The NPR Politics Podcast - How Did Russia's War On Ukraine Drive Up U.S. Energy Bills?

Episode Date: September 26, 2022

European utilities, which used to purchase lots of natural gas from Russia, are buying from the United States instead. That has driven power costs higher at home — and could become politically relevant as the U.S. heads into the colder months.This episode: political correspondent Susan Davis, editor Arezou Rezvani and national political correspondent Mara Liasson.Learn more about upcoming live shows of The NPR Politics Podcast at nprpresents.org.Support the show and unlock sponsor-free listening with a subscription to The NPR Politics Podcast Plus. Learn more at plus.npr.org/politics Connect:Email the show at [e-mail] the NPR Politics Podcast Facebook Group.Subscribe to the NPR Politics Newsletter.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Support for NPR and the following message come from the Kauffman Foundation, providing access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity, regardless of race, gender, or geography. Kauffman.org. Hey Atlanta, it's Asma Khalid from the NPR Politics Podcast. We are going to be live on stage doing our show Thursday, October 20th at 8 p.m. at the Buckhead Theater. And we'd love for you to be there. Ticket info is at nprpresents.org. Thanks to our partners, Georgia Public Broadcasting, WABE, and WCLK Jazz. See you there.

Hi, this is Caitlin from Santa Barbara, California. I grew up in Maine, and my first job was lifeguarding at a beach across our lake. So my first commute was either kayaking or swimming a mile to work every morning, which was just amazing. This podcast was recorded at 2.37 p.m. on Monday, September 26th. Some things may have changed by the time you hear this, but I'll still be out swimming around Santa Barbara with the dolphins. Swimming a mile to work, that's pretty unique. This is why Maine people are hardy folk.

Hey there, it's the NPR Politics Podcast. I'm Susan Davis. I cover politics. I'm Mara Liason, national political correspondent. And NPR's Arzu Rezvani is here. She's fresh off a stint covering energy with NPR's Business Desk. Hey there. Hi. So Americans continue to confront higher costs due to inflation. Lots of important things like your grocery bill cost more than they did a year ago.

Of course, gas prices have gone back down, but other energy prices are on the rise. The cost of keeping your house cool this past summer probably cost a bit more. And as we head into the colder winter months, many more Americans may see higher heating costs. So, Arzu, what is driving the cost of energy right now? Well, it's all connected to global natural gas supplies. There's much less of it in the world these days, and that's because of Russia. You know, for years, Europe relied on Russian gas to run its factories and heat its homes. But Russia has significantly cut back supplies in recent months.

It's, you know, a retaliatory move for Europe's support of Ukraine. And while this is happening, while they've slashed supplies, global demand has remained high. So here in the U.S., 40 percent of the nation's power comes from natural gas. Half of homes use it for heating. It was also a really hot summer, like you said, for parts of the country, and people had their ACs working overtime. So, you know, all of this together is why power is so expensive right now. Arzu, can you do a little Econ 101 here? Because I think a lot of people know that the U.S. is a net exporter of energy.

So why the increase in prices if we have enough of it? Yes, that is true. The U.S. does have a lot of its own natural gas and infrastructure, but it's a global commodity. And prices are mainly a function of market supply and demand. When there's less of it on the market globally and demand persists globally, prices shoot up across the board. So U.S. natural gas producers are not just producing for the U.S., they're also exporting a lot of their supplies to Europe. And there's an incentive to do so. The prices they can sell for in Europe is a lot more than what they can sell for here in the US because there's a major and urgent void to fill there. So as US producers keep exporting,

we're likely to keep seeing high prices in the US. But I should also mention, I mean, it's not all about profits here. There is also a pretty big geopolitical argument for stepping up exports. The EU, as we know, is a huge trading partner, and any big disruptions there could have aftershocks here in the U.S. Mara, this has been a, that's a good point. I mean, this has been part of the point that President Biden has made, that like the greater geopolitics that are at stake here might be a good cause for having higher energy prices. Yeah, and he's tried to blame Vladimir Putin for the rise. And I think Vladimir Putin is probably responsible for some of it. But as Arzu just explained, gas prices, gas price inflation is a global problem, because

the market for gas is globalized. And it doesn't matter if America is a net energy exporter and we are pretty much self-sufficient in energy. The price is set by global supply and demand. Do you think voters connect that dot, though? I mean, we talk so much about when gas prices were going up and up and up, it dominated the political conversation. Is it the same for energy costs? You know, do you think Biden runs this risk of people being really angry just as we head into Election Day if everyone's heating bills are going way, way up? add to the overall inflation picture. And voters tend to blame the party in power when they're mad about something. And inflation is a pretty easy thing to be mad about. I will say, I do think that there is some recognition, at least in Congress, that this is a coming problem. Because at least one senator last week, Kirsten Gillibrand, who's a Democrat from New York, a state that gets

very cold in the winter months, has already put out a letter saying that they might need to consider more financing for programs that help low-income families pay for their heating bills. So I don't think that this is a problem that people aren't bracing for. I just don't know if they necessarily know the solution for it yet. Yes, and that program, it has a big, long acronym, LIHEAP, is to help low-income people heat their homes. The problem is, in the past, it was a real bipartisan program supported by both parties. But now New England is mostly blue. So the big question is, will Republicans want to help poor people in blue states in New England? Sure. And just in general, more government spending is not something that there's a huge appetite for in the Republican Party,

especially if they take one or both chambers of Congress in the fall. But Arzu, I mean, the Russian campaign in Ukraine doesn't seem to be stopping anytime soon. So is there no expectation that is this just life now? Is there any expectation that prices could get any cheaper or should people just be bracing for higher costs? Yeah, you know, this is expected to last a while, especially as we head into the

winter months. There are estimates that the average family in the U.S. may pay more than $1,200 to heat their home this winter. That's about $175 more than last year, which, you know, is notable when you consider that nearly 40% of Americans feel financially strapped, according to a recent NPR-Marist poll. For homes in the U.S. that do use natural gas, it's about 40%, they could see their electricity costs go up by a third, and that could keep inflation up. That is a lot of money for a lot of people. Yeah. All right, let's take a quick break, and we'll talk more about this in a second. And we're back. And I'm curious, Arzu, about new energy, you know, whether it's renewable power or even new fossil fuel infrastructure.

I know it takes a while to set up, but there is a lot of work already being done to sort of expand these energy reserves. Is there a path here forward for Europe to sort of get around the dynamics of the Russian gas supply? Well, there is a path for Europe to find alternative sources for its natural gas, but it's going to take a bit of time. I mean, right now, Europe gets most of its gas through pipelines, and it's scrambling to set up additional infrastructure to receive liquefied natural gas from countries like Qatar. So this is going to be a long and expensive process to get this infrastructure set up and to look for other sources of energy. But I was talking to Agathe Desmarais, Global Forecasting Director with the Economist Intelligence Unit about this, and she says it will be worth it long term. Europe will be in a better place because it

will have completely gotten rid of its dependency on Russian gas. So we expect the most pain to be concentrated in late 2022, early 2023 in many European countries. But after a few years, Russia won't be able to weaponize gas supplies anymore. Hmm, easy for her to say after a few years. I mean, a few years sounds short in an economist's time, very long in political time. Yeah, no, it's going to be painful. And we don't know what that's going to look like as people try to heat their homes this winter. You know, Germany, for example, is trying to store as much of the natural gas as they can in storage facilities. But, you know, Europeans are bracing for what could be a really tough winter. They're

bracing for what could be a recession in the next year or two. So, yes, it's not going to be an easy ride. Mara, this also feels like such a unique and important problem for President Biden to try to address on his watch, because you have on the one hand, this big macro geopolitical conflict in which the White House sees democracy itself at stake, right? Like there are long term U.S. interests in what's happening in Europe right now with the Russian invasion of Ukraine. But on the other end of this, you have like the very domestic concern of Americans not being able to pay their heating bills this winter. And how does he explain that to the country? Can he explain that to the country in a way that they understand?

Will Americans be willing to put the interests of Europe ahead of the fact that American families could be paying $175 more to heat their homes this winter than last winter? Yeah, I think that's a really good question. I think the political argument that your sacrifice, you're paying more for gas is worth it because we're defending Ukraine is more salient in Europe than it is in the United States. President Biden has on occasion tried to make that connection. The reason why gas prices are higher is because of Vladimir Putin. But I think for the most part, voters don't connect those two things. They might, in theory, be very happy to support Ukraine's effort to stay an independent country, but they're also angry about high gas prices. And that's the tension for Joe Biden. That's why the White House was so happy when prices started to come down. Of course, the inflation is still with us,

and high gas prices are too. So I don't think that he can tell people, we're doing this for a bigger cause. You have to pay more for heating because of Ukraine. I think that's a connection that most voters are not going to be willing to make. All right, let's leave it there for today. Arzu Rezvani, thank you so much for coming on the podcast. Good to be with you guys. I'm Susan Davis. I cover politics. I'm Mara Liason, national political correspondent. And thanks for listening to the NPR Politics Podcast.