WASHINGTON, April 29, 2012 — President Obama’s energy policies have come under fire as Republicans and industry leaders question his commitment to securing American energy independence as gas prices continue to rise.
Critics are right to worry about rising gas prices – they hit the middle-class hardest, and it’s the middle class that will keep the economy on the road to recovery. If there’s pain at the pump, consumers will be more reluctant to open their wallets elsewhere. That’s the last thing the American economy needs as sluggish growth continues and unemployment remains high.
Americans for Prosperity, a conservative organization headed by the billionaire Koch brothers, recently announced a $6.1 million advertising blitz against Obama’s energy policies in eight states that will be closely contested in November.
Americans for Prosperity claims on its website that “Obama is letting election-year politics get in the way of commonsense solutions” and that he continues to “stand directly in the way of projects that would create thousands of American jobs and reduce energy costs.”
Obama’s campaign has responded by suggesting that Romney’s campaign is beholden to big-oil interests, and that “industry speculators” are largely responsible for high gas prices.
Voters respond very differently to price increases at the pump than they do to other price hikes. Although the links between “energy speculators,” supply-and-demand, and prices at the pump are tenuous, high prices are very conspicuous and very painful. Voters will inevitably look to place blame.
Regardless of who is responsible for high gas prices, $4 gasoline couldn’t have come at a worse time for the incumbent.
The President has to walk a tricky line on this issue, between spurring job growth (and thus boosting economic production) and diversifying America’s energy portfolio for the future. America needs to pursue energy independence now more than ever. Democratic movements in the Middle East, combined with increased American-Iranian tensions, have contributed to fears over oil supply. Rising demand for oil from India and China have also played a role in rising prices at the pump.
The debates surrounding domestic energy policy going into November have revolved around two core issues: construction of the Keystone XL pipeline, and the President’s stated intention to eliminate tax subsidies for American oil and natural gas industries.
For Republicans, the best way to lower high gas prices is to increase domestic supply. Once again, the Keystone XL pipeline is in the spotlight. The pipeline would bring crude bitumen from Alberta’s oil-sands in Western Canada to refineries in Texas, where the finished product would increase market supply and thus lower prices. This is why Obama is under renewed pressure from Republicans and the American Petroleum Institute (API) to finally approve construction of the pipeline following TransCanada’s announcement of a revised route through Nebraska.
In an April 19th statement, API President and CEO Jack Gerard urged the President “to make the right choice now” regarding construction, noting that “Keystone XL would bring upwards of 830,000 barrels a day of Canadian oil from Alberta to U.S. refineries in the gulf”. This would “send a signal to the markets that help at the pump is on the way,” and would also indicate that the White House is serious about solidifying American energy independence.
Both the state of Nebraska and the U.S. House of Representatives have indicated their support for the project, and have made the construction of the pipeline a top priority.
But the White House has pursued an energy policy that emphasizes energy efficiency over increasing energy supply. This isn’t necessarily incompatible with increasing domestic sources, but it isn’t nearly as popular politically.
In the White House’s Blueprint for a Secure Energy Future, released on March 30, Obama pointed to increases in demand for oil from developing countries – and the inevitable increases in the finite commodity’s price. “That’s why we need to make ourselves more secure and control our energy future by harnessing all of the resources that we have available and embracing a diverse energy portfolio.”
From this perspective, the Keystone pipeline does not provide a long-term solution to America’s energy needs, nor is it compatible with the White House’s emphasis on promoting alternative energy sources. The oil-sands are notoriously harmful to the environment, and the processes needed to extract the bitumen are quite costly (the oil sands have only become profitable in the past decade due to $100/barrel prices).
Another major point of criticism for Obama’s energy policies is his plan to eliminate tax subsidies for American oil and natural gas industries. His partisan proposal to eliminate these subsidies and shift the increased revenue to “promote renewable energy and energy conservation” was an attempt to demonstrate how Republicans benefit from big-oil profits at the expense of voters.
Given that the American Petroleum Institute represents “more than 500 oil and natural gas companies” that deliver “more than $86 million a day in revenue to our government,” there will always be considerable backlash against attempts to shift tax policy in this area. The current level of political gridlock in Washington makes this approach even more volatile.
The proposal was consistent with the White House’s overall approach – and would have been a vital talking point for the Obama campaign is successful. But the Senate defeated the motion on March 29, when four Democrats joined Republicans in voting against removing big-oil subsidies. The President fell short of the 60 votes needed to conclude the discussion and was forced to abandon the strategy.
Obama’s policy of sustainable energy independence is very different from the policies promoted by Republicans and industry leaders. It is possible to reconcile energy security with promoting sustainable energy, but it’s hard to convince voters not to point the finger at the President over high gas prices.
Although at odds with his overall approach, it’s probably in Obama’s best interest to clench his teeth and placate the oil and gas industry – for now – and to approve construction of the Keystone XL pipeline. The President can worry about promoting sustainable energy in his second-term. He just needs to get there first.
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