A short while ago, “Senate Majority Leader Harry Reid and Senators Jeff Bingaman, Max Baucus, Charles Schumer, Byron Dorgan, Maria Cantwell and Bernie Sanders held a press conference today to unveil the Consumer-First Energy Act of 2008.” Done with some fanfare, the language around the act and its substance suggests that this author is unlikely to be a fan.
This discussion will take a series of several posts. And, full disclosure: these comments are based on the summary material (fully quoted, commented on below) without having read the entire bill and all its analysis. With one exception, this post will focus solely on the six points and not address the language used to introduce it and surrounding it.
The exception. One commentator, quoted from the Senate leadership said: “This bill is a lifeline to families struggling with high fuel prices.” Think about these measures with that perspective in mind.
Roll Back Tax Breaks for Oil Companies and Invest in Renewable Energy – In 2004 and 2005, the Big Oil companies received tax breaks worth $17 billion over 10 years. The Consumer-First Energy Act will roll back $17 billion in tax breaks for oil and gas companies and instead invest those taxpayer dollars to improve consumer price protection, renewable energy development and energy efficiency technology through a designated Energy Independence and Security Trust Fund.
1. What are the odds that Mary Landrieu will sign up to this ending of tax breaks for the oil companies this time around? And that George the W would sign this if Mary votes for oil taxes to help pay for renewable energy this time?
2. Does this measure do anything that is likely to reduce prices at the pump? I would assume, if anything, this will be excuse for some price increases.
3. I am supportive of the use of the money for renewable energy and energy efficiency technology development and deployment.
Force Big Oil to Pay Their Fair Share through a Windfall Profits Tax – Since the Bush Administration came into office, the five biggest oil companies have made over half a trillion dollars in profit. The Consumer-First Energy Act creates a 25 percent windfall profits tax on companies that fail to invest in increased capacity and renewable energy sources. This provision would not apply to the profits those companies reinvested in clean, affordable, domestically produced renewable fuels, expanding refinery capacity and utilization, or renewable electricity production. The proceeds of the tax will be invested in consumer price protection, renewable energy development and energy efficiency technologies through a designated Energy Independence and Security Trust Fund.
1. I agree, worth doing in terms of recognizing that oil companies are awash in greenbacks that, to a tremendous extent, are subsidized profits. And, the 25 percent windfall tax will help drive companies like Exxon-Mobil toward investing for the long term, for a better future for their companies, the nation, and the globe.
2. Again, however, one must wonder how this might lead to lower gasoline prices.
3. And, is this not another path toward fostering increased ethanol production? Anyone a big supporter of massive, unconstrained increases in ethanol production at this time?
Halt Government Purchases of Oil for the Strategic Petroleum Reserve – The Administration continues to place between 70,000 and 80,000 barrels of oil a day underground in the Strategic Petroleum Reserve (SPR), which is 97 percent full. The Consumer-First Energy Act calls for suspending through December 2008 oil purchases for the SPR. Filling could resume when the 90 day average price of crude oil recedes to $75 or less. Energy officials have stated that by halting purchases for the SPR, the price of gasoline can be reduced 2 to 5 cents per gallon.
1. Halting SPR purchases and making them perhaps price driven will have an impact on gas prices.
2. Thus, we have a “lifeline” of between 1/2 to 1 percent of pump price.
Protect Consumers from Price Gouging – The Federal government’s authority and enforcement actions are inadequate to protect consumers from artificially created spikes in retail gas prices are inadequate. The Consumer-First Energy Act would give the President the authority to declare an energy emergency should there be a shortage, disruption or significant pricing anomalies in the oil market. Once an emergency is declared, setting an “unconscionably excessive price” during such an emergency would be deemed unlawful and subject to civil penalties.
1. Do we have any evidence of this price gouging? Nice politics, but show me the substance as to the impact on prices.
2. The concept of increased authorities (and reminding the Bush Administration that the consumer actually can merit some protection) seems reasonable. But, again, how much has this truly been a challenge and cause for higher gasoline prices?
Stop Market Price Speculation – The Administration’s failure to regulate the oil futures market has lead to exorbitant speculation. The Consumer-First Energy Act establishes two key limitations on speculation. First, the bill prevents traders of U.S. crude oil from routing transactions through off-shore markets to evade speculative limits and sets forth reporting requirements. The bill also requires the Commodities Futures Trading Commission to set a substantial increase in the margin requirement for all oil futures trades, contracts or transactions. Recently, one oil company executive indicated crude oil prices could be inflated due to speculation in the futures market.
1. Okay, I will admit some ignorance here. However, does this restraint on trading and market activity seem likely to have an impact on actual pricing? Could it, in fact, actually drive business outside the United States and more pricing of oil in Euros (or other currencies)? Anyone able to show the impact of this on current prices at the pump?
Stand Up to OPEC – OPEC’s near-monopolistic control over oil prices has lead to record oil prices which have driven up the cost Americans pay at the pump. The Consumer-First Energy Act allows the U.S. Attorney General to bring an enforcement action against any country or company that is colluding to set the price of oil, natural gas, or any other petroleum product. Enacting this provision will make it clear to nations that participate in the oil cartel that engaging in conduct designed to fix the price of oil is illegal under U.S. law. As such, nations concerned with maintaining good diplomatic relations with the U.S. will likely be reluctant to blatantly act in a way that is counter to U.S. law
1. It is the nasty OPEC evil people.
2. What arrogance. It is their oil, in their soil. Who are we to be acting to demand that they pump?
I do not see anything in this that suggests getting to the root of our oil addiction. Of course, this is just the summary points, but that is what is chosen to be sent out. And, the next post is going to be on the framing language, which also has some serious problems.
And, by the way, let us remember that Barack Obama just won support by being Energy Smart, by speaking strongly to state that there isn’t a quick fix to gas prices.
Why is the Senate Democratic Party leadership undercutting the likely Party nominee for President?
On first blush, I find this a sad travesty.
Anyone want to convince me otherwise?