Shades of green: Obama, McCain advisors on energy policy

The energy policies of Sen. Barack Obama (D-Ill.) and Sen. John McCain (R-Ariz.) were discussed at a conference hosted by the National Journal. In addition, panelists discussed their views of the political climate for legislative action in the coming congress.

Elgie Holstein, senior adviser to the Obama Campaign on energy, stated that both McCain and Obama have endorsed a cap and trade approach to controlling greenhouse gas emissions, believing it to be the most economically friendly way to meet strict greenhouse gas emissions limitations that the campaign is hoping will become a part of national policy. However, the candidates differ in how aggressive they plan to be. Obama hopes to see a reduction of 80 percent below 1990 levels in greenhouse gas emissions by 2050, while McCain would aim for a 60 percent reduction. In addition, Obama plans to auction off credits to companies that choose to continue polluting. Money from these auctions would be used to develop clean-energy technologies and underwrite the labor costs of transitioning to this new technology. McCain would not charge for these pollution credits, though would consider following a plan similar to Obama's years from now.

Douglas Holtz-Eakin, domestic policy adviser to the McCain campaign, described McCain's intention of focusing on the vulnerabilities to our economy, environment and national security that our nation's reliance on foreign oil has caused. Holtz-Eakin stated that this reliance puts us at the mercy of leaders who do not share the same values as the United States, including Vladimir Putin and Hugo Chavez. As such, McCain advocates new oil and gas development on US shores, though not in the Arctic National Wildlife Refuge (ANWR). He also favors research into new technologies to ease this dependence. Conversely, Obama is opposed to offshore exploration, favoring higher auto emissions standards along with a windfall profits tax on oil companies.

Despite their different policy preferences, Holstein noted that for the first time both Democrats and Republicans have acknowledged that environmental issues can no longer be ignored.

U.S. addicted to oil, like cocaine

House Majority Leader Steny Hoyer (D-Md.) spoke at his weekly pen and pad today about the failures of the Bush Administration and the need to regulate the speculation in the oil market. The House is holding four hearings this week on the impact of speculation on the oil market.

Recently President Bush said that the United States was addicted to oil, and his solution was to get more oil, Hoyer said you don’t give a cocaine addict more drugs and that the United States should be looking for alternative solutions to our energy needs. The United States should be looking to reduce, explore, extract, refine, sell and bring prices down in the oil market in the near future, he said. The House Democrats were recently blocked by the Republicans to get the oil industry to drill on the 68 million acres of federal land they have permits for or lose the permits. Hoyer said that Republicans have blocked many pieces of legislation on the House and Senate side and are not seriously working to solve the energy crisis.

Hoyer said that the Bush Administration has had the worst job performance of any administration, they have lost jobs and increase the national debt of the U.S. Americans are correctly concerned about the energy crisis, and that only recently did the Bush Administration recognize the fact that global warming was an issue.

The House will be getting its message out to voter in the month of July, and Hoyer said they will be working with the Obama campaign to get a change of direction from the Bush economic, energy and fiscal policies.

Black gold not flowing so quickly

Sen. Charles Schumer (D-N.Y.) held a hearing this morning focusing on the effects of high oil prices and the nations economy before the Joint Economic Committee. Schumer and the other democrats on the committee lambasted the Bush Administration for what they said was an inability to “lesson our dependence on foreign oil,” said Schumer.

Republicans on the committee though charged that it has been democrats who deserve much of the blame for high oil prices. Specifically, Sen. Bob Bennett (R-Utah.) placed blame on democrats for their resistance to supporting drilling in Arctic National Wildlife Refuge [ANWR]. Directing his remarks towards Sen. Schumer, Bennett said “you made reference to ANWR and said it will take ten years and to quote that great economist Jay Leno “that’s what democrats said ten years ago” when they refused to agree to open ANWR.”

But much of the time was spent listening to the committees witnesses which included Dr. Daniel Yergin from Cambridge Energy Research Associates. According to Yergin, approximately 60 percent of our energy comes from oil and gasoline and one reason why the price of oil has risen 70 percent has been a shortage of the overall supply of oil itself. “There’s been a slow response of supply; why? One is the issue of access around the world, secondly is uncertainty about investment fiscal and regulatory regimes and thirdly a shortage of equipment and people,” said Yergin.

Yergin also attributed the shaky economic oil markets to the psychology of its consumers. “I’m really struck by this kind of pessimism about future supply,” said Yergin, “you have to have trust in the market.”

If anyone needed any affirmation though that oil would play an important issue in this falls election Sen. Amy Klobuchar (D-Minn.) told the committee “it’s what my constituents are all talking about.”

House Majority Leader calls for domestic drilling

In his weekly pen and pad briefing, House Majority Leader Steny Hoyer (D-Md.) said that Democrats are supportive of using U.S. products to combat the rising oil prices. He said the most viable option, drilling in federal land and water, was still opposed by Republicans who want to drill offshore or in the Arctic National Wildlife Refuge (ANWR). He said that there are 68 million acres of federally owned land in the U.S. and this land shelters 107 billion barrels of oil and 658 trillion cubic feet of natural gas.

Hoyer said the only tool to lower gas prices in the near future is to try and control oil speculation. He told the press that his oil experts said that production cost was not really the driving force behind the colossal rise in gas prices, but that speculation accounted for between 20 and 50 percent of rising gas prices. He said that drilling ANWR would completely ignore the substantial supply already available in federal land.

He said that President Bush has done nothing to encourage conservation since taking office. Hoyer said that the Republicans may want oil prices to go down but instead of taking action he said they just offer subsidies to oil companies. He said that Senator McCain’s (R-Az.) new plan to develop an electric car was created to balance out the four billion dollar tax cut he proposed for the five largest U.S. oil companies.

The blame game: What’s causing high gas prices?

The role of market speculation and its effect on the dramatic increases in the price of oil was discussed by the House Energy and Commerce Committee’s Oversight and and Investigations Subcommittee. Rep. Michael Burgess (R-Texas) stated that the American economy will not be sustainable if high prices at the pump continue to climb.

Rep. Jay Inslee (D-Wash.) said a solution to inappropriate speculation would help to lower prices in the short term, contrasting this idea with calls to increase supply by drilling in the ANWR. Inslee said that these measures would affect future generations but have no immediate result now. Rep. Bart Stupak (D-Mich.) stated that speculation of future demand for oil has played a large role in oil’s price increase and that one can solve the issue of high prices by traveling to New York or Chicago.

Rep. Joe Barton (R-Texas) said the cost of oil can be attributed to low supply, not market speculation. Barton suggested opening the Strategic Petroleum Reserve and selling two million barrels each day. Barton said this would return oil prices to under $100 per barrel. He noted that the Bush administration opposes this strategy and that its success would rely on an act of Congress. Rep. Greg Walden (R-Ore.) said supply and demand principles, as well as deflation and market forces cannot be ignored.

Michael Masters of Masters Capital Management said that investment firms are good at making profits but ignore the long-term consequences of their decisions, naming the subprime mortgage crisis as an example. Inslee recalled being told by Vice President Dick Cheney that he did not understand economics when he presented Cheney with information concerning Enron, comparing that experience with what he views as the Bush administration’s refusal to acknowledge the effect of futures markets on oil.