Obama plays the Energy Shot Clock

Trans-Alaska Pipeline System (PS: pump station...
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After months of vilifying oil and gas companies for being—well—oil and gas companies by suspending drilling after the Gulf oil spill, imposing new regulations that raise costs and undermine America’s competitiveness without much change in safety or environmental protection, and then abusing administrative discretion with the slowness of regulatory review—suddenly domestic energy production to bring down high gasoline prices in time for the 2012 campaign is a high priority.

Do I sound cynical?

High energy prices are what the president’s base has always wanted.  It is easier to use the regulatory apparatus of government to create uncertainty and thus raise prices than it is to argue for the legislative changes necessary to keep prices high.  High energy prices are seen as inducing more energy conservation and efficiency.  High energy prices make renewable energy options more attractive.  High energy prices are the sine non qua for the transition to a clean energy economy.

Yes, but. . .!

High energy prices hurt the president’s reelection campaign.  High energy prices hurt economic recovery and slow American jobs creation just when he needs it most.  But high energy prices also, perversely, keep that bull’s-eye on the heart of big oil making them a perfect ongoing target for politicians—-except now it is Republican politicians tarring President Obama with the cynical sin of ‘protesting too much’ while Americans suffer.

That is the reason President Obama said in his weekly radio address that his Administration will extend existing leases in Gulf of Mexico, off Alaska Coast, hold more frequent lease sales in an attempt to bring down high gasoline prices.

But the timing of the President’s announcement was also not accidental.  It coincides with action in the Us House of Representatives on three bills sponsored by the Republican majority to expand and speed up offshore oil and gas drilling. The Republicans understand the President’s strategy and thus seek to take the energy issue away from him by forcing his hand.  So they adopted the president’s own words saying the goal of the bills is to ease gasoline prices, but they also acknowledged it won’t happen right away.  Reflexively, the White House opposed all three bills knowing even if they pass the House they are unlikely to pass the Democratic-controlled Senate.  Administration spokesmen said the Republican measures would undercut safety reviews and open environmentally sensitive areas to new drilling. But President Obama also adopted some of the bills’ provisions to suck more oxygen out of the Republican attempts to box him into action.

  • Obama said that he would extend all Gulf leases affected by his temporary moratorium on drilling imposed after last year’s BP oil spill by one year. That would give companies additional time to begin drilling.  But the Administration needed to take this action because the drill rig are expensive and companies can’t afford to let them sit idle so a growing number of Gulf of Mexico rigs were being pulled out and moved to Brazil and elsewhere so they can make money.  Obama did not want to get hammered in the heat of the campaign by allegations that he gave away America’s domestic production opportunities by dithering and thus is the cause of high oil prices.
  • New safety requirements put in place since the BP spill also have delayed drilling in Alaska, so President Obama also administratively extended lease terms there for a year. An oil lease typically runs 10 years.  The problem here is the Alaska Pipeline is facing increasing operating problems due to reduced oil flows.  When the pipeline is full oil travels faster and retains heat, lower flows slow the speed of the oil subjecting it to cold Alaska temperatures reducing pipeline efficiency, increase costs of maintenance and risking leaks.  Shell Oil plans to drill off the Alaska coast for more oil have been delayed by an air pollution permit, but now a concerned President Obama is forming an’ interagency task force to coordinate the necessary approvals’. He also will hold annual lease sales in the vast National Petroleum Reserve on Alaska’s North Slope to get oil flowing again through the Alaska Pipeline. Republicans bills proposed exempting drilling off Alaska from air pollution permit required the Administration has used to avoid action. Allowing additional drilling in Alaska is a prudent, safe and economic decision to keep the energy infrastructure already in place working to meet America’s energy needs.  Why delay?  Well the Administration was loathe to help Alaska while Sarah Palin was on his back.  But high oil prices also became higher risk in the President’s calculus since he could not afford the blame for shutdown of the Alaska Pipeline during a period of high prices because his Administration would not let the oil companies put more oil in the pipe.
  • Lease sales in the Gulf of Mexico postponed last year will be held by mid-2012, coincidentally the same time required by the House Republican bills. The President said he would direct the Interior Department to speed up environmental reviews and seismic studies needed to assess how much oil and gas is recoverable along the Atlantic Coast.
  • The president repeated his call to eliminate taxpayer subsidies to oil and gas companies. The problem with the action he proposes is those “taxpayer subsidies” are the same ones applicable to every other business in America and cutting them for all risks increasing uncertainty thus slowing job creation.  Cutting them just for oil and gas companies will be seen for what it is—politics.

So like it or not energy is shaping up to be a big issue in the 2012 campaign.


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