Are you driving 75% less? If not, then why is gasoline so cheap?

Bill Georgevich reporting

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We want to know why no one is investigating the relationship between oil prices and oil demand. Unless the world is using 75% less petroleum, it appears that the sky rocket in prices this summer was driven purely by speculation in the energy stock markets. If that’s so, what is the real cost of oil?

We know that it costs about $2/barrel or 4 cents a gallon to pump pure crude oil out of an existing oil well. There also are relatively small transportation and refining costs involved in turning that oil into consumer gasoline.

We know that in America a new oil refinery has not been built in 30 years. And we know that 30 years ago those refineries were producing gasoline that sold for less than 75 cents/gallon. Add to that the fact that in some countries like Iraq, Iran, and Venezuela, gasoline sells for less than 40 cents a gallon right now.

What does it all mean? Certainly this points to the fact that there is no relationship between “demand” and the market price of oil anymore than the value of a company is represented by it’s stock value. Companies can be over- or under-valued in the stock market….So too in commodity markets.

Without speculation inflation, oil would sell these days for between $10 and $20 per barrel with the retail cost of gasoline under a dollar per gallon. Keep in mind that oil sold for $45/barrel in early December 2008, even though OPEC had lowered production by 60 million barrels/month in a vain attempt to create a $50/barrel floor through which prices would not drop. Short term predictions point to even lower oil prices. What does this mean for the consumer and for renewable energy? Stay tuned, we’ll talk about low fossil fuel prices and its effect on renewables in our next program…

Energy Legislation at Last?

Bill Georgevich reporting

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Despite many efforts to pass an energy package, Congress adjourned for summer recess gridlocked and empty-handed. Partisan compromise is essential if we will ever see any real energy legislation. Republicans must give up oil industry tax breaks and Democrats need to budge on the offshore drilling ban. A bi-partisan group of 10 Senators, days before adjourning last month for summer recess, wrote a compromise bill that does just that.

The New Energy Reform Act of 2008 was written in response to the months-long Senate deadlock on energy legislation. The legislation, which could be considered when Congress returns in September, includes limited offshore drilling with increased investment in new energy technologies. A portion of the finding for renewables would come from taking back tax breaks from the oil industry. The bill also sets a goal of fueling 85 percent of the country's automobiles with alternatives to oil within 20 years.

The upside:

• co-sponsored by a bi-partisan group committed to breaking the energy legislation gridlock in Congress
• closes tax loopholes for the oil industry
• maintains the ban on offshore drilling in California
• extends renewable energy tax incentives that will expire in December
• invests $20 billion for the conversion of cars and trucks to non-oil fuel sources
• garnering wide support from liberal democrats, moderates, and Republicans

The downside:

• permits offshore drilling in parts of the Gulf of Mexico and the east coast (by states' consent)
• recycling of spent nuclear fuel

Given the many bones of contention between the two parties, it is imperative to accept that a compromise coming from both sides of the aisle is the only solution to the impasse. Republicans need to give in on oil industry tax loopholes so that the renewable energy tax credits can be paid for. Democrats need to budge on their intractable stance on offshore drilling.

This bill was written just before Congress adjourned in early August. We hope that our Senators give serious attention to this bill when they return on September 4.

Countdown to Energy Reform

Bill Georgevich reporting

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This week we begin our Countdown to Energy Reform. While Congress enjoys their August recess, many Americans are wondering, where are the solutions to our energy issues? Despite multiple efforts to pass energy legislation, the Senate has been intractably gridlocked. Time is running out. Essential renewable energy tax credits will expire in December. Join us in our weekly call to action as we contact our vacationing Senators every week until they reconvene in September. This week: send a letter to Senators Obama and McCain.

Congress went on recess in early August without passing any energy legislation. Despite multiple efforts, both the House and Senate danced around the crucial issues of gas prices, offshore drilling, oil-market speculation, and the clean energy tax credits that are expiring in December.

The clean energy tax credits are especially important, because as December draws nearer, more and more investors in various renewable energy projects are getting cold feet. Many have pulled out entirely or are threatening to do so if the extension doesn't happen. Failure to renew these tax credits will be disastrous for our country and the steady momentum towards clean energy that has been taking hold.

Obama and McCain have remained rather detached in Senate activities related to renewable energy legislation. Both were among only a few to abstain on a vote to get a bill that would renew clean energy tax credits on the floor for debate. And both have shown some allegiance to the big oil industry that so handsomely finances their presidential campaigns. In 2005, Obama voted for an energy bill backed by Bush that included billions in subsidies for oil and natural gas production. In June of this year, in the weeks following McCain's embrace of offshore oil drilling, contributions from the oil and gas industry poured in ($1 million, in fact, compared to $116 K in March, $283 K in April and $208 K in May).

When the Senate reconvenes on September 4, they will be greeted with a new, bi-partisan energy bill, the first to offer a compromise to the wide philosophical and political schism that has prevented any passage of renewable energy tax credits. The New Energy Reform Act of 2008 is very promising, and couldn't come a moment too soon.

Obama has shown support of the bill, in recognition of the hope that it will end "partisan gridlock and special interest influence" and bring to the Senate "a good faith effort at a new bipartisan beginning."

McCain has remained very quiet about the bill, but most likely will not support it, for at least 2 reasons: one, the bill will take away subsidies for the oil and gas industry, which McCain adamantly wants to keep in place; and two, the bill allows for very limited offshore oil drilling (none at all off the California coast). Learn more about the bill here.

And if you haven't already, we invite you again to send a letter to Senators Obama and McCain on the very important and timely matter of energy policy.

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