Sunday, June 8, 2008

McCain, Dems, Oil & The American Economy

Oil prices made their biggest single-day surge on Friday, soaring $11 to $138.54 on the NYME. That followed a $5.50 increase the day before, taking oil futures more than 13 percent higher in just two days. The price is being driven by world supply that has stalled at production of 85 million barrels of oil a day since 2005 while demand has skyrocketed since then with the growing economies of India and China. As to supply, the U.S. is sitting on or next to the largest energy reserves in the world, yet we do not exploit them primarily because Democrats are wedded to the radical environmental lobby. It is a lobby whose overriding motivation seems to be to punish America for its consumption of energy and a lobby that sees economic development as an evil to be halted. Who can forget Barack Obama’s answer to our energy problem – to lower our standard of living until it is acceptable to some unnamed foreign cabal.

John McCain's postition are better, though insufficiently so. His position on the development of nuclear plants is good. Yet his stand against drilling in ANWR is ludicrous and his position on drilling elsewhere, that he would leave it to individual decisions by states, is far too weak under the current circumstance.

To the extent there is a silver lining in this skyrocketing of oil prices, its that Americans are in fact consuming less fuel and that demand is subsiding. According to Charles Krauthammer, Americans are driving 4% less than we used to and auto manufacturers have found their SUV’s are about as unpopular today as Bush at a KOS convention. Yet it would seem that the dark clouds far outweigh the silver lining.

The cost of energy is going to bite the U.S. economy and bite hard. As the NYT reported yesterday, businesses are largely eating the costs to the degree that they can, at the moment, but that will play itself out over time, probably sooner rather than later. And virtually everything in our economy and the world economy is effected by the price of fuel. Coupled with - and in large part contributing to - the skyrocketing cost of food, it is hard to imagine a more regressive circumstance in terms of squeezing the poor and the middle class.

Indeed, in the Krauthammer article linked above, he speaks approvingly of high oil prices and notes he has long suggested artificially raising gas prices in the U.S. through tax as a means to curb consumption. He cites approvingly to Britain, which has taxed its gasoline to insanity. But the U.S. is not Britain. Britain is a small country. The U.S. is huge and the average daily distances traveled by Americans are simply beyond the comprehension of most Brits. While $10 a gallon gas in Britain today is a major problem, in America, it would be utter disaster.

This does not have to occur. While the Democrats are busy trying to repeal the laws of supply and demand, while they are embracing unproven and cost inefficient alternative energy sources, and while China is drilling some 70 miles off the Florida coast while we cannot, the reality is that we have sufficiently vast energy resources in America to be energy independent. Just authorizing the exploration of these resources would probably tamp down the speculation that is contributing, perhaps significantly, to the cost of oil today.

Somebody desperately needs to get a handle on McCain and talk some sense into him. His positions are simply far too weak to take advantage of what should be the single winning domestic issue for Republicans in November. As Powerline pointed out the other day:

Congressman Roy Blunt put together these data to highlight the differences between House Republicans and House Democrats on energy policy:

ANWR Exploration - House Republicans: 91% Supported House Democrats: 86% Opposed

Coal-to-Liquid - House Republicans: 97% SupportedHouse Democrats: 78% Opposed

Oil Shale Exploration - House Republicans: 90% SupportedHouse Democrats: 86% Opposed

Outer Continental Shelf (OCS) Exploration - House Republicans: 81% SupportedHouse Democrats: 83% Opposed

Refinery Increased Capacity - House Republicans: 97% SupportedHouse Democrats: 96% Opposed


91% of House Republicans have historically voted to increase the production of American-made oil and gas.

86% of House Democrats have historically voted against increasing the production of American-made oil and gas.

Read the entire post. But now this on McCain from Reuters:

Republican U.S. presidential candidate John McCain said on Wednesday he would support incentives to encourage states to develop potential oil fields but would not try to force them to exploit potential resources, especially in environmentally sensitive areas.

"I do believe that we should drill for it," he said when discussing oil exploration at a town hall meeting in Rochester, Michigan. "But I am a federalist and I believe in the rights of states to make those decisions."

He said he believed the U.S. government could do more to encourage states to develop their resources. "I think we can offer more incentives to states like California and Florida and more of a larger share of revenues and taxes from oil they may exploit," McCain added. "But I can't tell people in California what to do with their coast."

"I can't say we must drill in the most pristine environments," he added.
. . . New offshore energy exploration is now allowed only off the coasts of Texas, Louisiana, Mississippi and Alabama, and in some Alaskan waters. A presidential order bans offshore drilling everywhere else.

That is not likely to change after the U.S. election in November. If elected, Democratic presidential candidates Hillary Clinton and Barack Obama would likely extend the offshore moratorium, which is set to expire in June 2012.
McCain has favored a more flexible approach, giving the states more say on whether they want drilling off their shores.

McCain spokesman Brian Rogers has said McCain "supports the aim of the moratorium to protect ecologically sensitive areas but believes there are some (offshore) areas that can and should be developed for their energy potential."

Senate Republicans introduced legislation recently that would attempt to boost domestic oil production by allowing governors to petition to have the moratorium on offshore drilling lifted for their states and would give states a greater share of royalties.

All three of the candidates oppose opening the spigot to the huge oil reserves that are in the Arctic National Wildlife Refuge. The Alaska refuge is the main target of oil industry, which is eager to tap its possible 16 billion barrels of crude. . . .

Read the entire article. McCain is in la la land on this. While not mentioned above, his stand on establishing new nuclear plants is laudable. Beyond that, his emphasis on keeping areas pristine irrespective of the pain the majority of Americans are feeling shows he is as completely out of touch as the people he is running against. Not to mention that in an election year heavily favoring Democrats, that is simply ludicrous. And while I find it hard to fault McCain for his devotion to federalism on most issues, this is not one of them. States should not be the arbiters of a national energy policy. Congress has the authority to legislate this under the commerce clause and they should do so. And in the interests of not wanting to trigger a bout of Tourette’s, we won’t mention cap and trade. Someone needs to give McCain a dose of reality – and perhaps introduce him to Rep. Blunt.

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