Exclusive to The Economic Standard…
By Kristen Walker, American Consumer Institute
More than one-fourth of households in the U.S. experience energy insecurity, a term that refers to the inability to adequately meet energy needs. This is according to the Energy Information Agency’s most recent Resident Energy Consumption Survey (RECS) for 2020, data which is collected every five years.
Gasoline prices were fortunately low that year; the COVID-19 pandemic generally receives credit for that. But the administration serving at the time was also able to proclaim that the U.S. had finally reached energy independence by “marking the first time in 67 years that our annual gross energy exports exceeded our gross energy imports,” another contributing factor to modest prices at the pump.
Energy insecurity numbers will likely climb, however, with the next RECS survey to be conducted in 2025. The recently released annual Consumer Expenditure Survey (CE), which collects information on the buying habits of U.S. consumers, indicates a rise in energy spending not commensurate with a rise in income compared to 2020. Some of the poorest in the country are paying up to 36 percent of their income on electricity. Adding gasoline purchases puts that figure close to 53 percent, meaning that some folks are allocating more than half their income just to fuel their homes and vehicles.
A household is considered energy poor if six percent or more of its income is spent on utility bills, and according to this latest CE, roughly half the country now fits that category. Only those who make well over six figures are minimally impacted by increasing energy prices.
The below graph demonstrates the heavy energy burdens the middle- and lower-class face; the less you make, the more crushing the weight of energy costs.
Plenty of misguided policies have contributed to this economic hardship.
The Inflation Reduction Act, which is projected to cost in the trillions over the next decade, has handed out incredible amounts of subsidies in order to boost a so-called transition to renewable or clean energy sources like wind, solar, and electric vehicles. States which are aggressively pursuing these forms are seeing their electricity rates skyrocket, in some cases quadrupling utility bills. Wind and solar are proving to be quite expensive to integrate onto the grid while also proving to be less reliable.
At the same time, coal and natural gas, two cheap and dependable sources which are commonly used to heat and cool homes, have been significantly scaled back. Plant closures are happening across the country. The Environmental Protection Agency finalized a rule this year that will make it difficult for many plants to remain open.
Much has been done to curb oil production, including drilling moratoriums on public lands, shutting down pipeline projects, rolling back permitting reforms, eliminating fossil fuel subsidies, discouraging capital investments, instituting ESG rules, and increasing fees and royalties. Doubtless, these have all contributed to higher gasoline prices. And it is taking a toll on the American public.
Energy is the lifeblood of society and essential for survival, a necessity that facilitates heating, cooling, cooking, and transporting. Households cannot simply do without it, which may mean foregoing other expenses and/or even putting themselves in life-threatening situations.
The financial hardship of high energy costs often means that for low-income households there are fewer financial resources available for other crucial needs. Roughly one-third of Americans have cut back or skipped basic expenses such as food or medicine to pay the electric bill. One in five households kept their home at a temperature deemed unsafe or unhealthy, and as a result, nearly one and a half million of those households reported that someone needed medical attention.
Since all businesses need energy, increased energy costs also flow through the entire economy by increasing the prices of many goods and services. Higher fuel costs have contributed to soaring inflation rates, further straining household budgets for the last several years.
Consumers need and deserve affordable and reliable energy. They should not be burdened by oppressive rates nor be forced to choose between heating their homes, paying their bills, or adequately feeding their families. We must embody an all-hands-on-deck approach that utilizes the best options in every situation. It is past time to put practicality over politics.
Kristen Walker is a policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.theamericanconsumer.org or follow us on Twitter @ConsumerPal.