BALTIMORE, MD – The house unveiled its attack on big oil last week with the introduction of their new energy plan. Yet their plan seems as if it is preparing for a future after peak oil.
Despite oil prices dropping to a multi-month low of under $50 a barrel, our newly elected Democrats have begun the fight against America’s oil addiction during the past two weeks by passing new energy legislation aimed at big oil.
But if oil prices have been on the decline lately, why is it that the Democrats are still adamant about targeting oil companies with the intent to lower prices?
The answer could simply be that the recent dip in oil prices will be short-lived. And that the powers that be know it.
Curbing Our Addiction
Like an elephant playing hide-and-seek in a bamboo forest, there’s no hiding our country’s addiction to oil. And with that idea in mind Congress is poised to pass its new energy plan.
The plan is designed to go after the purse strings of several major oil companies by targeting their leases. Specifically, the proposal goes after oil and gas companies operating in the Gulf of Mexico, which currently enjoy an environment with no royalties for pumping crude oil. This bill forces these leases to be renegotiated along with a few of the production benefits also coming under fire.
The potential revenue that is expected to be generated is an estimated $14 billion which would be funneled to the development of alternative energy resources. In addition, large fees would be implemented and restrict them from leasing any more land in federal waters.
The attack on the oil industry is interesting in the face of peak oil. If Congress is adamant about reducing our dependence on oil, it comes during a time when cheap oil is becoming a thing of the past. The increased development in alternative fuels is the primary force that can help ensure an easy transition in future energy requirements.
To the Winner go the Spoils
With all this money suddenly pouring into new energy sources, one of the main questions that will arise is which group will receive funds from this new revenue. Although an inevitable shift away from oil will occur, there is no clear successor to its throne since none of the alternative energy sources is in a position to satisfy the energy requirements of the U.S.
Renewable sources that would potentially be competing for the money are solar, wind, and bio-fuels. And should the bill come into effect in the future, a brand new debate will emerge.
A Plan that Never Was
In the world of politics, legislation is sometimes over before it begins. After traveling through the house it will face a possible defeat in the Senate.
The bill would essentially be reworked and passed by the senate, then sent to the house again where it could again be reworked and put back before the senate-enough to make one’s head spin. Some of the real opposition will come from the oil industry’s counterattack through its lobby, which has many politicians sitting comfortably in their pocket.
The plan is also coming under criticism that the repeal of royalty relief subsequent elimination of the tax breaks will cause a disruption in new domestic oil and gas production and refinery capacity. In addition, opponents content that it could pressure American jobs and make it less economical to produce domestic energy resources.
The bill’s future has better outlook if it can get through the Senate because a veto coming out of the White House would be difficult since President Bush has repeatedly called for the U.S. to alleviate its dependence on foreign oil.
Government officials have even been reporting that Bush’s 2007 State of the Union address will call for U.S. imports from the Middle East to be reduced by nearly 75% in the future. In order for even part of that to be true the development of renewable resources will become a monumental issue.
Furthermore, White House opposition may also be hindered due to the looming election in 2008. If they were to put down this bill there could be fuel for Democratic criticism in the election.
No matter if you believe in the end of cheap oil or not, the effects of high oil prices (especially when this new record floor is established) are a significant motivating factor in this new Congressional energy plan; and their desire to wean the U.S. off oil with the advancement of renewable energy is at a very convenient period in peak oil.
Until next time,