Energy plan: Expect pain

By The Daily Progress

Published: November 14, 2008

A slender Santa approaches, and Big Oil producers stand on notice: they’ve been profitable and therefore naughty and now they must pay. Among the economic meltdown’s rare gifts have been plunging oil and gas prices. Americans should enjoy this development while it lasts, and so too prices for electricity and natural gas that wear the strange look of reasonability. President-elect Obama, exchanging a musty red suit for a tailored dark one, means to end all of this. He comes bearing gifts, cap-and-trades and tax-break rollbacks, both of which are fashionable but will prove expensive.

Gliding toward Pennsylvania Avenue, Jolly young St. Barack totes a bag full of policy changes and a mission. Call it the Obama Two-Step. First, according to his Web site, “make dirty energy expensive.” Then, pour “$150 billion over the next decade … [into] the deployment of clean, affordable energy.”

For the moment, let’s consider the cleansing. It starts, naturally, with oil. Experts expect the elimination of a 2-percent tax cut extended as part of a jobs bill to Big Oil in 2004. Never mind that producers’ stocks are sliding, too or that the effective tax increase – likely to be augmented by others – only will be passed on to taxpayers. Oh, and forget offshore drilling. The calls to drill that rang out across the land over the summer have fallen silent, and Obama hears this. Here, a pattern resurfaces, circuitously. Prices rise, rationalists call for drilling, leftists say capturing the oil would take too long to make a difference, prices fall, the calls for drilling fade, prices rise and, well, here we go again.

But Obama moves on. Next comes a cap-and-trade. Here’s how it works. Federal law places a cap on carbon dioxide emissions from the use of fossil fuels. Obama and his leftist allies want to slash emissions by 80 percent over 40 years. Companies that emit fewer carbons than allowed under the cap would build credits, which could then be sold to companies that pollute more heavily. This is the trade.

Obama hopes to drive coal to the brink and consumers to natural gas. This follows typical leftist thinking, or rather the lack of it. Investor’s Business Daily refers to America as the “Saudi Arabia of coal” with a supply of 489 billion short tons. Natural gas production, meanwhile, has been flat throughout the decade despite increased demand, which in economic laws of logic as opposed to federal laws of illogic translates to soaring prices. A cap-and-trade measure would exacerbate this trend, which does not trouble Obama but it would figure to disconcert consumers whose bills are growing at a rate faster than their ability to pay.

But as the meltdown bubbles at full boil, Obama – flexing policy muscle – glares at consumers and coal companies alike in the manner of Ivan Drago of “Rocky” serial movie fame, declaring icily, “I must break you.”

“Under my plan of a cap-and-trade system, electricity prices would necessarily skyrocket,” Obama said casually at one point during the presidential campaign. “I’m capping greenhouse gases, coal power plants, you know, natural gas, you name it – whatever the plants were, whatever the industry was, they would have to retrofit their operations. That will cost money. They will pass that money on to the consumers.”

Consumers’ stockings then will not sag with lumps of the dread black rocks after all, but will be stuffed instead with the prospects of utility bills capable of siphoning dry already depleted bank accounts. There will be nothing good in this hurt.