The Oil Crisis:
Two Political Parties Divided
Over Energy Policy
By Ann Carroll
M ajor oil policy decisions — are
we entering a new phase in
which decisions might get made
a breakthrough on age-old deadlocks
over energy policy. What is significant
about the petroleum reserve vote is the
Democrats have been insisting that the
answer lies on the demand side.
Until recently, many Republicans
again? With gas exceeding four dollars change it represents for congressional had backed President Bush’s proposal
a gallon, to double the
bipartisan size of the SPR,
Many have called for suspending the nation’s oil reserves.
support for which today
policies (which has a capacity
heretofore of 727 million
could not barrels of oil
pass Congress — meant to be
specific to oil held in store as
reliance) are a hedge against
beginning to disruptions
emerge. Many in foreign
in Washington oil imports.
called for Democrats
suspending have long
Strategic opposed
Petroleum pumping
Reserve (SPR) more oil into
acquisition for the reserve
many years, when gasoline
and up until prices are high,
now it had not arguing that
occurred. diverting the
The fuel into the
sudden turnaround on the oil reserve Republicans. Republicans have been market could ease some pain at the
and the decisiveness of lawmakers’ focused intently on ways to increase pump.
votes on legislation to freeze oil supply, pushing increased drilling in Only once before has Congress seen
shipments to the SPR is indicative of Alaska and the Gulf of Mexico, while this kind of shift on oil policy — in
60
1979 during the last energy crisis when producing the world’s
gas prices reached the same heights, power, we’re consuming
in real terms. At the time, lawmakers it.
rallied around major funding Right before the
and mandates for renewable and heavy summer driving
alternative fuels, as well as new steps season and Memorial
in conservation, including the last Day Weekend,
increase in fuel efficiency standards. the U.S. House of
However, the pressure dissipated when Representatives
prices plummeted in the 1980s. passed legislation
This is not likely to happen this designed to outlaw
time around. Most analysts believe price manipulation by Climate change is slowly gaining support but has failed
prices will keep going up, driven the Organization of to overcome a filibuster.
by booming demand from India Petroleum Countries
and China and (OPEC). The than a commercial activity. It is for this
projections bill, H.R. 6074, reason they are exempt from antitrust
that supplies of NOPEC would make known as lawsuits under U.S. law. Current law
accessible oil may “NOPEC” would allows lawsuits in federal courts only
start running out
it illegal under U.S. law amend antitrust in cases involving foreign countries’
within the next for foreign countries to law to allow legal commercial operations that affect the
century. action against United States.
The most
collectively manipulate the OPEC cartel. NOPEC would make it illegal
important factor energy prices or supplies. It passed with a under U.S. law for foreign countries to
is clearly PRICE. vote of 324-84. collectively manipulate energy prices
However, there This is or supplies. It would allow the federal
are also concerns certainly not a government to sue foreign countries
over transfer of wealth to oil-rich new idea. It has been floating around for any such actions that directly affect
nations, U.S. competitiveness, climate Congress for almost a decade and the United States. One of the primary
change, and the fact we’re not has resurfaced from time to time as purposes of OPEC is to regulate
gasoline prices have production to keep revenues high for
climbed. Lawmakers member countries, though the cartel
clearly wanted to has not always been successful in that
be viewed as doing effort.
something this time Supporters of climate change
around to counter the legislation say it is about ultimately
ever-increasing prices at restructuring U.S. energy systems.
the pump. The question They say the billions of dollars that
remains, though, will would be paid by carbon polluters
the White House follow would stimulate a giant alternative-
suit with the veto energy industry of biofuels, electric
threat? And, what will cars, and clean coal, which over the
the vote be in the U.S. course of decades would shift the
Senate? economy away from oil.
Republican and In June, when climate change
Democratic presidents legislation came to the Senate floor,
have not looked the measure failed to gain the 60
favorably on efforts votes needed to overcome a filibuster.
to subject OPEC to However, that could change over
antitrust lawsuits in U.S. the next two years. Climate change
courts, out of concern it is slowly gaining GOP [Gallant Old
might irritate allies such Party] support, and both presidential
as Saudi Arabia. The candidates back some form of cap-
law, if enacted, could and-trade proposal.
also face a World Trade In the short run, one aspect of this
Organization (WTO) issue that is quickly drawing support
challenge. from both sides of the political process
OPEC members is increasing regulation of oil futures
classify oil exporting as markets. Many Democrats contend
a governmental rather that oil speculators are driving up
Summer 2008 61
the cost of oil by as much
as $30 a barrel. In fact,
Congress recently passed
a farm bill that included
a provision to increase
regulation of natural gas
markets.
In testimony earlier this
year before the Senate
Homeland Security and
Governmental Affairs
Committee, lawmakers
were told pension funds
and other institutional
investors’ speculation in
commodity futures markets
are raising energy and
food prices so much that
Congress should ban them
from participating in those
markets and take other
actions to clear up the
futures markets.
Within the last five The high cost of diesel fuel has thrown the trucking industry into panic.
years, commodity prices
have increased faster of reaping speculative profits. position limits, and compel the
than demand and the increase can Lawmakers want to go further U.S. Commodity Futures Trading
be explained, according to some to rein in speculation in oil-trading Commission (CFTC) to distinguish
money managers, by corporate and markets. The urgency as oil between hedgers with an interest in
government pension funds, sovereign approaches $140 a barrel is driving the commodities and those controlled
wealth funds, university endowments, energy politics into uncharted by Wall Street banks.
and other territory. Market Meanwhile, the high cost of diesel
institutional forces are already fuel, about 64 cents higher than the
investors moving without average price of regular gas, has
seeking better government thrown the trucking industry into
returns in action. Demand panic, and has further contributed
equities. By for fuel is now to rising consumer costs. Trucking
rolling over running lower companies are pushing for the
these oil and than it was at the imposition of a 65-mile-per-hour
agricultural same time last national maximum speed limit,
commodity year according opening more federal land to oil
contracts, to a recent exploration, and making it easier to
the index government get permits for new refineries. The
speculators have survey. trucking lobby is a powerful force in
“stockpiled” oil Will Congress Washington, and as gas, particularly
and agricultural act to address diesel, continues to rise in price, look
commodities, actions that for the American Trucking Association
keeping prices are skewing to pound on Congress to mitigate the
high. markets? One effect on their industry. While retail
Senators recommendation gasoline prices get the most attention
were told is for Congress to from the public and Congress, diesel
the trading modify ERISA fuel’s direct impact on the trucking
strategies (Employee industry and the effect on the nation’s
employed by Retirement economy, particularly food prices,
index speculators amounts to virtual Income Security Act) regulations is sure to garner more attention on
hoarding by the commodities futures’ to prohibit pension funds from Capitol Hill.
markets. Institutional investors are using commodity index replication
buying up essential items that exist in strategies, stop some speculators from Ann Carroll is Vice President of
limited quantities for the sole purpose using a loophole to avoid speculative Legislative Affairs for HAI.
62
Photo courtesy of Los Angeles County Sheriff’s Department.
HAI
First Responder Program
Not a participant? Go to rotor.com/fr and sign up!
Already signed up? HAI congratulates your leadership.
The First Responder Program is designed to take full advantage of the benefits and capabilities of
helicopters and other aircraft to assist rescue efforts during times of emergency or crisis. Getting
assistance to stricken areas quickly can mean the difference between life and death.
By participating in the First Responder program, you are signaling your availability to help during
emergency rescue and relief efforts on short notice. A quick, coordinated response to disaster or
devastation requires information be made available to authorities, so they can match needs to
resources. This information includes type of aircraft, its current location, operational capabilities (e.g.,
IFR, night vision, EMS, external hook), and a 24-hour contact number. The importance of keeping
aircraft information current cannot be overemphasized. You will have the opportunity to provide and
update this critical information through this Web site.
Participation in the First Responder Program is voluntary. Even if you register your participation in
the program, you can decline to respond to any request for help. HAI encourages First Responder
program participants to consider the seriousness of this lifesaving effort and its potential for aiding
emergency victims.
There is no fee to join or participate in the First Responder Program.
Participants may opt in or out of the First Responder Program at
anytime. HAI makes no guarantee that program participants will
be reimbursed, timely or otherwise, for their services.
“If a man is in need of rescue, an
airplane can come in and throw flowers
on him, and that’s just about all. But Questions about the First Responder
a direct lift aircraft could come in and Program can be sent to:
save his life.” FirstResponder@rotor.com
Igor I. Sikorsky or call:
1-703-683-4646
r o t o r. c o m / f r