Counter-pander

Senate Democrats unveil a new energy bill based on the same false premises

Posted by David Roberts at 2:17 PM on 07 May 2008

Senate Democrats have just proposed a new energy bill: the Consumer-First Energy Act. It is meant as a response to the Republican bill introduced last week, which R's are currently trying to pass as an amendment to the flood insurance bill.

Now, the Republican bill -- the Drill, Drill, Drill Bill -- would be incredibly destructive and do nothing to solve short- or long-term energy problems. That's a given. It's important to block it, and I understand that Senate Dems think they need a positive alternative of their own.

Obama showed last week how you can offer a serious alternative to political gimmicks and be rewarded for it. It appears his Senate colleagues didn't learn the lesson. The bill they threw together is a lame piece of pandering, just as silly in its own way as the McCain/Clinton gas tax holiday.

I'll get into the details below, but the main problem is not in the details, it's in the three underlying premises:

High gas prices are attributable to short-term market quirks and oil industry perfidy;
it is possible for Congress to meaningfully lower the prices of gas; and
low gas prices are a proper target for public policy.

Each of these premises is false. Oil prices are rising because production is flat and demand is rising. Production is going to stay flat, or decline. Demand is going to keep rising. Ergo, gas prices are going to keep rising. So in the unlikely event the bill is passed, it would address a problem that's not really a problem, which couldn't be solved if it were a problem, in a way that does not address the real causes of the problem-that's-not-a-problem. Quite the legislative trifecta!

Look: you can't promise Americans you're going to lower the price of gas. It's a lie, and they're going to notice when prices don't go down. It might help you tactically in the short-term, but in the long-term it's going to come back and bite you on the ass. Gas prices are going to keep going up, and good leadership begins with honesty.

Now to the details. Here are the main proposals:

Roll Back Tax Breaks for Oil Companies and Invest in Renewable Energy

Force Big Oil to Pay Their Fair Share through a Windfall Profits Tax
Halt Government Purchases of Oil for the Strategic Petroleum Reserve
Protect Consumers from Price Gouging
Stop Market Price Speculation
Stand Up to OPEC

That first plank is great. It's the same thing Senate Dems have tried thrice now, unsuccessfully. It's unlikely it will pass this time either, though I admit to taking some satisfaction in seeing R's going on record against renewable energy yet again. The only worry here is that Dems are holding the renewable energy tax credits -- the PTC and ITC -- hostage. They need to pass those, now, by any means necessary -- millions, possibly billions of dollars and thousands of jobs are on the line. As long as they have other plans to get the credits passed, then this bit of theater seems fine.

But the other planks are just dumb.

Why should Congress be in the business of telling industries how much profit they're allowed to make? Is that a good precedent? Just eliminate the subsidies we offer oil instead. That's a bigger pot of money anyway.
This might briefly shave a half-percent of oil prices, a blip that would unnoticeable among the larger structural forces at play.
Where is the evidence of price gouging? This is a silly lefty conspiracy theory and it's risible for national Dems to be indulging it.
It's likely prices are slightly inflated due to futures speculation, and I'm all for better regulation of trading, but again, this is a blip.
OPEC owns the oil. It's under their ground. Who are we to dictate to them what they do with it? Regardless, they're pumping as much as they can. It's to their immense benefit right now to drive up supply, but they aren't. Why? They can't. It's called peak oil, and it's time for politicians in America to get a damn clue about it.

For decades, energy policy in this country has been predicated on the lie that cheap energy is an American birthright. It's not. The era of cheap energy is ending. Perhaps a politician or two might try finding out what happens when you treat voters like adults and tell them the truth. It's so crazy it just might work.

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they're emotionally stuck in the 90s maybe?

The unbelievably cheap oil that befell US consumers during most of the 90s was not supposed to have happened in the peak-oil scenario, maybe some of these pols think we can magically return there by the stroke of the pen.

As great as the 90s were in some ways, I don't wanna go back there. Cheap gas is not an American birthright, that is correct.

The provisions of this policy that would invest in renewables, are the ones worth emphasizing and retaining. Problem is, I didn't see those included in the numbered steps cited above, just the asterisked title. Is that an example of more misleadingly misnamed federal legislation?

Moving toward sustainability with hopefulness, one revolution at a time.

by 2wheeler at 2:50 PM on 07 May 2008

Couple comments

Totally agree with your premise, but a few comments on details:

The PTC/ITC link to oil & gas tax breaks is a PAYGO issue. The D's could simply take off their self-imposed shackles that prevents them from spending money unless they show an equivalent revenue boost. This has been done before and while it may not be long-term fiscally prudent, it is the underlying constraint. And so long as that is the constraint, the calculus is political. To wit: which potential revenue pot is big enough to pay for this other thing and can get the necessary votes? For example, we could fund the PTC/ITC by rolling back Iraqi spending... which is a big enough pot to pass the first test, but almost certainly fails the second. So the real key to decoupling these items as you suggest is to answer the "if not oil & gas tax breaks, then what?" question. I'm not sure anyone's floated any ideas out there that work politically, and so we keep ending up at... an idea that doesn't work politically. That's the crux of the log-jam as I see it.
As long as we're thinking big, why the love affair with PTCs / ITCs? A revenue payment from the feds has the same fiscal benefit, but leaves a lot more of the money in the pocket of folks building clean energy. The only disadvantage of that process is that while a tax incentive only requires one vote by the Congress, a revenue bill requires two (first to pass, then to appropriate). This historically has biased congress towards tax-offsets as the primary form of fiscal incentive, but it's an artifact of congressional procedure that could be addressed. Which is a bit complicated but - as you say - requires only that we treat voters like adults to resolve.
Finally, I'd note that you may be wrong about peak oil. (I personally don't have a strong opinion.) But even if you are, your OPEC point belies a larger truth. 15 years ago, the Saudis "knew" that if oil went above $30/bbl, it would cause global recessions and induce massive shifts in behavior that lowered the world's demand for their product. They knew this based on 1970s vintage information that was clearly outdated, but were nervous to test that theory. The combination of factors which may or may not include peak oil (Iraq war, rise of Chinese demand, etc.) that have caused the recent run up in oil prices have been a huge gift to the Saudis in the sense that it not only forced the experiment (how does the world respond to expensive oil?) but also proven that apparently their thesis was wrong. You can increase the cost of oil four times without seeing any real fall off in demand! Which is f'in awesome news if you're the Saudi oil minister. And it means that even if the peak oil thesis is wrong, it simply isn't in swing producer's interest to ramp up production. It's Starbucks coffee, as applied oil-economics. (e.g., if you can charge $3 for a cup of coffee instead of 60 cents and see no fall off in coffee demand, why would you ever charge 60 cents again?) Regardless of what one thinks about peak oil, I find the Saudi economic vantage point to present a much more compelling argument for long-term increases in oil price. (Note that I'm agreeing with your thesis on this point - just suggesting that the underlying cause is stronger than you suggest.)

by Sean Casten at 2:58 PM on 07 May 2008

They'd kill the messenger

Dave --

You've generally been quite the political realist -- has anyone canvassed Congress about their attitudes about why gas is getting more expensive? It seems like everyday I hear another weird reason, today Rep. Fazio, one of the best representatives, was mostly blaming speculation (he claimed that 30 to 50 dollars of the per barrel price was from speculation -- considering the track record of economists on the supply of oil, I'd be very suspicious.)

Or another question for Congresspeople: Do they think that they'd be defeated in the next election if they told their constituents that the price of gas is going up forever because of peak oil? Because if that's the case -- and it very well may be-- this is going to be a bumpy ride.

On top of all this, they might be defeated if they didn't keep saying that gas should go down.

by Jon Rynn at 6:43 PM on 07 May 2008

David has it figured out.

It would be too risky at this point in the election cycle to try to deflate myths now. It might be reasonable to offer people ways to use less gas, you just gotta be careful in how you package it. Demand destruction is the only way to get the price down. Given the robust demand from the developing world, even that is unlikely to do enough. But signals that we intend to party on regardless, such as the tax-holiday, simply send the oil markets the message that we will keep consuming as the price goes higher. Nothing like the subtlety of trying to convince the seller, that you don't want his goods anyway. But, thats way too subtle an argument for 10 second sound bite.

by bigTom at 7:07 PM on 07 May 2008

OPEC

OPEC is a monopoly.

Monoplies don't have any right to manipulate markets.

How to relieve short term shortage and pain? Withdraw from Iraq. That will either bring peace, in which case production will rise and speculation will lose it's main impetus.

Or it will set traditional enemies against each other directly. As war rages, saudis and iranians will need more munitions, to get those munitions they will sell more oil.

Withdrawing from Afghanistan (if they haven't got bin laden yet, they aren't going to) would allow a pipeline for oil from the stans to be built by the saudis, more oil. The reason 911 was allowed by Bandar bush was because the Texans threatened to start a war if the taliban wouldn't allow UNOCAL to build a pipeline without the warlords getting a percentage of the profits.

There is plenty of oil in russia. in fact huge new deposits all around the globe are announced every year.

Peak oil is a myth created by oil analysts in the employ of oil companies, oPEC, and hedge funds. We are far from peak oil. but if the myth is spread, it increases the profit and power of military industrial oil empire.

The bush brats barred drilling off Florida. Why? To create an oil "crisis". They aren't environmentalists.

The real problem is peak GHG. Now how to solve GHG climate disaster? 26% of US GHG is due to transportation. Are high oil prices going to cut that figure? Sure, but only a few percent.

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 10:11 PM on 07 May 2008

Hot off the press

From E&E this morning:

RENEWABLE ENERGY: House Dems plan to move new tax package without attacking oil incentives (05/08/2008)
Alex Kaplun, E&E Daily reporter
House Democrats say they intend to move in the next couple of weeks on a new renewable energy tax package that will not be paid for by repealing oil company incentives.
The House Ways and Means Committee will likely take up the new package next week and will bring it to the floor sometime before Memorial Day, Chairman Charles Rangel (D-N.Y.) told reporters yesterday. The renewable energy package will be part of a broader multibillion dollar package of "tax extenders" for various items that are set to expire this year.
"Before the Memorial Day break, we will be bringing to the floor a comprehensive energy tax package that promotes research and development and promotes efficiency," House Speaker Nancy Pelosi (D-Calif.) said yesterday. "The resources are there, the motivation is real, and I think they have reached some level of agreement with the Senate," she added.
Rangel and other top Democrats declined to say exactly what items will be in the package or how it will be paid for but they said the legislation will be something that will be palatable to the Senate than the oil company incentives.
"Rangel has been working with the Senate on a package that we think will be passable to them," Pelosi said. "They have objected to some of the pay-fors in the past, so we may take these issues up separately, in terms of having a different set of pay-fors for the renewable energy tax credits."
Senate Democrats have repeatedly failed to move a broader -- roughly $18 billion -- package that extended tax incentives for renewables such as wind and solar by repealing oil and gas company tax breaks. More recently, the Senate has moved a $6.6 billion tax package that is not offset at all and Senate Finance Chairman Max Baucus (D-Mont.) has offered his own "extenders" legislation though he has not yet determined how it would be offset.
Pelosi, however, did not throw in the towel on repealing the oil and gas subsidies down the road, saying Democrats will look to pay for other alternative energy initiatives by removing the subsidies for oil companies. "Maybe a different match up will be more successful -- we certainly hope so," she said.

by Sean Casten at 6:02 AM on 08 May 2008

"Strategery"

As the shaved chimp says it.

The plan was to kill the economy just enough so that the investment capital to energize the replacement for fossil and nuclear power would be in short supply. At least until this whole GHG climate craze blew over.

High oil and other energy prices do that, taking the wind out of the sails of those pushing renewable/conservation energy revolution as well.

Sure it reduces economic growth, but it puts oil companies at the top of the bottomline heap. This was the tune coming out of the organ grinder's organ all these last 8 years.

It's been successfull. The military industrial oil empire now rules. Maybe Barack can change that? McCain surely won't bother to even try. All his campaign staffers are lobbyists.

Think about it. A simple step of going to a 40 mpg car from a 20 mpg SUV cuts your gas bill in half. That is underway right now, that shift in consumer choices.

Can semi tractors be built that get twice the mileage too? Peterbuilt has a hybrid semi coming off the line right now. And how about driving slower, especially accelerating more slowly?

Meanwhile people who are nimble enough to curtail their driving in favor of biking or mass transit are pulling ahead financially. Likewise people who just stop buying crap. Coffee and fast food, salad shooters, third and fourth cars for the kids, and so forth.

I see this as a shifting economy. Right now consumption is coming down, that takes people's jobs away. If government incentivizes the shift to a new energy economy new jobs are created to replace those lost. That wrecks the Cheney plan.

Wreck it Barack, wreck it good!

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 7:39 AM on 08 May 2008

ADVERTISING POLICY

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