Energy independence a hard goal

The Energy Daily and Covanta Energy hosted a media breakfast with Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) to discuss the congressional outlook on energy. At the forefront of discussions was the Outer Continental Shelf (OCS) Moratorium. The OCS Moratorium was put in place by Congress in 1981 to protect America's coasts from threats of oil and gas developments as well as to prevent leasing of coastal waters for fossil fuel development.

According to Bingaman, any ideas of changing the Moratorium would run into significant opposition and pointed out that President George Bush has not asked for a change either. When asked if the OCS Moratorium is shaping up to be an election issues, Bingaman said that the longer the topic was debated, the better it would be understood. Bingaman also noted that both presidential candidates Senator John McCain (R-Ariz.) and Senator Barack Obama (D-Ill.) have "kept the issue boiling" and not voted on it. Bingaman also said he was against the federal government ceding authority of the OCS to coastal states. He said that around $100 billion of the OCS revenue would go to coastal states and this in unfavorable in a time when the federal government needs its reserves. According to Bingaman, the OCS has always been a federal resource. Bingaman was quick to admit that leaders of coastal states would not agree with his stand.

Bingaman commended Texas oilman T. Boone Pickens for taking on the issue of energy and developing an alternative energy plan. According to Pickens' testimony before Congress last week, America needs to switch to local energy resources within the next 10 years to stop foreign oil dependence. Using Department of Energy estimates, Pickens said the U.S. should be capable of producing 22 percent of its electrical energy needs using wind-powered electricity. Bingaman said that he was in favor of using wind energy, as Pickens has been advocating. However, Bingaman admitted that, "100 percent energy independence is a hard goal."

Senators searching for the bad guys

Senators Byron Dorgan (D-N.D.) and Amy Klobuchar (D-Minn.) held a press conference to discuss the Stop Excessive Energy Speculation Act. Dorgan said the act's future lies in Republican support, saying that ending speculation is the first step in lowering oil prices and emphasizing that the need to halt excess speculation in the oil futures market is separate from calls for increased domestic drilling.

Dorgan said speculative oil prices have increased from 37 percent in 2000 to 71 percent in 2008. He called the market "infested with excess speculation," saying though United States must develop alternative energies, a short term solution rests in controlling oil futures. Without high speculative costs, Dorgan said prices at the pump could be reduced by 20 to 40 percent.

Klobuchar, in response to suggestions that oil prices are reflective of the law of supply and demand, said American demand for oil has not increased by 25 percent, an increase she said would warrant higher prices at the pump. She cited oil executives statements that oil should be $50 per barrel and said the Stop Excessive Energy Speculation Act would put 100 "cops on the beat" who would oversee the activity of traders in the oil market. "Follow the money and you'll find the bad guys" was the advice given by Klobuchar in reference to traders on Wall Street who, she said, are running away with Americans' money.

Bush’s policy a “hoax”

Speaker of the House Nancy Pelosi (D-Calif.) called global warming and energy policy “the issue of our time” at a press conference where she urged President Bush to relieve high gas prices by opening the Strategic Petroleum Reserve. Pelosi said the SPR is 97 percent full, the highest it has ever been, and that Americans deserve access to gasoline purchased with their tax dollars. Pelosi, who made a similar request to Bush ten days ago, added that gas prices would have lowered by now if Bush had acted when she originally asked. Pelosi repeatedly stated that despite having two oil men in the White House, gas prices remain over $4.

Continuing, Pelosi said Bush’s energy policy have caused price spikes and discussed the democratic DRILL (Drill Responsibly In Least Lands) Act, an act that advocates increased developments in energy alternatives and minimal drilling. She noted that calls for off-shore drilling by Republicans will take ten years to enact and only lower prices by $0.02. Pelosi said this route would cause the average family to spend $57,000 on gas in the next decade. She called Bush’s solution to high energy prices a “hoax” and said a majority of Americans agree that increasing the development of alternative energies is a good way to decrease prices while building new jobs.

In reference to increased violence in Afghanistan, Pelosi criticized the White House for initially turning its attention towards Iraq, allowing the situation in Afghanistan to worsen. She said Democrats in Congress demand accountability from the military and the Executive Branch, adding that Bush is now realizing the commitment that is necessary to fight extremism in Afghanistan.

Kerry tired of same old rhetoric

Visible frustration concerning increased oil prices was displayed by Senators at a meeting of the Senate Committee on Small Business and Entrepreneurship. To prepare for the winter, the committee met to discuss the effect of increasing oil prices on the cost of home heating oil.

Senator Olympia Snowe (R-Maine) presented statistics showing the rising cost of home heating oil in Maine. According to Snowe, the price of home heating oil has increased 135 percent in her state while income has only increased 17 percent. Snowe projects that Mainers will have to spend $5,000 to heat their homes with a per capita income of $33,000. Snowe said that many "could freeze to death," adding that many throughout the United States will be unable to afford to heat their homes during the winter months.

Senator John Kerry (D-Mass.) said one can attribute the rising price of home heating oil to the rising cost of crude oil. In reference to the White House, Kerry stated that a stronger administration would be doing more to assist Americans. He also said he finds it shocking that Americans continue to waste energy by using electricity when it is not needed after 30 years of gas shocks and efforts to counteract global warming.

Deputy Assistant Energy Secretary for Petroleum Reserves David Johnson said in his testimony that the price of home heating oil can be lowered by increasing domestic production of oil by drilling on continental shelves and in the Arctic National Wildlife Reserve (ANWR.) Kerry told Johnson that oil from the ANWR would only lower American gas prices two cents per gallon at full production and that the United States only has three percent of global oil reserves. Kerry continued, saying the United States’ oil supply is not large enough to lower international prices and that the rhetoric employed by Johnson and others has “worn short.”

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.