State Department Senior Advisor for Energy Amos Hochstein joins Yahoo Finance Live to discuss the energy supply crunch in Europe, California's grid crisis and EV mandate, and how the Inflation Reduction Act speeds up the green transition.
AKIKO FUJITA: Well, a team of UN inspectors have now reached Europe's biggest nuclear plant in Southeastern Ukraine, braving ongoing fighting to get to the facility. This comes as the state-owned Gazprom shuts down Nord Stream 1 yet again, cutting off a major natural gas pipeline to Europe. Moscow maintains the maintenance closure is necessary, but it's elevated concerns about energy security going into the peak winter months. Germany's economy minister, by the way, saying the nation faces the bitter reality that Russia will not restore supplies to the country.
Let's bring in Amos Hochstein, US State Department senior advisor for energy security. Amos, always good to have you on. Let's start by talking about Europe. Because clearly, we have seen the storage levels at a good pace, at least for September, but there's still a lot of uncertainty of what that supply is going to look like come wintertime. What do you see?
AMOS HOCHSTEIN: Well, Akiko, it's great to be with you again. It's always good to see you. I think you're right. Since last winter when the war started in February, we had started preparing for the war before that, knowing that Vladimir Putin uses energy as a weapon. And we were really saddled with the fact that Europe's storage levels of natural gas were below where they needed to be at around 75%, 76%.
So part of the March 25 agreement between President Biden and the EU Commission president was to really prepare for the winter in a better way. So if you look at where we are today, number one, Germany is already announced that they're going to be at about 95% storage fill by the wintertime, and they're ahead of schedule. All of Europe will have significantly higher storage levels. So that really puts us not out of the woods.
We're still in a very concerning place with the decline of the supplies from Russia and playing politics with gas. But I think we're in a better place than we were last year. And we're continuing to do more work. But there's no doubt that this is something that we're very concerned about, and working very closely with EU member states, governments, as well as the EU Commission itself.
BRIAN CHEUNG: Hey. It's Brian Cheung here. Last time you stopped by the show, I think it was in July. We were talking a lot about the high price at the pump. What have you seen on that front? We've seen substantial easing in terms of the price of a barrel of oil. What do you see as the future?
Do you think that there are other types of dynamics here? Obviously, demand and supply still very much volatile with China and then just the production coming out of the many oil producers in terms of what's going to happen in the future and whether or not those price pressures could actually return at some point.
AMOS HOCHSTEIN: So Brian, you're right. Last time we were on your show, we talked about the fact that prices at the pump were-- they were no longer at their peak of about over $5 a gallon in the United States, but they were still in high 4's. Look where we are today. Oil prices from peak in early June, mid-June were at about $120. We're now at about $90 in WTI in the United States, below $90. The price at the pump is now come down to about $3.80, maybe a smidgen below that.
But in reality, if you take certain states out of the equation, so you look at what most Americans are seeing, they're already below $3.50. So we have declined in gasoline prices. And I think that's why you're also seeing the effect on inflation with oil prices coming down and gasoline at the pump. I expect those prices to continue to come down or stabilize. Don't see much of an increase here.
What we've seen since the last time we spoke over the last 10 weeks or so that has precipitated this massive decline is, one the president's actions on releasing from the Strategic Petroleum Reserve about 180 million barrels or a million barrels a day for six months. That has taken hold. We've traveled around the world. We've seen some production increases as a result of diplomacy in places like Libya. We've seen increased production at home.
So we're working towards making sure that we have enough supply in the short and medium term, while at the same time, accelerating our US diversification away from it at the same time. So we're doing all those things.
AKIKO FUJITA: And on that front, I guess the big question here is what those inventory levels look like going into the fall. You had Energy Secretary Granholm urging domestic oil producers to try and limit exports because of concerns around domestic buildup. What does that level look like right now going into the fall?
AMOS HOCHSTEIN: So let me just clarify on that. I think the letter from Secretary Granholm, it's not about restricting exports. It's about-- what we want to see is oil companies United States, refiners and oil companies targeting and prioritizing ensuring that supplies are reaching the East Coast and across the country so that we don't have a situation where we have a increase in exports to other markets, while at the same time, a decline in inventories in the United States.
So the Biden administration has been very clear. We support exports. We're not trying to intervene in the markets. However, there is a responsibility by the private sector in the United States to do a number of things. One is at times when oil prices, for a significant period of time, many months, are above $100 or near $100 a barrel, to take some of those profits, those record profits-- and you saw the second-quarter profits. Those are records. Those need to be invested into additional capacity for production in the United States.
We are at a time where there is a war raging in Europe. We need to make sure that as we deal with that war in Europe, as we deal with the recovery from COVID, we have enough supply. And second, we want to make sure that when-- using whatever efforts they can, to not always prioritize the extra few cents, and to make sure that throughout the United States, we have supplies as we go into hurricane season, as we go into higher demand for the winter, the fall and winter, that we have the inventories.
The inventories are not where they-- you know the numbers. They're not at the five-year average. And we would like to see them there. So I think what Secretary Granholm, myself, others are telling the industry is prioritize ensuring that inventories in the United States are there, because we can't have this imbalance otherwise.
AKIKO FUJITA: Finally, I'd love to get your thoughts on what's playing out over in California. Obviously, Governor Newsom, utilities there warning about rolling blackouts, potentially. They're looking at a record heat wave here at a time when the power grid is already strained.
You've also got the state coming out last week saying that all new EVs, including plug-in hybrids, by 2035. There's a lot of questions here about whether, in fact, those kind of targets are moving too quickly, too soon when you consider where the grid is right now. What do you say?
AMOS HOCHSTEIN: So I agree that if we were trying to snap our fingers and turn all cars into EVs tomorrow, we would have a very hard time with managing the loads, and so on. We have a period of time between now and 2035. We would like to see an accelerating of the energy transition.
To do that, we have to plan out these next several years. And I think that's what we have been calling on Congress to do. That's what the IRA, the inflation Reduction Act, is supposed to help us do, is to-- between the Recovery Act, the Chips Act, and the IRA-- is to invest in our domestic infrastructure, invest in the grid to bring it up to the ability to electrify the United States, to move away from our dependence on fossil fuels for both climate, economic, and geopolitical reasons and for our security, and to upgrade the systems. We have to do that.
So I think setting the goal for 2035 of all cars being electric is a good goal to have. And we need to do all the work now in order to make sure we can meet that goal. I think if you look at 2010 or 2015 and the projections of where we would be on electric vehicles, where we would be on renewable energy installations and the penetration to the market, we have exceeded a lot of those. So I'm not too worried about people getting worried.
I think the United States has always done best when we set ambitious goals and then work our hardest to meet them. And I believe we can.
AKIKO FUJITA: And we will follow up, definitely, through the IRA implementation. Amos Hochstein, US State Department senior advisor for energy security, really appreciate it. Have a good one.
AMOS HOCHSTEIN: Thank you.
AKIKO FUJITA: Well, China's zero-COVID policy--