(John Kemp is a Reuters market analyst. The views expressed are
By John Kemp
LONDON Jan 24 President Barack Obama will
use his annual State of the Union address to call for a "new era
of American energy", according to advance materials being
circulated in Washington.
The White House is trying to shape reactions and reclaim the
initiative going into this year's presidential election
But if America is on the threshold of a new energy era, it
is no thanks to this administration or Congress. For all his
soaring rhetoric about a new era of American energy, the
president is the accidental beneficiary of a drilling boom he
has done little to encourage.
NEW, MORE INCLUSIVE LANGUAGE
Many of the themes likely to feature prominently in the
president's address have already been trialled in an editorial
published last week by Heather Zichal, deputy assistant to the
president for energy and climate change.
"For the Obama administration, moving towards the goal of
energy independence has been a clear priority since day one,"
Zichal wrote (here).
"The Obama administration's approach to achieving American
energy independence has been a comprehensive and sustained
effort, with emphasis on boosting domestic energy production,
increasing efficiency, and transitioning to cleaner energy
While some environmental groups continue to frame policy
questions in terms of fossil fuels versus clean energy sources,
the White House wants to promote a more balanced and inclusive
approach that sees both clean technology and fossil fuels,
especially cleaner burning natural gas, as part of a balanced
energy supply portfolio.
Taking a more inclusive approach is designed to build a
broader political coalition to support the president's
re-election bid while reassuring core supporters in both the
unions and green groups the president remains committed to
climate and jobs goals.
Overt references to climate change and greenhouse gas
emissions have been banished from White House vocabulary.
Instead there is mixed language stressing energy independence
(for national security hawks and isolationists); jobs (for the
middle classes worried about employment); and increasing
efficiency and cleaner energy (for environmentalists and others
concerned about global warming).
For states and voters that produce fossil fuels or worry
about fuel prices, the president is likely to highlight the rise
in gas and oil production since the start of the administration
Zichal noted the rise in U.S. crude production last year to
its highest level since 2003 and the biggest one-year increase
in natural gas output on record, taking production to an
all-time high, surpassing the previous peak in 1973. She also
noted falling U.S. oil imports.
The administration is keen to claim credit for these trends.
Zichal highlighted the administration's decision to conduct
lease sales in Alaska's National Petroleum Reserve, extend
leases in the Gulf of Mexico and study (but not yet develop) oil
and gas resources in the mid- and south-Atlantic areas.
For those concerned about climate change, the president is
likely to emphasise tougher fuel economy standards and
investments in clean technology.
"New fuel economy standards will dramatically cut our oil
dependence, reducing consumption by an estimated 2.2 million
barrels a day in 2025 (eventually reaching more than 4 million
barrels a day as the fleet turns over), and saving 12 billion
barrels in total over the lifetime of the program," Zichal
POLICY STILL LACKS COHERENCE
Few in the energy industry will recognise Zichal's
description of the president's comprehensive and coherent energy
In his State of the Union, the president will imply credit
for cutting the country's dependence on oil imports from
unstable parts of the world as well as boosting domestic
production of oil and gas. But none of these things has anything
to do with administration policy.
Falling oil imports are the lingering product of the
recession (which has cut fuel consumption) and ethanol blending
mandates approved in 2005 and 2007 by President George W. Bush
and a Republican-controlled Congress.
Rising gas and oil output is the delayed effect of the
hydraulic fracturing revolution that has been gathering pace
since the mid-2000s.
Almost all the increase in fossil fuel output has come from
Republican-dominated "red states" that voted for Senator John
McCain in the 2008 presidential election and for George W Bush
in 2000 and 2004 and are dominated by Republican governors and
legislators at both state and national level, who have proved
more friendly to fracking than Democrats.
The administration's views on fracturing and drilling
generally remain ambiguous. The president has yet to offer a
clear endorsement of the technology or offer much leadership on
His party on Capitol Hill remains concerned about the
environmental impacts (on local communities and global
emissions). Large sections of the Democratic party and its
support base continue to push for restrictions, stricter
regulation or outright bans on fracking.
Zichal's observation that the Interior Department held its
first oil and gas lease sale in the Gulf of Mexico since Macondo
in December 2011 and that it has "extended drilling leases in
the areas of the Gulf impacted by the temporary moratorium
following the Deepwater Horizon oil spill", was probably not
meant to be ironic.
But it is bound to raise a wry smile from those who remember
that the administration's temporary moratorium was only lifted
when drillers challenged it in court. The judge blasted it as
"arbitrary and capricious".
"The court is unable to divine or fathom a relationship
between the findings (of the technical report) and the immense
scope of the moratorium ...(It) simply cannot justify the
immeasurable effect on the plaintiffs, the local economy, the
Gulf region, and the critical present-day aspect of the
availability of domestic energy in this country," the judge
wrote in overturning the ban, a decision which drew a furious
response from the administration and green groups.
THE SHADOW OF KEYSTONE
The president's expected focus on gas is designed, in part,
to blunt criticism from unions, business groups and
conservatives about the administration not caring about jobs and
energy following his decision to block the Keystone XL pipeline.
For both supporters and opponents, Keystone has become a
touchstone for the administration's seriousness about clean
technology and affordable fossil fuels.
It will not be far from the surface when the president
speaks later. Zichal's editorial was peppered with references.
"New fuel economy standards will ... save 12 billion barrels in
total over the lifetime of the programme. To put that in
perspective, it would take a pipeline that carried 700,000
barrels a day nearly 47 years to transport the amount of oil."
She wrote, "The truth is that just two of the
administration's programs (the DOE Loan Guarantee Program and
the EPA's Mercury and Air Toxics Standards) will create more
than 10 times the amount of jobs generated by the Keystone XL
pipeline, which will only generate a few thousand temporary
"In terms of reducing America's dependence on oil, the
administration's fuel economy standards alone will save more
than twice the amount of oil the Keystone pipeline would
The carrying capacity of the pipeline is not relevant to the
question of fuel consumption savings. And dismissing a few
thousand temporary jobs will strike a hollow chord with those
who might have got them. But the most dispiriting thing about
this rhetoric was that it showed how little has changed.
The White House may be talking about a balanced approach to
clean technology and fossil fuels, acknowledging both will be
needed to meet future energy needs. Beneath the surface,
however, many policymakers still see it as an either/or decision
that pits clean energy jobs versus those in "dirty" fossil fuel
The erratic and inconsistent approach to energy policymaking
that has historically hampered development of stable, affordable
energy supplies has not changed either.
The White House has still not provided a substantive
justification for its Keystone decision. It seems to have been a
political decision taken for reasons of short-term expediency
with little regard for consistency and long-term consequences.
(editing by Jane Baird)