Stratfor Briefing: The Energy Policy Debate and Katrina
(Most of you already know where I stand on the ANWR issue...and most of you know which political party I side with...which is why I find this very iiiinteresting...*doing the thing with the thing*)
August 31 2005 22 53 GMT
By Bart Mongoven
In the wake of Hurricane Katrina, the Bush administration has decided to open the Strategic Petroleum Reserve (SPR) in an effort to mitigate the economic impacts of oil-supply disruptions. The decision likely will remove some significant obstacles to a renewed debate on energy-conservation proposals in Washington -- a debate that was expected to fall dormant after the National Environmental Policy Act passed in July.
As it did prior to the energy bill's passage, part of the debate will swirl around what the proper response to rising gasoline prices and dwindling oil reserves should be. The discussion is certainly not new: It will touch on such perennial concerns as expanding domestic oil production -- especially drilling in the Atlantic National Wildlife Refuge (ANWR) -- and the feasibility of non-oil fuel sources. But with Katrina having cut a destructive path through one of the United States' most important oil-producing and -refining regions, the debate now will gain new currency in Washington.
President George W. Bush, along with many politicians from the Rocky Mountain states and Alaska, has argued the country should open up more domestic oil deposits to development. The focus has been on development in the Rocky Mountain states, off the coasts of California and Florida, and in Alaska. However, the energy bill that passed in July did little to address U.S. companies' ability to extract and process this oil -- an area where some industry observers have called for streamlining. Instead, one of the most controversial issues associated with the bill -- drilling in the ANWR -- was shunted out of energy legislation and placed into Congress's budget process. Though this maneuver helped Republicans move their energy legislation through Congress (and also might lead to a budget resolution that includes language allowing ANWR to be developed), it kept one of the most visible issues in U.S. energy policy off the table during the energy bill debate.
However, ANWR is set to return as a focus of political debate in September, as Congress attempts to reconcile different budget proposals. ANWR's return to the limelight, coupled with Hurricane Katrina and its as-yet-undetermined effects on U.S. oil production and refining infrastructure, will prompt renewed discussion on energy conservation and ways to address high oil and gas prices.
At this point, both sides in the energy debate feel they can use Hurricane Katrina to support their policy positions.
Supporters of drilling in the ANWR will argue, during the congressional debate on that subject, that Katrina has underscored the country's need for more domestic sources of oil, and that those supplies should be geographically diverse in order to mitigate the impacts of future natural disasters. They also will argue that the United States needs greater oil independence in order to reduce price shocks and supply problems caused by unforeseen and uncontrollable weather events.
On the other side, supporters of improved energy efficiency, energy conservation and increased use of alternative fuels will argue that the economic harm wreaked by Katrina reveals a strategic vulnerability that must be dealt with through policies encouraging lower consumption of oil. Although some of these "vulnerabilities" were addressed in the recent energy bill -- which carried provisions increasing the use of ethanol and some renewable fuels -- many on this side of the argument believe that a much more significant overhaul of U.S. energy policy is necessary to truly insulate the United States from shocks to the economy, national security and standards of living currently linked to its reliance on oil.
Bush's decision to open the SPR bolsters the conservationists' political position more than it aids supporters of opening ANWR. Democrats began calling in mid-August for the SPR to be opened, as the price of oil rose above $65 per barrel. It was good politics: The Democrats knew that Bush wouldn't do it; he had stated repeatedly that the SPR is to be used only for supply emergencies rather than to smooth out natural fluctuations in oil prices. But by drawing public attention to the SPR, the Democrats presented themselves as being concerned about middle-class issues and proposing a remedy to a very real problem -- high fuel prices -- that the President not only had not solved, but would be perceived as refusing to solve.
Hurricane Katrina has given Bush an opportunity to open the SPR in a way that is in keeping with its actual purpose: relief of oil-supply shortages in extraordinary situations. In other words, he now has an opportunity to appear to be taking action -- potentially helping to reduce gasoline prices -- without appearing hypocritical, given his past comments. The wisdom of the administration's decision here will be debated and analyzed for some time, however. If the damage assessments in coming days and weeks reveal that Hurricane Katrina has damaged refining capacity as much as or more than the country's capacity to produce and import oil, opening the SPR likely will do little to mitigate the coming increases in gasoline prices. How the administration handles the communications and politics of the SPR loans will have a significant impact on the energy policy discussions that follow Katrina.
With Katrina as justification for releasing oil from the SPR at a time of already-high gas prices, Bush can achieve two political objectives: He can respond to the Democrats' challenge that is he is unwilling to use the resources at his disposal in ways that potentially could help reduce gasoline prices, while also helping to limit economic damage caused by Katrina across the country. But the president also could walk into a trap. In acknowledging that a storm can cause the same kinds of shocks that the 1973 Arab oil embargo did, the president is admitting that oil dependency continues to leave the United States vulnerable. He will be conceding, implicitly, what many Democrats and conservation advocates were saying during the summer's debate over the energy bill: that current levels of oil consumption are sufficiently high that an interruption in imports or domestic production could hurt the U.S. economy.
This is not the first time this administration has offered loans to oil companies from the SPR -- the taps were opened following Hurricane Ivan in 2004 as well. However, the matter of U.S. oil consumption now is attracting attention in media and policy circles at levels unseen since the oil embargos of the 1970s. Consequently, environmentalists and other energy conservationists are better positioned to take advantage of an action that can be interpreted as an admission that U.S. oil consumption levels are dangerously high.
This generally strengthens the Democrats' hand on energy policy -- except that they have no legislative vehicle or policy proposal of their own around which to rally. Given the political opportunity presented by $70-a-barrel oil and the SPR loans, Democrats and environmentalists have a rare opportunity to take the offensive. The obvious option would be to revive many of the issues raised during the debate over the energy bill, particularly programs that would fund research and development of alternative sources of energy and "oil savings" measures, meant to reduce overall U.S. oil consumption. Under the most likely scenario, a Republican and a Democrat would introduce a bill focused on energy conservation and alternative energy, timing the proposal to coincide with resumed Senate debate on whether to open the ANWR to oil drilling.
What will emerge, therefore, is a post-Katrina debate over the future direction of U.S. energy policy. The catch-words of this debate will be the ANWR on one hand and conservation of energy resources on the other. And with oil prices continuing to rise and Bush very publicly making loans out of the SPR, advocates of national policy to reduce oil consumption have the ball in their court.
August 31 2005 22 53 GMT
By Bart Mongoven
In the wake of Hurricane Katrina, the Bush administration has decided to open the Strategic Petroleum Reserve (SPR) in an effort to mitigate the economic impacts of oil-supply disruptions. The decision likely will remove some significant obstacles to a renewed debate on energy-conservation proposals in Washington -- a debate that was expected to fall dormant after the National Environmental Policy Act passed in July.
As it did prior to the energy bill's passage, part of the debate will swirl around what the proper response to rising gasoline prices and dwindling oil reserves should be. The discussion is certainly not new: It will touch on such perennial concerns as expanding domestic oil production -- especially drilling in the Atlantic National Wildlife Refuge (ANWR) -- and the feasibility of non-oil fuel sources. But with Katrina having cut a destructive path through one of the United States' most important oil-producing and -refining regions, the debate now will gain new currency in Washington.
President George W. Bush, along with many politicians from the Rocky Mountain states and Alaska, has argued the country should open up more domestic oil deposits to development. The focus has been on development in the Rocky Mountain states, off the coasts of California and Florida, and in Alaska. However, the energy bill that passed in July did little to address U.S. companies' ability to extract and process this oil -- an area where some industry observers have called for streamlining. Instead, one of the most controversial issues associated with the bill -- drilling in the ANWR -- was shunted out of energy legislation and placed into Congress's budget process. Though this maneuver helped Republicans move their energy legislation through Congress (and also might lead to a budget resolution that includes language allowing ANWR to be developed), it kept one of the most visible issues in U.S. energy policy off the table during the energy bill debate.
However, ANWR is set to return as a focus of political debate in September, as Congress attempts to reconcile different budget proposals. ANWR's return to the limelight, coupled with Hurricane Katrina and its as-yet-undetermined effects on U.S. oil production and refining infrastructure, will prompt renewed discussion on energy conservation and ways to address high oil and gas prices.
At this point, both sides in the energy debate feel they can use Hurricane Katrina to support their policy positions.
Supporters of drilling in the ANWR will argue, during the congressional debate on that subject, that Katrina has underscored the country's need for more domestic sources of oil, and that those supplies should be geographically diverse in order to mitigate the impacts of future natural disasters. They also will argue that the United States needs greater oil independence in order to reduce price shocks and supply problems caused by unforeseen and uncontrollable weather events.
On the other side, supporters of improved energy efficiency, energy conservation and increased use of alternative fuels will argue that the economic harm wreaked by Katrina reveals a strategic vulnerability that must be dealt with through policies encouraging lower consumption of oil. Although some of these "vulnerabilities" were addressed in the recent energy bill -- which carried provisions increasing the use of ethanol and some renewable fuels -- many on this side of the argument believe that a much more significant overhaul of U.S. energy policy is necessary to truly insulate the United States from shocks to the economy, national security and standards of living currently linked to its reliance on oil.
Bush's decision to open the SPR bolsters the conservationists' political position more than it aids supporters of opening ANWR. Democrats began calling in mid-August for the SPR to be opened, as the price of oil rose above $65 per barrel. It was good politics: The Democrats knew that Bush wouldn't do it; he had stated repeatedly that the SPR is to be used only for supply emergencies rather than to smooth out natural fluctuations in oil prices. But by drawing public attention to the SPR, the Democrats presented themselves as being concerned about middle-class issues and proposing a remedy to a very real problem -- high fuel prices -- that the President not only had not solved, but would be perceived as refusing to solve.
Hurricane Katrina has given Bush an opportunity to open the SPR in a way that is in keeping with its actual purpose: relief of oil-supply shortages in extraordinary situations. In other words, he now has an opportunity to appear to be taking action -- potentially helping to reduce gasoline prices -- without appearing hypocritical, given his past comments. The wisdom of the administration's decision here will be debated and analyzed for some time, however. If the damage assessments in coming days and weeks reveal that Hurricane Katrina has damaged refining capacity as much as or more than the country's capacity to produce and import oil, opening the SPR likely will do little to mitigate the coming increases in gasoline prices. How the administration handles the communications and politics of the SPR loans will have a significant impact on the energy policy discussions that follow Katrina.
With Katrina as justification for releasing oil from the SPR at a time of already-high gas prices, Bush can achieve two political objectives: He can respond to the Democrats' challenge that is he is unwilling to use the resources at his disposal in ways that potentially could help reduce gasoline prices, while also helping to limit economic damage caused by Katrina across the country. But the president also could walk into a trap. In acknowledging that a storm can cause the same kinds of shocks that the 1973 Arab oil embargo did, the president is admitting that oil dependency continues to leave the United States vulnerable. He will be conceding, implicitly, what many Democrats and conservation advocates were saying during the summer's debate over the energy bill: that current levels of oil consumption are sufficiently high that an interruption in imports or domestic production could hurt the U.S. economy.
This is not the first time this administration has offered loans to oil companies from the SPR -- the taps were opened following Hurricane Ivan in 2004 as well. However, the matter of U.S. oil consumption now is attracting attention in media and policy circles at levels unseen since the oil embargos of the 1970s. Consequently, environmentalists and other energy conservationists are better positioned to take advantage of an action that can be interpreted as an admission that U.S. oil consumption levels are dangerously high.
This generally strengthens the Democrats' hand on energy policy -- except that they have no legislative vehicle or policy proposal of their own around which to rally. Given the political opportunity presented by $70-a-barrel oil and the SPR loans, Democrats and environmentalists have a rare opportunity to take the offensive. The obvious option would be to revive many of the issues raised during the debate over the energy bill, particularly programs that would fund research and development of alternative sources of energy and "oil savings" measures, meant to reduce overall U.S. oil consumption. Under the most likely scenario, a Republican and a Democrat would introduce a bill focused on energy conservation and alternative energy, timing the proposal to coincide with resumed Senate debate on whether to open the ANWR to oil drilling.
What will emerge, therefore, is a post-Katrina debate over the future direction of U.S. energy policy. The catch-words of this debate will be the ANWR on one hand and conservation of energy resources on the other. And with oil prices continuing to rise and Bush very publicly making loans out of the SPR, advocates of national policy to reduce oil consumption have the ball in their court.