Volts podcast: Lauren Melodia and Kristina Karlsson on energy inflation and how to tame it
In this episode, Lauren Melodia and Kristina Karlsson of the Roosevelt Institute explain why it’s counter-productive to increase domestic oil and gas production when energy prices rise, and how building out clean-energy infrastructure is the actual best way to address the price volatility of fossil fuels.
(PDF transcript)
(Active transcript)
Text transcript:
David Roberts
Americans are struggling with two related problems: one, there’s general inflation, which means pretty much everything is expensive; two, there’s energy price inflation, which means that energy in particular (specifically, oil and gas) is expensive.
This has led some politicians, mainly Republicans-and-Joe-Manchin, to propose a dual solution: cut back on government spending (to tame inflation) and increase domestic oil and gas production (to tame energy prices).
This approach is wrong-headed and counter-productive on both counts. The reasons why are laid out in a new issue brief from the Roosevelt Institute, the first in a series called “All Economic Policy Is Climate Policy” (which, hell yes).
Lauren Melodia, deputy director of macroeconomic analysis at the Roosevelt Institute, and Kristina Karlsson, the institute’s program manager for climate and economic transformation, argue that fossil fuel prices are inherently volatile, and that volatility has serious macroeconomic effects; on the flip side, electricity prices — specifically renewable electricity prices — tend to be far more stable and manageable.
It follows that government spending to build out clean-energy infrastructure is itself anti-inflationary; it removes a source of price instability and replaces it with stability.
This argument is my favorite kind — it put words to something that’s been rattling around in my head for years — so I was excited to talk to Melodia and Karlsson about the volatility of fossil fuels, why we’ve come to accept it as an inevitable fact of life, and why it is, in fact, a choice that we could make differently.
With no further ado, Lauren Melodia and Kristina Karlsson from the Roosevelt Institute. Welcome to Volts. Thanks for coming.
Kristina Karlsson
Thanks for having us.
Lauren Melodia
Thanks so much for having us.
David Roberts
You have written this report about energy and inflation. It's one of my favorite kinds of reports, in that, after I read it, I was like, "Oh, well, duh, of course that's true." But it's like it hadn't occurred to me before. It's one of those things where just hearing it stated clearly, I think is very eye-opening. So let's walk through a little bit, the pieces of it, and then we'll get into what it means for policy. So to start with, something I found interesting and didn't really know, which is that these traditional measures of inflation, which are gently sort of like bundles of products through which inflation is measured and tested, exclude energy.
Typically, energy is not included in them because energy is sort of inherently volatile and is swinging up and down all the time. And so the idea, I think, is if we include that, it's going to sort of obscure what we're trying to look at. So we'll set that aside and look at another bundle of products, and if they are going up, then it's real inflation. This is sort of how things are typically done. But as you say, this can be somewhat misleading since energy price volatility plays a huge role in inflation, and, specifically, is playing a huge role in current inflation.
So explain briefly sort of the role of energy prices in the inflation we are currently experiencing.
Lauren Melodia
Sure, absolutely. I mean,
