The Heritage Foundation delves into Barack Obama's newly unveiled energy plan and finds some good but as they say, "it was mostly bad", as they walk through the bad policies, explaining how costly Obama's plan is.
They go through each of the items in detail.
Immediately Provide Emergency Energy Rebate:
The summarize their findings and show that this plan would reduce supply, increase the demand for gas, and rely on windfall profits taxes on big oil. They then go on to show how that plan has already been tried and failed "miserably", in their words.
Of course, there is a considerable populist appeal to taking more in taxes from big oil at a time when they can most easily afford it and giving the proceeds to taxpayers when they are straining to pay high energy costs. But the last time it was tried, the windfall profits tax (WPT) backfired badly. It discouraged expansion of domestic energy supplies and led to increased oil imports. According to a 1990 Congressional Research Service study, the WPT in place from 1980 to 1988 "reduced domestic oil production from between 3 and 6 percent, and increased oil imports from between 8 and 16 percent." These unintended consequences were among the reasons why the WPT was repealed in 1988 and why similar bills should not be introduced today.
That plan is described by economist Don Boudreaux as "trying to put out a fire by dowsing it with jet fuel."
Tapping the Strategic Petroleum Reserve (SPR):
They explain the intended purpose of the SPR is a federally maintained petroleum stockpile intended to make up for any shortfall caused by a temporary supply disruption. They go on to point out that tapping it would lower prices temporarily but would drain the supply within a six month period, to which prices would again rise and there would be no stockpile geared for the originally intended purpose.
They go on to ask what would happen to the U.S. if it were hit with a severe energy crisis and had no stockpile as well as pointing out the national security and economic implications.
But the SPR is not up to the task of making oil cheaper--at least not for very long. The world uses about 86 million barrels of oil per day, and U.S. consumption accounts for 21 million barrels of that total. Relative to this, the 700 million barrels in the SPR is not very much. Granted, an extra 3 to 4 million barrels per day would lower prices, but the SPR could maintain that pace for no more than six months. After that, the price of oil would likely return to its previous level, and the SPR would be empty and thus no longer available for its intended purpose as an insurance policy against a supply disruption. It would then take many years to refill the SPR.
Cracking Down on Speculators:
Heritage points out that speculators can help consumers at the pump and that their role in increased prices is "marginal, at best".
Capping-and-Taxing:
They point to the The Lieberman-Warner cap-and-trade legislation that died in the Senate in June as well as a study on the economic costs of that legislation the burden cap-and-trade legislation would impose on the economy. They point out the Lieberman-Warner bill would have imposed a $4.8 trillion hit to GDP by 2030 and nearly 1 million jobs lost in certain years saying that Obama's plan would not lower prices, but in the long run would increase them as well as costing jobs.
Renewable Fuels Mandates and Fuel Economy Standards:
Under Obama’s new energy plan, 10% of America’s electricity will come from renewable sources by 2012, and 25% by 2025. Now that food prices have risen dramatically, there is bipartisan consent, along with statements from environmental and global hunger groups, that the ethanol mandate has been an absolute failure.
They conclude by saying that Obama's plan makes baby steps in the right direction by increasing supply and advocating nuclear, but that even those specific parts of his plan are flawed and they end by saying, "The unfortunate part his plan is that it repeats the same mistakes of the failed policies introduced in the 1970s, along with a few other bad ideas for good measure. These policies will lead to more restrictions on energy supply and higher costs for Americans — all to change the earth’s temperature .1 of a degree."
The Heritage Foundation is a conservative think-tank in operation since 1973. American voters seem to agree....at least for now because according to Rasmussen Reports, 81 percent of Americans believe that the development of new energy sources as an urgent priority and they believe that need is more important than reducing current energy usage.
65 percent believe that finding new sources of energy is more important that reducing the amount of energy Americans now consume. 28 percent think reducing current usage is more important.
McCain has gained some momentum on the energy issue since he first proposed in early June lifting the long-standing ban on offshore oil drilling. Most Americans have responded positively to the idea of offshore drilling which Obama strongly opposed for several weeks. The Democrat now appears to be more supportive of it at least in part because, as the New York Post reported today, “Obama's internal polling shows that he's getting killed on this issue.”
They also find that voters like Obama's proposal for a $1,000 energy credit for working families but are evenly divided on his plan for windfall profits tax on oil companies.
American are much less enthusiastic about Obama's plan to tap into the SPR, with 57 percent thinking that $4 dollar a gallon gas prices is not enough justification to tap in to the Strategic Petroleum Reserve, with only 31 percent thinking it is.
In a separate survey late last month, McCain had gained ground on Obama on energy issues, with 46% of voters saying they now trusted the GOP candidate more than his opponent in this area versus 42% who say they trust Obama more. Two months ago, Obama held a four-point advantage.
In a Washington Post editorial, they specify the windfall profits tax and Obama's call to release oil from the Strategic Petroleum Reserve, and they call them "gimmicks" not unlike what Obama called John McCain's plan for a gas tax holiday as a way to reduce the high cost of driving.
Everyone agrees that gas prices are tapping into the wallet and the politicians disagree on the best way to handle the problem. For the moment, the plurality of Americans prefer John McCain's ideas.
Then again, this is politics and the "by the numbers" page, can change in a political heartbeat.
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