ENERGY POLICY:

Soaring oil prices become popular argument for just about anything

As the price of oil climbs over $100 a barrel, it's fueling arguments for congressional action from groups with very different agendas.

The corn ethanol industry and farm groups say it underscores why Congress shouldn't block federal support for the biofuel. Wind's trade group argues that switching to plug-in vehicles powered by turbines would improve fuel independence. Securing America's Future Energy, a group of corporate executives and retired military personnel, seeks a slate of changes it believes will help shrink dependence on foreign petroleum.

"When oil prices get high, it's just an opportunity for all of these folks with disparate interests to draw attention to their concerns," said Adele Morris, policy director for climate and energy economics at the Brookings Institution.

"It's hugely popular" as a tactic, Morris added, because "even if there's no logical relationship it's always tempting to espouse your favorite technology as the solution."

For now, Congress appears to be paying attention.

Rising gasoline prices likely will spur Congress to act on some form of an energy bill, Sen. Lisa Murkowski (R-Alaska) has said. Ranking member of the Senate Energy and Natural Resources Committee, Murkowski believes that more production is needed and that the Arctic National Wildlife Refuge's coastal plain should be available for drilling.

"The arguments for opening more domestic production and increasing domestic production have always been relevant," said Murkowski spokesman Robert Dillon. "What you've seen in North Africa has highlighted it for the public. The higher gas prices we're unfortunately likely to see this summer are going to bring the debate to the forefront."

As the issue flares up, Republicans are likely to argue that it is not just about supply and demand.

"The opportunity to produce more of our resources here at home offers an opportunity to create jobs and raise federal revenue that can be used to pay down the national debt," Dillon said. Money raised through drilling leases and royalties and tax revenues can also be used to advance renewable power, he said.

Democrats are using the issue to make different points.

Higher fuel prices should accelerate arguments for ending oil industry tax breaks, said Democratic Rep. Earl Blumenauer (D-Ore.).

"Drilling in the Arctic Wildlife Refuge won't provide Americans relief from high gas prices," Blumenauer said. "History shows that increasing domestic drilling has not brought down gas prices, and economists agree that the benefit of drilling in the Arctic would be negligible.

"If we really wanted to save the taxpayers' money, we would eliminate the $5 billion a year in giveaways to the big oil companies, whose profits go through the roof whenever prices go up," Blumenauer added. "Giving people transportation choices and investing in cleaner alternatives that create jobs and reduce our need for oil in the first place will do much more to provide relief from high gas prices."

The national price for a gallon of gasoline averaged $3.72 per gallon yesterday, according to AAA's Daily Fuel Gauge Report, up from $3.08 per gallon a year ago. But analysts believe it will take even higher gas prices for Democrats and Republicans to agree on solutions.

"There continues to be wide disparity between different camps and different parties on what the right response from Congress ought to be to high oil and gas prices," said Tyson Slocum, director of Public Citizen's Energy Program. "You've got those banging the table shouting, 'Drill, baby drill,' and you have others saying we need an all of the above." Some believe market speculation is to blame, he said.

Others said Congress cannot exert much control over fuel costs.

The world price is set by demand, which is growing in Asia, India and other developing countries, said Ken Green, resident scholar at the American Enterprise Institute think tank.

"Supply is increasingly set by corrupt and incompetent governments, government-run oil companies and government-run producers and refiners," Green said. "There's really not much that can be done in the short term to regulate oil prices."

Ethanol fights CR language

The ethanol industry argues that it is part of the solution for escaping dependence on foreign oil, and it is using price in its campaign.

In a statement with the headline "Ethanol the Answer to $5 Gallon Gasoline," ethanol trade group Growth Energy cited a USA Today article that quoted Darin Newsom, senior analyst at energy tracker DTN, saying if Libyan unrest escalates, "$5 gas isn't out of the question."

"Our economic recovery is fragile. Many Americans are still looking for work and are living close to the edge," said Growth Energy CEO Tom Buis. "Yet some in Congress would have us continue a policy that would keep us addicted to foreign oil -- even as political upheaval in the Mideast and North Africa push gas prices up to prediction of $5 a gallon."

The ethanol industry is flagging gasoline prices as it asks the Senate to void two amendments in the federal spending bill passed by the House on Feb. 19.

One of those, from Rep. John Sullivan (R-Okla.), would stop U.S. EPA from using its funding to support fuel blends of up to 15 percent ethanol, known as E15. Another, from Rep. Jeff Flake (R-Ariz.), would prevent federal funds from being used for ethanol storage facilities or the blender pumps that would be used to prepare fuel with a higher ethanol content (E&E Daily, Feb. 19).

Those amendments were omitted from a two-week government funding bill that House Republicans are preparing. The measure amounts to a short-term version of the $60 billion in federal cuts the caucus approved last week, but without the restrictive riders on U.S. EPA and other agencies (E&E Daily, Feb. 25).

The ethanol industry does not know whether the extension will survive past that two-week window, said Growth Energy spokesman Chris Thorne. The group is moving ahead with its campaign, he said, that ties high oil and gas prices to national security and the need for more domestic alternatives. Farm groups joined ethanol in urging the Senate "to defeat any efforts that would damage the American ethanol industry."

Analysts, however, discounted ethanol as an answer to high gas prices.

Ethanol offers about 70 percent of the mileage that traditional gasoline does, said Green with AEI. Although ethanol blends tend to be less costly than traditional gasoline, he said, the savings is negated by the need to refuel more often.

"It won't protect us from price shocks," Green said. Supplies are not likely to be a problem, Green said, but prices could rise.

Morris with the Brookings Institution said that ethanol already has tax incentives and a guaranteed market because of federal requirements that the country's production of biofuels increase steadily.

"I think the ethanol folks have a lot of nerve asking for more than they've already got when we're already sending lots of money down a rathole for biofuels," Morris said.

Growth Energy disagreed with both analysts. The mileage when using an ethanol blend depends on the vehicle and in some cases equals that of gasoline, Thorne said. And "the ethanol tax policy is a pretty good deal for taxpayers," he added, given amounts spent "to defend Middle East oil, and that oil and gas enjoy near-monopoly control over access to the fuels market.

"Ethanol creates jobs here in the United States, it's cleaner, and last time I checked, there were no al-Qaeda training camps in the Midwest," Thorne said.

Wind finds tie-in

The wind industry tells supporters it could help pare dependence on foreign oil.

Trade group American Wind Energy Association on Facebook last week asked people if they were "concerned over rising gas prices." It linked to a blog post where AWEA CEO Denise Bode offered a formula for reducing oil use.

"While wind energy is already significantly reducing air pollution and the fossil fuel dependence of our economy, those savings would be expanded even further if wind energy could directly reduce the use of oil in the transportation sector," Bode said in the post. AWEA asked its in-house statistician, Bode said, to look at the results "if half of the U.S. auto fleet were composed of plug-in electric hybrid autos," and those were powered by wind-generated electricity.

"We would avoid the use of over 60 billion gallons of gasoline annually," Bode wrote. "We would use 3 billion fewer barrels of oil annually.

"Accomplishing this level of oil reduction would require only ... 82,000 turbines," Bode added. "That's less than 2 percent of the total wind resource potential in the U.S."

Morris with Brookings said that there were "several gigantic leaps of logic" in AWEA's post.

"What is it that's going to drive half of the vehicle fleet to turn over into electric cars?" Morris said. "Even the president's ambitious agenda on electric cars wouldn't come close to half." There is no assurance wind would be the source of the electricity for those hybrid cars, she said.

As well, Morris added, "what is the cost of trying to offset all that oil and what are the benefits of offsetting all of that oil? Yes, oil is expensive, but electric cars are expensive, too. It requires some careful thought to analyze those trade-offs."

AWEA argues that it is important to consider various scenarios.

"Admittedly, it's going to be a long time before the fleet gets to half the hybrids, and wind won't be the only electricity source powering those hybrids," said AWEA spokesman Peter Kelley, "but it can make a major contribution, and it's the direction we need to move in."

Wind power also helps moderate the price of natural gas, he said, which is important if it is going to be used to power more vehicles.

The group Securing America's Future Energy, meanwhile, is seeking electrification of U.S. ground transportation, expanded domestic supplies of oil and natural gas, reduced demand through vehicle efficiency, investment in research and development of new energy technologies and managing global risks to energy supplies. Those are the same issues it has been promoting for several years amid other price spikes, said spokesman Justin Kitsch.

Members of the group's Energy Security Leadership Council spoke with reporters amid the oil price climb.

"It is one of the United States' greatest economic risks to be tethered to these increasing supplies of imported petroleum from unstable and often unfriendly parts of the world," said Frederick Smith, chairman, president and CEO of FedEx Corp. and co-chairman of the Energy Security Leadership Council. "It's unsustainable. The country has to mobilize and take some action to finally address this problem, which has been going on now for an awfully long period of time."

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