U.S. candidates react to higher energy costs

CINCINNATI/NEW YORK (Reuters) - Americans are finally reacting to record gasoline prices by shunning SUVs, driving less and even debating drilling off the coasts of Florida and California.

And in an election year dominated by economic concerns, the two U.S. presidential candidates are pumping out proposals to cut back the oil habit of the world's largest fuel consumer.

But those plans -- from Democrat Barack Obama's emphasis on biofuels to Republican John McCain's push for more drilling and higher tax breaks for zero-emission cars -- could take a decade to lower gas prices.

Talk of eventual change is cheap, with neither candidate wanting to risk alienating voters, said George Philippidis, energy policy professor at Florida International University.

"There's a lot of lip service now," he said. "I don't see anything happening until well after the election. And by then, who knows what the price of oil will be?"

The lack of ideas to control short-term costs and the time needed to bring new technologies to market mean drivers may need to get used to high prices at the pumps, regardless of who is in the White House after November's election.

"Let's not kid ourselves," said Joel Darmstadter, a fellow at the Washington think tank Resources for the Future. "If you're talking about zero emissions, you're not talking about what's on the assembly line."

CUTTING BACK

Already, poll after poll shows change is being driven by consumers, not politicians.

More than half of Americans intend to drive less and 74 percent support drilling for oil in U.S. coastal waters, according to recent polls by Zogby International.

For the first time since the 1970s and early 1980s, the number of miles driven by Americans has begun trending downward and gasoline demand may have peaked, Cambridge Energy Research Associates said in a report last week.

"We're certainly seeing behavioural changes at $4 (2 pounds) a gallon that we did not see at $2 and $3 a gallon," said Samantha Gross, associate director of the consulting firm.

Sales of sport utility vehicles, minivans and pickup trucks fell below 50 percent of new vehicle sales this year for the first time since 2001. Ford and General Motors plan to shut truck plants and boost production of fuel-efficient cars.

The energy-hungry United States consumes some 7.5 billion barrels of oil a year, including about 9.3 million barrels per day of gasoline.

With oil doubling in the past year to nearly $140 a barrel, that suddenly has Americans talking about conservation, more fuel-efficient cars, nuclear energy, ethanol production, wind and solar power, and drilling in the Arctic or Gulf of Mexico.

"There is no silver bullet," said Philippidis. "We have to look at all the options."

Obama's plan would rely heavily on next-generation biofuels like cellulosic ethanol, which companies hope to make from plants like switchgrass and poplar trees. Technical hurdles have prevented anyone from making commercial amounts of the fuel and launch dates keep getting pushed into the future.

"We're just not into the prediction business anymore," the president of a cellulosic ethanol company said about when the company planned to start producing the fuel.

McCain's proposal to end a ban on offshore oil drilling, also supported by President George W. Bush, would add about 1 million to 2 million barrels a day to global oil supplies.

But analysts said developing the new wells could take 10 years, when global demand is expected to be at least 100 million bpd, about 15 million bpd above current levels.

Domestic drilling may not be a big factor even years from now because of the small amount of production and because oil can be extracted far more cheaply elsewhere in the world, said Tim Evans, analyst at Citi Futures Perspective in New York.

"One reason why we don't see a lot of oil companies begging to produce in environmentally sensitive areas is because they have to spend a lot of money to be careful," Evans said.

OTHER IDEAS

With the desire to wean America off foreign oil, the presidential candidates have not focused enough on plans to improve relations with global oil producers, Evans said.

Among other short-term fixes not raised by the candidates would be swapping high-quality sweet crude out of the U.S. Strategic Petroleum Reserve with sour crude that costs about $7 a barrel less, said Phil Verleger, an independent oil analyst and consultant in Colorado.

A gasoline tax would be politically painful but could lower demand, Evans said, adding another step could be simply enforcing the law to cut down on speeding.

"We tend to forget that the accelerator connects to the fuel gauge, not just the speedometer," he said.

Voters appear to have accepted that things need to change -- both politically and personally.

In Arizona, Benny Pelosi drives an enormous Ford Expedition with lifted suspension and extra-fat tires. The truck also sports a For Sale sign.

The imposing SUV is one of three he owns. But as he pumped gas into the Ford, Pelosi said he planned to replace it with a gas-sipping car to run around town.

"What am I looking for? Something really fuel efficient for a third car," he said. "The U.S. should be a little less greedy."

(With additional reporting by Tim Gaynor in Phoenix; Editing by John O'Callaghan)