ENERGY
Oil Firms Guzzel Profits, Consumers Get Fumes
'Tis the season (again) of sky-high gas prices, and according to the Department of Energy, they're here to say, with costs likely to average $2.28 through the summer. This means a major added burden on America's middle class. Except for housing costs, low- and middle-income households in the United States spend more of their earnings on transportation than anything else. And high gas prices hit Americans is other unexpected ways – pressuring local businesses to increase costs, curtailing vacation and travel plans, even jacking up prices for the flowers you gave to Mom this past weekend (hey, she's worth it). But as Americans realize, it doesn't have to be this way. A new Gallup poll shows that while President Bush claims "he can do little to address gas prices in the short run, two in three Americans say there are reasonable steps that he should take right now that would significantly lower U.S. gas prices." As we show below, they're right: President Bush and conservatives in Washington are standing in the way of real solutions to rising gas prices.
THE CONSERVATIVE PLAN – HIGHER PRICES, MORE PORK: President Bush has admitted his energy bill "wouldn't change the price at the pump today." But that's just half the story. A 2004 analysis by the administration's Energy Information Administration found that the Bush-backed energy bill will actually raise gas prices and increase oil demand nearly 14 percent by 2010. And that's even after profit-flushed oil and gas companies are flooded with subsidies. The energy bill lavishes fossil-fuel firms with $515 million in authorized spending from the U.S. government, including "$125 million to reimburse oil and gas producers for 115% of the costs of remediating, reclaiming, and closing orphaned wells." The bill also creates a $2 billion ultra-deep water fund (taken from conservation funding) to pay for research that companies are already doing without government help. And on top of that, the bill also provides $3.275 billion in new tax breaks to the oil and gas industry.
CONSUMERS STRUGGLE, OIL INDUSTRY CELEBRATES: As Americans struggle at the pump, oil companies are raking in record profits and giving their executives fat raises. According to the Wall Street Journal, Exxon Mobil and Royal Dutch/Shell Group "both reported huge increases in first-quarter income, benefiting from the industry wide bonanza also swelling the coffers of their peers: high prices for the oil they pump and high margins for refining it." Of course, those profits do have their drawbacks: Exxon's "soon-to-retire CEO suddenly has a new anxiety: how to spend the windfall wrought by $55-a-barrel oil," Fortune Magazine reports. "If oil simply stays where it is now, Exxon's cash could approach $40 billion in 12 months. By then [Exxon's CEO] is expected to have handed off the top job – and the headache of what to do with all that cash." And the recent Wall Street Journal compensation survey found that oil and gas executives' total direct compensation (2004) averaged about $16.5 million (median). The median percent change from 2003 to 2004 was 109.1 percent, by far the highest of the industries profiled. (For more on CEO pay soaring while the middle class struggles, read this from the Center for American Progress.)
BUSH'S CLEAN ENERGY PLAN IS "BULLS--T": Hey, we didn't say it. House Resources Chair Rep. Richard Pombo (R-CA) did. A few weeks ago, while Pombo's conservative colleagues were talking up new subsidies for hydrogen technology at a Capitol Hill news conference, Rep. Pombo turned to House Majority Whip Roy Blunt (R-MO) and whispered, "This is bulls--t." (A CNN journalist happened to be within earshot.) Pombo later explained his comment: President Bush's plan to spend $2 billion developing hydrogen-fueled cars is "not a short-term solution because we just don't have the technology to produce it," he said, adding that the promised vehicles are "multimillion-dollar prototypes that nobody's going to buy." And Pombo's actually right. Sure, hydrogen could be an important energy option down the road. But making fuel-cell technology the prime focus of our sustainable energy policy, as conservatives in Washington have done, "means having to wait 15 to 20 years to produce cleaner cars and wean the country off of oil." Our environmental problems are serious and growing now. And while President Bush trumpets the long-term gains of hydrogen, he's hindering investment in clean technologies that already exist and actively opposing efforts to make today's cars and trucks cleaner and more fuel-efficient.
REAL SOLUTIONS ARE READY AND WAITING: Gas prices can be lowered sooner rather than later, and American Progress has laid out a series of steps to do just that. For example, scrap-and-replace programs offer low-income drivers (who typically own the least safe and the most polluting cars on the road) the opportunity to trade in their inefficient vehicles for cleaner, more efficient cars. A system of feebates – fees and rebates assigned to each vehicle type based on its fuel efficiency – would provide a direct signal of the value of efficiency to consumers where they pay the most attention, at the sticker price. Buyers of more efficient vehicles would receive a rebate; buyers of less efficient vehicles would pay a fee. And merely improving standards for tire replacements, so that substitute tires are required to be as efficient as new car tires, would save over 7 billion barrels of oil over the next 50 years.
'Tis the season (again) of sky-high gas prices, and according to the Department of Energy, they're here to say, with costs likely to average $2.28 through the summer. This means a major added burden on America's middle class. Except for housing costs, low- and middle-income households in the United States spend more of their earnings on transportation than anything else. And high gas prices hit Americans is other unexpected ways – pressuring local businesses to increase costs, curtailing vacation and travel plans, even jacking up prices for the flowers you gave to Mom this past weekend (hey, she's worth it). But as Americans realize, it doesn't have to be this way. A new Gallup poll shows that while President Bush claims "he can do little to address gas prices in the short run, two in three Americans say there are reasonable steps that he should take right now that would significantly lower U.S. gas prices." As we show below, they're right: President Bush and conservatives in Washington are standing in the way of real solutions to rising gas prices.
THE CONSERVATIVE PLAN – HIGHER PRICES, MORE PORK: President Bush has admitted his energy bill "wouldn't change the price at the pump today." But that's just half the story. A 2004 analysis by the administration's Energy Information Administration found that the Bush-backed energy bill will actually raise gas prices and increase oil demand nearly 14 percent by 2010. And that's even after profit-flushed oil and gas companies are flooded with subsidies. The energy bill lavishes fossil-fuel firms with $515 million in authorized spending from the U.S. government, including "$125 million to reimburse oil and gas producers for 115% of the costs of remediating, reclaiming, and closing orphaned wells." The bill also creates a $2 billion ultra-deep water fund (taken from conservation funding) to pay for research that companies are already doing without government help. And on top of that, the bill also provides $3.275 billion in new tax breaks to the oil and gas industry.
CONSUMERS STRUGGLE, OIL INDUSTRY CELEBRATES: As Americans struggle at the pump, oil companies are raking in record profits and giving their executives fat raises. According to the Wall Street Journal, Exxon Mobil and Royal Dutch/Shell Group "both reported huge increases in first-quarter income, benefiting from the industry wide bonanza also swelling the coffers of their peers: high prices for the oil they pump and high margins for refining it." Of course, those profits do have their drawbacks: Exxon's "soon-to-retire CEO suddenly has a new anxiety: how to spend the windfall wrought by $55-a-barrel oil," Fortune Magazine reports. "If oil simply stays where it is now, Exxon's cash could approach $40 billion in 12 months. By then [Exxon's CEO] is expected to have handed off the top job – and the headache of what to do with all that cash." And the recent Wall Street Journal compensation survey found that oil and gas executives' total direct compensation (2004) averaged about $16.5 million (median). The median percent change from 2003 to 2004 was 109.1 percent, by far the highest of the industries profiled. (For more on CEO pay soaring while the middle class struggles, read this from the Center for American Progress.)
BUSH'S CLEAN ENERGY PLAN IS "BULLS--T": Hey, we didn't say it. House Resources Chair Rep. Richard Pombo (R-CA) did. A few weeks ago, while Pombo's conservative colleagues were talking up new subsidies for hydrogen technology at a Capitol Hill news conference, Rep. Pombo turned to House Majority Whip Roy Blunt (R-MO) and whispered, "This is bulls--t." (A CNN journalist happened to be within earshot.) Pombo later explained his comment: President Bush's plan to spend $2 billion developing hydrogen-fueled cars is "not a short-term solution because we just don't have the technology to produce it," he said, adding that the promised vehicles are "multimillion-dollar prototypes that nobody's going to buy." And Pombo's actually right. Sure, hydrogen could be an important energy option down the road. But making fuel-cell technology the prime focus of our sustainable energy policy, as conservatives in Washington have done, "means having to wait 15 to 20 years to produce cleaner cars and wean the country off of oil." Our environmental problems are serious and growing now. And while President Bush trumpets the long-term gains of hydrogen, he's hindering investment in clean technologies that already exist and actively opposing efforts to make today's cars and trucks cleaner and more fuel-efficient.
REAL SOLUTIONS ARE READY AND WAITING: Gas prices can be lowered sooner rather than later, and American Progress has laid out a series of steps to do just that. For example, scrap-and-replace programs offer low-income drivers (who typically own the least safe and the most polluting cars on the road) the opportunity to trade in their inefficient vehicles for cleaner, more efficient cars. A system of feebates – fees and rebates assigned to each vehicle type based on its fuel efficiency – would provide a direct signal of the value of efficiency to consumers where they pay the most attention, at the sticker price. Buyers of more efficient vehicles would receive a rebate; buyers of less efficient vehicles would pay a fee. And merely improving standards for tire replacements, so that substitute tires are required to be as efficient as new car tires, would save over 7 billion barrels of oil over the next 50 years.
posted by T. Scott Brineman at 5:10 AM
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