WASHINGTON (Reuters) - President-elect Barack Obama promises a bold energy plan to develop green technology, slash oil imports from unfriendly nations and tax more of the profits of oil companies, but the cost of the Wall Street bailout and an expected U.S. recession may impede his efforts.
Obama said as much during the first presidential debate when he said he may have to scale back on his green plan.
“I‘m not willing to give up the need to do it, but there may be individual components of it that we can’t do,” he said.
A key part of Obama’s energy plan is a $150 billion fund that would invest in clean energy over the next 10 years and create 5 million jobs in the process.
Despite Obama’s sweeping win on Wednesday, that might be a lofty goal given the $700 billion already committed to rescue Wall Street, the drop in tax revenue from a weak economy and the sharp decline in gasoline prices that puts energy issues on the back burner for some.
“The main threats to Obama’s energy plan are declining energy prices and the financial meltdown,” said Jerry Taylor, energy expert at the Cato Institute.
As a result, Taylor said he doubted Obama would make energy one of his top goals during his first two years in office.
However, millions of jobs that would come from Obama’s energy plan are just what the United States would need, according to Daniel Weiss, energy expert at the Center for American Progress Action Fund.
“Economic research shows that a $100 billion investment in clean energy policies would create 2 million jobs,” Weiss said. “Clean energy policies should be a central element in an economic stimulus and recovery package.”
Taylor cautioned that the political intolerance among U.S. lawmakers for large budget deficits “may inhibit Congress” from spending billions on Obama’s energy plan.
“But then again, when the economy is in recession, tolerance for deficit spending increases,” Taylor said. “Given that those expenditures are a key part of Obama’s plan to create ‘green jobs,’ he may well be able to salvage this aspect of his plan as a key part of his antirecession package.”
“These are green collar jobs that help Main Street and will revitalize America’s manufacturing and high-tech sectors,” Thomas Leyden, managing director for SunPower Corp, told a congressional hearing last week.
Obama’s plan would increase the cost of energy, according to the Institute for Energy Research. “Wind and solar power are more expensive to produce and utilities will simply pass those costs on to consumers in the form of higher utility bills,” said group spokesman Brian Kennedy.
One part of Obama’s energy plan that he may be able to jettison is his idea to release about 70 million barrels of crude oil from the Strategic Petroleum Reserve in order to put more supplies in the market and lower gasoline prices.
With the national price for gasoline now at $2.40 a gallon and set to fall further, U.S. consumers are definitely better off than four months ago when motor fuel hit a record $4.11.
“There is no need to release oil from our government reserves right now, but the next president should do so if prices again exceed $100 a barrel,” said Weiss.
Falling petroleum prices will also ease the pressure on Congress and Obama to expand offshore drilling, possibly allowing a reinstatement of a federal offshore drilling ban.
While Obama wants to require oil companies to drill on the existing 68 million acres of land they have leased from the government or lose them, the oil industry will continue to press for access to new offshore areas.
“I believe the most critical thing is to send some signal to indicate that the (offshore drilling) moratorium is not going to come back into effect through executive order or through congressional action,” said Red Cavaney, who retired November 1 as president of the American Petroleum Institute.
The decline in fuel prices should not hurt Obama’s plan for a windfall profits tax on oil companies’ profits, so each family could be given $1,000 to help pay for energy costs.
“Increasing taxes on oil companies is always popular no matter where prices are. But again, windfall profit taxes are most popular during high price periods, so the political capital associated with imposing such a tax will decline with price,” said Taylor.
Obama also wants to require that 10 percent of the electricity consumed in the U.S. market is generated from renewable energy sources by 2012. Many states are way ahead of Washington on the issue and already have stronger renewable electricity generation requirements.
Reporting by Tom Doggett; editing by Jim Marshall