The consequences haven’t been limited to higher prices. From December 2020 to March 2021 the nation had to do without Grape Nuts, after Post Holdings Inc. shut down the only facility that produces the gritty-yet-in-some-quarters-beloved cereal because so many workers were out with Covid-19.
Fossil fuels are more fungible than breakfast cereals, so precisely that kind of debacle is unlikely. But fossil fuels are also a lot more important to the economy than breakfast cereals, so even temporary price increases really sting. Shutting down production capacity too fast or in the wrong places is one path to price hikes amid declining demand. Another is having to maintain distribution networks even as the amount of product flowing through them shrinks. In California, which is both especially dependent on natural gas for home heating and cooking and especially committed to getting gas users to switch over to electricity, current rules for setting gas rates will translate into much higher bills for those who are late to making the switch — which will likely be lower-income households.
Those rules can be changed, and as detailed in a recent Utility Dive story, California officials are already working on ways to manage the transition. The transition away from gasoline and diesel is clearly going to take a lot of managing, too. The rapid decline of coal-fired electricity generation over the past 15 years in the US has probably given a misleading impression of how easy it is to make such a switch. In coal’s case, most of the immediate burden was taken over by another fossil fuel, natural gas, that had suddenly become abundantly available thanks to the fracking boom. Given how unexpected that boom was, I’m not going to say that something like it will never happen again. But it does seem unwise to count on it.
My point here isn’t that we should stick with fossil fuels. Beyond the obvious need to slow and eventually halt global warming, there are lots of other reasons to look forward to the prospect of an economy fueled by abundant clean energy rather than finite dirty resources. But as we make the transition it’s important to remember that reducing our consumption of something doesn’t equate to ending our dependence on it, and that declining demand doesn’t always equate to declining prices.
Justin Fox is a Bloomberg Opinion columnist covering business. A former editorial director of Harvard Business Review, he has written for Time, Fortune and American Banker. He is author of The Myth of the Rational Market.