The U.S. House of Representatives just passed a $57 billion alternative energy bill. The deal extends a broad range of tax incentives to invest in wind, solar, biofuel and other renewable energy technologies. However, to pay for this, congress is proposing some corporate tax increases to balance the equation. This part of the bill doesn’t sit well with the White House, so a compromise will have to be struck.
Considering that ... A: It’s an election year, and B: Oil prices touched $135 a barrel today – I have no doubt that the alternative energy bill will ultimately prevail – but unfortunately it’s not enough. In fact, extending the alternative energy incentives is a great step in the right direction, but it’s just a stop-gap measure – a band-aid solution.
A recent Wall Street Journal article details General Electric’s (GE) frustration with the lack of coordinated U.S. energy policy. CEO Jeff Imelt has successfully steered GE into a leading position as “a clean-tech juggernaut,” but is clearly worried about America’s piecemeal approach to investing in fossil fuel alternatives.
It’s not that Imelt is an environmental crusader either; “he just smells the chance to make a lot of money,” – ah the free enterprise profit motive at work. The trouble is, without a more clearly defined set of rules – an alternative energy play-book if you will – Imelt is worried that the U.S. may “miss the train altogether.”
As the WSJ article points out, “Lack of planning for new nuclear plants has paralyzed the industry; lack of progress on renewable-energy tax credits has clean-energy developers treading water. Worries over how carbon will be priced has the traditional coal-powered utility industry trembling.”
Meanwhile, in another chamber of Congress, executives of big-oil firms were called on the carpet to answer for sky-rocketing crude oil prices.
Congress wants to know why crude oil is soaring past $135 a barrel – double the price of last year! Hmm... more demand than supply maybe?
Of course Congress just doesn’t get it! As the CEO of ConocoPhillips correctly points out, “The fundamental laws of supply and demand are at work.” We are getting squeezed by oil exporting nations that are “managing demand for their own interest,” and severely restricted access to energy reserves both at home and abroad.
Today, the International Energy Agency said that a major supply crunch is looming unless the world’s oil majors can ratchet up production by 12.5 million barrels a day within the next seven years. Uh... don’t count on it.
Decades of underinvestment in new energy exploration and development, and a seismic shift in who controls access to new energy deposits means sustainable high prices for years to come. Fossil fuels are a dead-end for American big-oil firms – it’s time to embrace an alternative energy future!
Great comment about the supply and demand. The WSJ article also mentioned how some tax increases were included in the bill, so President Bush will probably veto it. I see the US energy policy as penny wise, pound foolish. Think were we would be today if what Pres. Carter had started for alternate energy had continued funding. And now the Saudi's have thrown back on Pres. Bush, why should we increase supply (which costs money), if you goal is through biofuels to decrease by 75% the amount of oil you import.
The good news is by having high oil prices, it's causing a lot of research into alternate fuels/power and increases in efficiency in the US. Bad news is the impact on the US economy.
Posted by: Ray | May 23, 2008 at 12:53 AM