Energy battle lines drawn in U.S. election : LUSENET : TB2K spinoff uncensored : One Thread

Wednesday August 16, 5:33 pm Eastern Time

Energy battle lines drawn in U.S. election

(UPDATE: adds closing oil price, para 14)

By Tom Doggett

WASHINGTON, Aug 16 (Reuters) - When Americans enter the voting booths on Nov. 7, their choice for president may be influenced by the climbing cost of filling gasoline tanks and heating homes.

Energy issues are expected to play a bigger role in this year's presidential campaign than during any election since 1980, when a doubling of oil prices and higher fuel costs helped Ronald Reagan defeat Jimmy Carter.

Based on the public records of the major presidential candidates -- Republican George W. Bush and Democrat Al Gore -- the battle lines have been drawn and voters will have a clear choice on whose energy policies they believe are better.

U.S. gasoline and crude oil prices have remained stubbornly high throughout most of this year due to dwindling inventories and tight world oil supplies. Prices for heating fuel and natural gas are expected to be 50 percent higher this winter compared to last winter due to tight supplies.

Bush and his running mate Dick Cheney are well-known figures in the oil industry. Both favour increased domestic oil production to wean the U.S. dependence off crude imports.

The Democrats, meeting this week in Los Angeles to choose formally their presidential nominee, contend Bush and Cheney are in the back pockets of oil firms. The U.S. oil industry long has angled for permission to drill on more public lands and fewer federal environmental regulations.


``The Democrats' subliminal message, and it may be not so subliminal after that, is that the Republican ticket consists of two oil men,'' said Stephen Hess, a political analyst at the Brookings Institution, a Washington think tank. The Republicans will aim to blame the Democrats for rising gasoline prices, he added.

Gore and his running mate Sen. Joseph Lieberman back the development of alternative energy sources, such as wind and solar, tax credits for energy-efficient vehicles and blocking energy companies from drilling in pristine Alaska wilderness.

The Republicans accuse Gore and Lieberman of bowing to environmental groups and being too eager to sacrifice U.S. energy security by focusing mostly on renewable energy sources and protecting elk from drilling.

While voters can expect to be bombarded with partisan campaign commercials, there are some basic energy facts about which both parties can agree.

U.S. oil production fell from 7.2 million barrels per day (bpd) in 1992, the year before the Clinton administration took office, to 5.8 million bpd in the first half of this year, according to the U.S. Energy Department.

Domestic production is at its lowest level in half a century, causing the United States to import about 55 percent of its supplies. Meanwhile, tight world supplies pushed crude prices to 10-year highs this summer.

While record U.S. retail gasoline prices have eased since mid-June, experts say they could rise again if U.S. crude oil prices continue a current upward march toward $33 a barrel.

Crude oil prices climbed 13 cents on Wednesday to $31.80 a barrel in New York futures trading.

The Energy Department has warned of potential shortages of heating oil and natural gas this winter.

Electricity prices have also skyrocketed this summer, especially in California, where hot weather and a deregulated market have doubled some consumers' power bills.

The Republicans blame these problems on the Clinton administration's failure to develop an adequate national energy policy. The Democrats say greedy oil firms, which have seen record profits this year, are gouging consumers at the pump.


Both candidates differ greatly on how to deal with the nation's energy problems.

Gore and Lieberman have vowed to protect the coasts of California and Florida, as well as the Arctic National Wildlife Refuge in Alaska, from oil and natural gas drilling.

Bush, who once ran an oil exploration company, also backs the current federal moratorium on new drilling off California and Florida, but he supports oil exploration in the Arctic refuge. Cheney, when he was a member of Congress, co-sponsored legislation to open the Alaska wilderness to drilling.

Oil firms contend they must have access to more federal lands to reduce foreign imports.

``The choice is going to be whether or not we have control of our energy supply or if we have other nations control our energy supply,'' said Diemer True, vice chairman of the Independent Petroleum Association of America.

Oil companies also could benefit under Cheney's position against the U.S. government's unilateral sanctions against large investments in Iran's energy sector.

When he ran the giant oil services firm Halliburton Co. (NYSE:HAL - news) for five years, Cheney argued that U.S. firms should be able to do business in Iran. The Clinton administration backs sanctions to keep Iran, which it believes supports international terrorism, from becoming a larger oil supplier.

Gore has his own problems in international oil policy.

Environmentalists have urged him to sell shares of Occidental Petroleum (NYSE:OXY - news) stocks worth between $500,000 and $1 million that are held in a family trust, because the firm plans to drill for oil on land claimed by native Indians in northeastern Colombia.

Both candidates support new federal regulations requiring lower sulphur levels in gasoline and cleaner engines in cars. U.S. refiners say the new gasoline requirements would be expensive to implement and would raise the cost of fuel.

-- Cave Man (, August 16, 2000


Oil Prices to Breed Discontent This Winter 16 August 2000


The price of crude oil rose to more than $32 per barrel on Aug. 15, reaching a 10-year high. While the upsurge was attributed to a comment made by Venezuelas president, it actually reflects current market conditions. An increase in oil production by the Organization of Petroleum Exporting Countries (OPEC) would help alleviate prices but is unlikely to occur. High energy prices will persist through the winter and affect every sector of the global economy.


Crude oil prices rose to more than $32 per barrel on Aug. 15. The price spike was widely attributed to a comment made by Venezuelan President Hugo Chavez that oil producers should not allow prices to drop below their current levels. Chavez is currently touring nations that make up the Organization of Petroleum Exporting Countries (OPEC) in preparation for a September heads of state summit in Caracas. However, the price spike actually reflects current market conditions. High energy prices, which will affect every sector of the global economy, are likely to continue throughout the winter

The only dependable method of attaining relief from high oil prices would be to increase production. Saudi Arabia announced in early July that it would unilaterally increase production by 500,000 barrels per day (bpd). However, according to the U.S. Energy Information Administration (EIA), Saudi production has only increased by 150,000 bpd. Since global demand tends to slacken in the autumn, OPEC will be reluctant to boost production. As well, individual members of OPEC have recently opposed increases; when Saudi Arabia announced its decision to boost production in July, it faced a solid wall of opposition.

Consequently, the global economy faces a dual threat from flat supplies and diminished stocks. U.S. crude stocks are at a 24-year low. More importantly, low gasoline stocks in the United States and Europe are pushing refineries to favor gasoline production at the expense of heating oil.

Last winter, heating oil stocks were already at a 10-year low. This winter, American and European deficits will be 50 percent and 20 percent worse, respectively, according to the International Energy Agency. Reflecting this crucial shortage, the price of U.S. heating oil hit a six-month high this week  and this near the end of the summer, when demand is generally at its lowest.

These price crunches will lead to higher prices for other petroleum products, as well. Already, U.S. natural gas producers are expecting a 50 percent increase in prices this winter.

Higher energy prices will hit every sector of the global economy, but the damage will not be uniform. In Europe, various energy taxes already constitute more than 80 percent of the price of gasoline. As a result, gasoline prices begin from a level about triple that of U.S. prices. An additional 30 cents on a $4 gallon of gasoline in London is not nearly as noticeable as an additional 30 cents on a $1.2 gallon of gasoline in New York. Europeans are also used to paying far more for natural gas, so again, the rising prices wont be shocking.

The United States, with its preference for cheap energy, lacks this safety mechanism. Any increases in price will hit far harder in percentage terms. While the U.S. economy grew at an impressive 5.2 percent in the second quarter, higher energy prices could still trigger the inflation that Alan Greenspan fears. The United States depleted energy reserves will only exacerbate this problem.

But it is the developing world that will be the hardest hit. Oil demand in Asian states alone has already increased by almost 600,000 bpd in the first half of the year. And most Asian states lack substantial energy reserves or significant energy taxes. This all makes them far more susceptible to price shocks. Any rise in crude prices will directly impact their still-fragile economies.

Unless OPEC agrees to a significant production increase during its September meeting  a highly unlikely event  the world will face sustained high prices and energy-induced inflation, especially in developing economies.

-- Cave Man (, August 16, 2000.

oh ,you silly -fickle citizen you!

-- al-d. (, August 16, 2000.

Heating oil, natural gas, and politics

-- Recently (, August 17, 2000.

Cave Man, thanks for your continuing coverage of energy issues.

Lessee, my choice would appear to be between the party with NO energy policy and the party whose private market forces have favored other products thereby ensuring that we won't have what we really need which is heating oil this winter. Yup, that's some choice all right. Pretty much guarantees there will be a huge cry for nationalization next year.

-- Whatever (, August 17, 2000.

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