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Bob Williams
Bob Williams, director of research for PennWell Publishing's Oil & Gas Journal Research Center
Bob Williams is a Contributing Editor for PennEnergy. Previsouly, he worked as Director of Research for PennEnergy's Oil & Gas Journal Online Research Center and PennEnergy Online Research Center. He worked for 4 years for the US Department of Energy writing about energy R&D, including the power sector. Prior to that, he spent 24 years on the Oil & Gas Journal staff, and has authored and managed many ancillary publications and editorial products for PennWell over the years. For a detailed bio…


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Whither Obama on energy?
November 10th, 2008
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Which way will President Barack Obama go on energy?
Will it be President Obama, pragmatist?  Or President Obama, ideologue?
That’s a tough one to call because, to a large extent, we’ve had to deal with Presidential Candidate Obama, enigma.

This week’s blog will kick off a series, of indeterminate duration, of analyses and commentary on how energy will fare under the new regime.

No. 1 on Obama’s to-do list, of course, will be the economy. Short-term fixes, such as a bailout of the auto industry and pressure on banks to further loosen credit will take priority over longer-term challenges that would include alternative energy and climate change questions.

Certainly, Obama has outlined an ambitious agenda for energy, but he also has shown that political expediency can undercut some of those ambitions. He vehemently opposed an expansion of offshore leasing and drilling until gasoline prices topped $4/gallon and polls showed that Americans overwhelmingly favored more drilling, a stance that benefited his opponent in the campaign. That led him to adopt a more pragmatic stance to favor some expansion of offshore drilling. Now that oil prices have plummeted, and it’s beginning to look a bit more like 1999 at gasoline pumps, don’t be surprised if President Obama issues an executive order to re-impose the offshore leasing ban

Obama also has backpedaled a bit over some of his more aggressive proposals on climate change, hinting that such efforts might be a bit more attenuated than expected because of the floundering economy.

The centerpiece of his energy agenda has been a plan to pump $150 billion over the next 10 years “to catalyze private efforts to build a clean energy future.”
He also wants to put 1 million plug-in hybrid cars on the road by 2015.

Both of these efforts will be tied to jobs creation. Obama estimates that the clean energy initiative will create 5 million new jobs. The trouble is that this initiative would be funded from the sale of carbon cap-and-trade permits he puts at $15 billion/year. The devil is in the details, however, as carbon credit trading to date in Europe has proven horribly complex to implement and subject to abuse. So that initiative could take years to implement.

As for the plug-in hybrids initiative, this will no doubt be preceded by a massive bailout package for the Big Three automakers that Obama is already signaling he will undertake early on.  It is likely that his administration, in concert with a Democrat-dominated Congress, will insist on commitments to a quota for low-carbon-fueled vehicles as part of the Detroit bailout deal. One million new vehicles is really just a tiny fraction of the nation’s vehicle fleet, but the initiative will resurrect the debate over alternate-fueled vehicles and their potential. That revived debate will now occur against the backdrop of $2/gallon gasoline vs. $4/gallon gasoline. Remember California’s failed mandate for a certain minimum percentage of autos sold in the state to be zero-emission? Sometimes you can build it…and they won’t come.

Given Obama’s already-demonstrated predilection for political pragmatism, a windfall profits tax seems a sure bet, especially if Congress proceeds with his plan to confiscate oil company revenues—remember, the earlier WPT was an excise tax on domestic production, not on “excess” earnings—in order to redistribute that unseemly wealth to all Americans.  The trick is in the timing. Count on quick action here, as Obama and Democratic congressional leaders will point to ExxonMobil’s record 3Q 2008 earnings to justify the raid on oil company coffers to hand out $500 to $1,000 to individuals and families under the banner of economic relief. Once the 4Q2008 earnings reports are released, and the picture of voraciously greedy petrocrats doesn’t look quiet so convincing, then Robin Hood will have disappeared into the forest. The very, very green forest.

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