By Alex Mills
The oil and gas industry is in a political fight for its life. No exaggeration!
U.S. Speaker of the House Nancy Pelosi calls the energy debate a fight for the future of the planet. Former Vice President Al Gore says it’s the future of human civilization. Senator Barack Obama called for the “end the age of oil in our time.”
Obama, who will receive the nomination of the Democratic Party for President, released his energy plan last week that called for additional taxes and restriction on the oil and gas industry and mandates and tax subsidies for alternative energy sources. Senator Obama’s plan that was outlined on August 4 would…
· impose a windfall profits tax on big oil corporations and redistribute $1,000 to families struggling with high energy costs;
· sell 70 million barrels of oil from the Strategic Petroleum Reserve;
· require that 1 million electric hybrids be built within six years;
· mandate that 10% of energy come from alternatives by 2012; and
· reduce electricity demand by 15% by the end of next decade.
Obama’s energy plan will create energy shortages, and it will cause prices to rise even further. There is nothing in the plan that will increase supplies.
Governments have tried to override the law of supply and demand, but they failed. Most recently, President Nixon tried by placing price controls on crude oil in the 1970s when we had supply shortages and rising prices.
President Carter tried a windfall profits tax. And, when supplies out paced demand prices started to collapse in the 1980s, and OPEC refused to cut production (supplies) enough and prices fell even farther.
Obama wants to attack the crude oil and gasoline price issue by punishing U.S. oil companies with a windfall profit tax. “Barack Obama will require oil companies to take a reasonable share of their record-breaking windfall profits and use it to provide direct relief worth $500 for an individual and $1,000 for a married couple…to help families cope with the rising price of gasoline, food and other necessities,” according to documents on www.barackobama.com.
Obama doesn’t say who qualifies for the money or how the tax will be implemented. If it is similar to Carter’s windfall profit tax, it won’t be a tax on profits at all, but an excise tax on revenues.
He also supports more regulation of the futures market and implementation of an cap-and-trade program with a goal of reducing carbon emissions to “80 percent below 1990 levels by 2050.”
Certainly, putting 2 million electric hybrids on the road within six years, and reducing electricity demand by 15% by the end of the next decade, and generating 10% of electricity through alternative sources by 2012 are lofty goals. Because the technology hasn’t been developed yet, U.S. consumer will continue to face energy shortages and price spikes.
Government mandates are nothing more than a politician’s wishful thinking. Mandating that the U.S. reduce electricity demand is like mandating that the sky change colors from blue to green by the end of the week. It just is not going to happen, unless certain things happen.
As consumers, Obama’s energy plan leaves a lot to be desired, because there will continue to be supply shortages and rising prices. As for the oil and gas industry, it tries to put it out of business.
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