John Barrasso

The Biden administration, “woke” banks, and activist investors want to make it impossible to invest in traditional American energy. If their mission succeeds, today’s 31-year-high inflation will seem tame.

Just look at Europe. Its energy crisis has been aggravated by policy choices designed to stifle investment in fossil fuel projects. The predictable results have been record-high energy prices, blackouts and economic dislocation.

We are seeing similar signs of chronic underinvestment here. Look no further than one of our biggest banks. Citigroup said earlier this year that it “will not provide financial services” for coal-fired power plants any longer.

This activist mindset means fewer U.S. energy projects and more expensive utility bills for American families. Underinvestment is affecting energy producers’ ability to raise capital for new projects and keep pace with demand. This imbalance is contributing to today’s rampant inflation. Democrats have compounded the problem by intentionally deterring investment in drilling and mining.

Just a few years ago, rapidly rising global crude oil prices would have sparked an immediate surge from U.S. producers. Not anymore. Oil and gas industry capital expenditures in the second quarter of 2021 were just $37.4 billion, a record low since 2008. In the third quarter, they rose to about $42.5 billion, but that was about 41 percent lower than in the same quarter of 2019.

Even after crude rose above $80 per barrel this fall, U.S. output is running about one million barrels per day less than in 2019. That’s not enough to moderate spiking prices.

Things are only getting worse under President Biden. His administration’s hostility to fossil fuels is breathtaking. He has killed pipelines, blocked drilling and mining, and planned an unprecedented regulatory assault on the energy that powers four-fifths of the economy. All of this has created enormous uncertainty for investors.

With Merrick Garland running the Justice Department, it’s easy to imagine financial institutions being subjected to a new “Operation Choke Point.” That was an Obama-era scheme targeting banks that did business with companies that administration officials simply did not like.

Oil, gas, and coal companies should expect nothing different from this cast of characters.

Fossil fuel producers are already in the crosshairs of the Securities and Exchange Commission, where climate disclosure is deemed a “top priority.” Its upcoming rules to enhance “environmental, social, and governance” — or ESG — disclosures are sure to depress equity valuations and raise the cost of debt financing. This will make it more difficult for energy companies to raise capital. It will also reinforce inflationary pressures.

Some of the biggest U.S. banks are already on board with this anti-fossil fuel agenda. Goldman Sachs, Morgan Stanley, Chase, Wells Fargo and CitiBank will not finance oil and gas projects in the Arctic. Citibank has committed to ending financing for coal mining. And at the Glasgow climate talks, several large banks pledged to curb financing of fossil fuels.

Big banks’ discrimination against fossil fuel companies got so bad that the Trump administration issued a rule preventing banks from refusing to lend to entire categories of businesses. At the urging of the banks, the Biden administration has put the rule on hold.

The same banks that find it unethical to fund unfashionable American energy are happy to send billions of dollars to communist China — the world’s largest carbon emitter and a country that can count Uyghur genocide among its many crimes against human rights.

ESG schemes will increase the already large spread between the rates of return needed for oil and gas projects and for renewables. Profitable fossil projects will have to go begging.

The Western Energy Alliance’s president Kathleen Sgamma recently gave this blunt assessment: “We can’t get capital because they’re putting so much pressure on banks not to lend to us in the name of climate change.”

ESG is not only unfair to stockholders; it is inflationary. But the president is treating high energy prices as a political problem to manage, not an economic threat. Pleading with the OPEC cartel and Russia to boost their output is a humiliating sign of weakness. It also misses the point.

The solution to our energy woes is not in Riyadh or Moscow. It’s in the many small- and medium-sized U.S. companies that unleashed the shale revolution and turned America into an energy superpower.

The upheaval in Europe is giving us a preview of the economic fiasco caused by underinvesting in reliable and secure fossil fuels. For Democrats, Europe is a model. For the rest of us, it should be a warning.

(U.S. Sen. John Barrasso, R-Wyo., is the ranking member of the Senate Energy and Natural Resources Committee. This piece first appeared in Newsweek.)