep domestic prices stable and deter hoarding. A whiff of panic is in the air.
Everyone needs to take a deep breath. Commodity markets correct themselves when they’re given the freedom to do so, and, unless there’s manipulation or fraud, government should not intervene. Overreacting to a price spike only undermines the market forces at work. Our advice: Do no harm, and let the marketplace sort itself out.
More broadly, the desperate grab for natural gas reflects the importance of this fossil fuel for economic and political stability across the globe. That important fact conflicts with the agenda of environmentalists who want to eliminate the use of all fossil fuels, preferably as of yesterday. Compared with burning coal, natural gas is relatively clean, but its use does indeed contribute to global warming and climate change, increasing the risk of severe storms, flooding, drought and other harmful consequences.
What to do? Again, don’t panic.
Over time, the world needs to wean itself from carbon-based fuels and embrace renewable sources of energy. The key phrase, however, is “over time.” As the recent market action shows, there’s no responsible way to turn off the gas without an affordable alternative in place. One reason supplies are short is that environmental activism has discouraged investment in gas production that currently is needed to keep the wheels of industry turning.
In a few weeks, world leaders will gather in Scotland for the United Nations’ 26th Climate Change Conference. Yes, this is the 26th time they’ve gathered, and, as that number suggests, consensus is hard to come by. Since the first conference in 1995, most nations have committed to curb emissions through two landmark treaties, the 1997 Kyoto Protocol and 2015 Paris Climate Accords. Slow progress is being made, which is better than no progress and a lot better than a radical agenda that would involve permanently parking our cars and sitting in the cold as the economy falls apart.
At this year’s conference, we hope to see wealthy nations like ours commit to helping poorer countries cope with the effects of climate change, including some Pacific Island nations that could be swallowed by rising seas. At the same time, the U.S. needs to build resilience at home by adopting stricter building codes along the coasts, discouraging development in flood-prone areas and taking active measures to reduce wildfires. Realistic goals for reducing emissions need to be adopted, though that is difficult on a global scale, given the conflicting interests of the U.S., China and other leading polluters.
We have higher hopes for action outside the United Nations’ big-picture talk fests. In Illinois, energy legislation that Gov. J.B. Pritzker just signed into law is flawed and costly, but it should succeed in curbing the state’s reliance on coal-burning power plants. Other states and cities are similarly committing to reduce their carbon footprints.
Even more important, companies across the globe are under pressure from investors to curb their companies’ environmental impact. The flow of money to companies that are getting greener provides a powerful incentive for conservation, as well as support for new technologies that could be game changers.
For now, the best way to reduce carbon pollution is to use less energy (which all of us can do) and discourage demand for the dirty stuff. Demand for coal already is under pressure. Natural gas, your day will come.
— Chicago Tribune/TNS
