Saturday, August 16, 2008

"Obama's Energy Plan Is Fueled By Populism"

The latest additions to Sen. Barack Obama's energy plan, outlined during an appearance in Lansing Monday, may win the Democratic presidential candidate some votes from disgruntled consumers in November, but they'll do nothing to answer the nation's long-term needs." -- The Detroit News

"Obama's Energy Plan Is Fueled By Populism"
Editorial
The Detroit News
August 5, 2008

The latest additions to Sen. Barack Obama's energy plan, outlined during an appearance in Lansing Monday, may win the Democratic presidential candidate some votes from disgruntled consumers in November, but they'll do nothing to answer the nation's long-term needs.

The Illinois senator called for releasing the nation's strategic oil reserve to provide temporary relief from high gasoline prices, and also promised to lift the profits from Big Oil to give Americans a $1,000 energy rebate check.

As political pandering goes, Obama's proposals rank right up there with Sen. John McCain's call for a temporary suspension of the federal gasoline tax. They also equal McCain's gas tax holiday both for their worthlessness as a permanent policy solution and their potential for causing more harm than good.

The 707 million barrels of oil in the strategic reserve are there to protect the country from disruptions in its oil supply. It's essential for the United States to have such an insurance policy, considering that it gets much of its imported oil from some of the worlds' most volatile places.

The stockpile was last tapped after Hurricane Katrina cut off oil supplies from the Gulf of Mexico. President Bush, under pressure from Congress, stopped filling the reserves earlier this year in hopes of easing fuel prices.

Draining the reserve would drop consumer fuel costs for the short run, as would any sudden increase in supply. But then what? Once the reserves are gone, prices would go back up, and perhaps even higher because the reserves ultimately would have to be replaced.

Oddly, although Obama's proposal shows he recognizes the impact of supply on prices, he remains hesitant about lifting the congressional ban on off-shore drilling. Credit Obama for moving slightly away from the hard-line no drilling position of the Democratic congressional leadership by saying he'd consider "limited" coastal drilling if it were packaged with big increases in government subsidies for alternative energy development.

But at the same time, he proposed taking away any incentive oil companies would have to expand drilling and increase supplies by pushing a windfall tax on Big Oil's profits to fund the $1,000 rebate checks.

Perhaps the senator is hoping the checks will make Americans forget, as he apparently has, about what happened when Presidents Nixon, Ford and Carter played the price and profit limiting game the 1970s.

As the pay-off for oil exploration dwindled, so did oil supplies, driving up fuel prices and creating long lines at the pump. There's no reason to think Obama would be any more successful in executing this dubious redistribution strategy.

His plan also would give the state-owned oil companies in places like Saudi Arabia and Venezuela a huge advantage over domestic companies, since they'd be beyond the reach of Obama's profits grab.

Gasoline prices have been falling in recent weeks as demand has decreased and hopes have risen that the United States may be prepared to allow expanded drilling.

Taking steps to keep demand in check while assuring a steady supply of oil is a much better energy policy than populist promises.

Read The Editorial
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