Obama Shifts Focus to Energy

Gas Nozzle
Offshore Oil Rig

With health care reform finally in tow, the Obama administration has shifted its focus to passing long-awaited energy and finance reform bills before the end of the legislative year. Yesterday, Obama proposed an end to the offshore drilling moratorium that he so staunchly defended as a candidate—even in the face of record gas prices and Sarah Palin’s memorable “drill baby, drill” refrain. Today, the government finalized an accelerated increase in Corporate Average Fuel Economy standards that the President first announced last May. President Obama has also been touting the greening of the federal fleet, which has added around 2,500 hybrids during the first 14 months of his administration and soon will include 100 electric vehicles.

Yesterday’s offshore drilling announcement was met with disbelief and outrage by many environmentalists, but a closer look at the policy reveals that it is unlikely to have much of an impact on energy prices or ecosystems in the near future. The expanded exploration will be limited to the gulf and southeast coastal areas—at least 50-125 miles offshore—and is still a long way from being a sure thing. Some major oil companies’ stock prices actually fell yesterday despite the news and there’s no guarantee that the recoverable oil in these areas will actually merit drilling, or that congress or the EPA won’t act to block the exploration in lieu of a blanket ban. Even if everything goes according to plan, production may not even begin for at least another decade.

The timeline for CAFE standards is a lot clearer. Beginning in 2012, carmakers will phase in a 40 percent increase in average fuel economy, culminating in a 35.5 mpg standard by 2016. Various estimates have the policy resulting in decreased emissions of between 20-30 percent. Don’t expect the government to stop there though—the Alliance of Automobile Manufacturers said today in a press release that the industry is already gearing up for further CAFE increases in 2017 and beyond.

An important step in raising those averages will be the launch of dozens of new hybrid and electric models over the next few years and the federal government plans to support these new releases with subsidies and fleet purchases. Currently, the government offers a $7,500 subsidy toward the purchase of an electric vehicle, owns more than 5,000 hybrids, and plans to purchase the first 100 EVs sold in the United States. It’s very likely that there will be further announcements on those fronts as the administration rolls out a series of energy proposals in the coming weeks.

Politics As Usual

What is expected to be missing from any new energy bill is the creation a comprehensive cap-and-trade system. Republican lawmakers have pledged to filibuster the legislation, and with many congressional Democrats already battered by a prolonged health care debate and facing tough reelection battles this year, the administration reportedly doesn’t think it has the votes to enact cap-and-trade this year. Whether Democrats revisit the plan next year will likely depend on the outcome of the November elections.

Some have speculated that the White House’s reversal on offshore drilling is a meant to act as downfield blocking for an energy bill that was all but dead as recently as a few weeks ago. The President’s willingness to adopt the main platform of McCain/Palin’s rather limited 2008 energy plan could take a leg out from underneath the conservative opposition. Where Palin is known to assure audiences that “drill baby, drill” will bring energy independence, the administration plans to argue that drilling is acceptable—but simply not enough. Indeed, even generous estimates limit the total output of offshore discoveries to less than 1 percent of daily global production.

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  • Shines

    With oil prices rising and gasoline reaching $3.00/gal (soon to go higher especially when Memorial Day weekend arrives) the new CAFE standards may not matter. Hopefully more people willl realize the days of cheap gas are gone. I look forward to hybrids and electrics making up more than 5% of vehicle sales.

  • Samie

    I’m sure like normal talking points will focus on why Obama did not offer 25-50 mile drilling and reminding us of the annoying and pointless conversations over ANWR

    Refreshing is the clear stance on hybrids and electric vehicles. My concern is that drilling, bio-fuels, ethanol, & natural gas would be treated as equals to hybrids and EV’s. Anyways a good step forward and when $4-5 gasoline comes back our economy will be able to start absorbing energy prices through greater efficiencies in vehicle designs.

  • AP

    Obama has indeed used up his political equity on the health care “reform.” To borrow a mortgage term, his political house is “under water.”

    Nothing of any consequence will happen between now and November.

  • hamilton

    “Nothing of any consequence will happen between now and November.”

    In US political terms, that’s absolutely true. Health care and the debacle in Copenhagen mean there’s neither the will nor any external impetus for the US to come up with a proactive energy policy. More-of-the-same tactics that constitute an energy policyof sorts – ratchet up CAFE ’cause it’s easy and politically costless; keep oil + coal cheap by underwriting carbon exhausts; encourage nuclear expansion (but don’t solve waste storage – a political quagmire); and throw a few crumbs to wind and solar (call it a jobs program).

    Environmentally, though, the climate keeps throwing small but increasingly noticeable extremes at us – DC snowstorms, floods in New England, 80 degree temps in April. March is wayyy too early for wildflowers and mayflies here in Michigan…. but they’re out.

    Hopefully, after the November nuttiness subsides, “our” federal pols can refocus on doing some of the right things to reduce our carbon emissions. Position it as energy security (true!), if that’s what it takes politically.

    Remember on the campaign trail when McCain and Obama’s energy policy statements were almost interchangeable? How do we get back to that happy place?

  • Samie

    AP & Hamilton I think it goes beyond using up political clout.

    Instead, I think it has more to do with the environment becoming a politically supercharged issue. Most mainstream media does not cover energy polices in detail because of pressures from major oil/gas sponsors and you see lobbyists kill any reform possible or have the ability to make a cap and trade politically risky. Oh also those stupid cable opinion networks also help dumb down energy polices including freaking people out about needed changes.

    Obama’s energy policy (CAFE) came out of $4-5 gas prices and we can argue that it was not enough but unless another situation like that happens or a natural disaster occurs we will continue to be stuck not moving environmental policies forward.

    What is funny about all this is despite the complaints about added prices, indirectly and often 10-20 years later all of us pay for subsidizing current fossil fuels.

  • hamilton

    agreed that for lots of reasons the media dumbs down and then raises the political stakes around anything approaching a coherent, long-term energy strategy.

    Unfortunately, through November (and maybe beyond), the president has no political capital to lead public opinion and ‘our’ lawmakers through the wilderness to the promised land of a thoughtful energy policy.

  • Dom

    I hope the higher CAFE standards will see more choices in diesel vehicles as well, not just hybrid/electric.

  • ex-EV1 driver

    I agree Dom, a diesel plug-in hybrid option would be awesome 🙂

  • Anonymous

    i don’t know about you guys, but my dream car with the current tech would be something like this:

    1. primary system driven by electric motor, all EV mode whenever practical, min 30 km range

    2. decked out solar panels all the way around to maximize recharge opportunities (preferred energy source). the tricky part here will be the balance between weight and energy generation.

    3. plug-in capability (second preferred energy source)

    4. reg gas engine as a last energy option (e.g. for long distance travel), prefer non-diesel for availability and emission reasons

    5. affordable (very tricky to achieve)