Oil companies call Waxman-Markey clean energy bill 'unfair'
Filed under: Energy
When it comes to the Waxman-Markey bill, or the American Clean Energy and Security Act of 2009 (ACES), it's difficult to sift through all the noise to find concrete and real answers. Between lobbyists, overzealous green heads and plain partisanship, it's not always clear what's hype and what's not.A big headline in The Wall Street Journal today says that "Oil Refiners Predict Higher Gas Prices" as a result of the bill. While I don't doubt many of the costs associated with the bill will end up being paid for by the consumer and taxpayers, the goal is to benefit them. A few warning bells immediately go off in my head when I read such articles:
1. Oil and gas companies have increased their lobbying budget by 50 percent in the first three months of the year, spending up to $45 million to pressure lawmakers to reject president Obama's efforts to enact clean energy and climate legislation. No doubt, many such "scary" articles are the result of this lobbying, which would make any of these issues, even if justified, possibly far more hyped than their true weight in the grand scheme of the bill.
2. Like any government program, some of the plan is no doubt going to be funded by taxpayers, directly or indirectly. Refiners say the added cost of buying allowances would likely be passed on to consumers in the form of a 28-to- 54-cent-a-gallon rise in the price of gasoline by 2030, although even the WSJ article points out that the real hurt for the oil producers would come in the form of a lower demand for gasoline. So while consumers may pay more per gallon, they will also be consuming less (by driving more fuel efficient cars etc.), making the net cost more manageable. In fact, this is supposedly the way the program was intended to work, "assuming the bulk of revenues from the program are returned to household," as the EPA suggests (pdf).
3. The biggest complaint that may have more merit is that the oil and gas sector is being unfairly burdened compared to other sectors. Oil and gas, which accounts for 44 percent of U.S. carbon emissions "would receive just 2 percent of the emissions allowances available under the bill," while "the electricity sector, which accounts for about 40 percent of U.S. CO2 emissions, would receive 35 percent of the allowances, with other industries such as cement, glass and paper manufacturers getting 15 percent of the free permits." There are many who believe these inequities could clear the way to financial manipulations, distort the real value of the allowances and lead to lower revenue for the government. A straight carbon tax would be better, they say. But there also other considerations that come into play, such as the risk of bricks-and-mortar industries going overseas if the costs are too high, while oil and gas clearly doesn't have that option.
The bill isn't finalized yet, at least not in its detailed form. No doubt it isn't perfect and may have to be amended as we learn what works and what doesn't. But, overall, especially seeing the reaction from some sectors, it seems to be attacking exactly what needs to be if protecting the environment -- our environment -- is its final goal. Such protection is for our benefit and that of future generations and if we have to pay a little more now to avoid future disaster, then so be it. Besides, if there's one thing we learned from the sub-prime crisis, it's how artificially low payments upfront come to bite you later when you're least prepared.
Here's a link to the bill on the Committee on Energy and Commerce: Chairmen Waxman, Markey Release Discussion Draft of New Clean Energy Legislation.
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Reader Comments (Page 1 of 1)
5-21-2009 @ 2:38PM
Iridium said...
The profit ratio of gas will always be in favor of the gas companies. Your pocketbook will be just as empty with a 100mpg car as it is with a 15mpg car.
Let’s say oil didn't go through its speculation driven manipulation phase. I'll put the price per gallon at $1.75. Really where gas should be right now even with a tight supply that doesn't exist. In all reality gas should be $.75 a gallon.
The average car has a 15 gallon tank and gets 25 miles per gallon. Costing about $26 to fill up the tank. That car is good for 375 miles before it needs to be filled up again. Roughly $.07 per mile.
People think that if we all drive cars that get 50mpg we will save a ton of money at the pump. That is true if the price of gas stays where it is. The net result of using less gas should mean a lower price. But what we have seen in the market is demand has nothing to do with the set price of gas. Using less means a squeeze on profits, less profit means a declining share price. In order to stay in business the oil companies will have to increase the price of gasoline to maintain profit levels in line with analyst estimates and expectations.
If we all drive cars that get 50mpg the price of gas will skyrocket. Perhaps to $7.00 a gallon. Say due to hybrids the size of the tank drops to 10 gallons. The range of the car will be 500 miles but it will cost you $70 to fill your tank. Even though your car is far more efficient you are paying $.14 per mile. In effect the cost of driving your car has been inflated 100%.
The reality is that the price of gas has been manipulated far higher than the current market should allow. This means it can be manipulated even higher in the future to maintain the level of profit now expected. The oil companies need $60 per barrel oil just to match current profit expectations.
What really matters is the amount of money coming out of your pocketbook to pay for transportation. If gas is more expensive it won't matter how much more efficient your car is. We will have 100% inflation or more in the cost of transportation. Yes it will be better to have a 50mpg car instead of a 25mpg car when gas is $7 a gallon but that isn’t the point. Without an equal rise in the wages of the common worker less money will be around to fund the central economy. The only future is recession and depression unless the cost of living is put under control.
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5-21-2009 @ 3:19PM
Monica said...
We need a climate plan that’s affordable and effective. Americans should support a plan that:
• Achieves emissions reductions
• Creates jobs
• Preserves fuel diversity as a means of promoting greater energy independence
• Protects consumers against unnecessarily
high energy costs
We support a federal plan to reduce greenhouse gas emissions, but the Waxman-Markey bill needs to do more to guarantee that consumers are protected from unnecessary increases in energy costs. Because without these changes the bill is not affordable – and therefore, not effective.
To find out more about America’s Power’s stance on Waxman-Markey, watch our video. http://www.sn.im/balenergy
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