Senators Warn Bill Could Spike Gas $1.50-$5 a Gallon

[audtatious]

Senators Warn Bill Could Spike Gas $1.50 to $5 a Gallon Inhofe, Sessions blast massive costs of global warming legislation.

By Jeff Poor Business & Media Institute 5/15/2008 5:44:34 PM

Worried about gas prices hitting $4 a gallon and beyond? Imagine if they were $6, $7 or even $8 a gallon. Those levels are a certain possibility should Congress pass cap-and-trade legislation, which could face a vote in early June.

Oil is trading at record levels, in excess of $120 a barrel. Leading Republican Sens. James Inhofe (Okla.) and Jeff Sessions (Ala.) both told the Business & Media Institute (BMI) energy prices would drastically increase if the Lieberman-Warner Climate Security Act (S. 2191) is signed into law.

“The studies show it would be directly affected, would be a $1.50 a gallon, in addition to what it is today,” Inhofe, the ranking Republican on the Senate Environment and Public Works Committee, said to (BMI).

Inhofe spoke at a press conference at the National Press Club in Washington, D.C. on May 15 to introduce the “We Get It!” campaign – a program founded by evangelical Christians that question the merits of global warming alarmism. According to Inhofe, the bill will make it to the floor of the Senate on June 2.

“So now I think we need to concentrate on what it will cost the American people,” he said during the press conference. “To try to put it in a perspective people understand, if we had ratified, according to the Wharton School of Economics, the Kyoto Treaty, back five years ago, it would have cost about – between $300 and $330 billion – that was the range they had. This bill that’s up today is $471 billion – far more than that. And the question is, what do you get for it?”

Sessions, a member of the Senate’s Committee on Energy and Natural Resources, went a step further. He cited sources that suggest the increase could be as much as $5 a gallon.

“[L]et me tell you what’s heading down the tracks,” Sessions said to BMI on May 14. “In a few weeks, we expect that the cap-and-trade legislation that’s been voted out of Sen. Barbara Boxer’s (D-Calif.) Environment and Public Works Committee will be on the floor and according to the Environmental Protection Agency it will increase gas prices by $1.50. The National Association of Manufacturers says it will increase it as much as $5 per gallon.”

Sessions proposed that money should be spent on energy investment versus a regulatory bureaucracy to enforce the provisions of the Lieberman-Warner bill.

“So instead of actually coming forward with any idea about what to do about rising prices, we’ll soon be voting on a bill that has already passed committee, has some Republican support, that would surge the price of energy, create a bureaucracy – and I just don’t think is the right thing to do,” Sessions said. “I’d rather spend our money in investing in the new the technologies, helping get nuclear power online, improving batteries, researching cellulosic ethanol. Let’s spend our money on that without creating cap-and-trade bureaucracies that have not worked in Europe.”

According to the Energy Information Administration, the average price of a gallon of gas in Europe ranges from $8 to $9 a gallon.

Gas prices have been one of the most reported news stories of the past several years. Reporters have repeatedly warned of prices approaching the levels Inhofe and Sessions warned about. However, journalists have consistently complained about oil company profits, not taxes, making gas prices higher.

On NBC’s May 15 “Today,” host Matt Lauer interviewed ExxonMobil (NYSE:XOM) CEO Rex Tillerson. Lauer quizzed Tillerson on oil companies’ profit margins and higher gas prices, but Lauer didn’t ask Tillerson about the potential impact Lieberman-Warner would have on the price of gasoline.

“Well, the problem we have right now, and fortunately we have several months before the election, to make sure the American people know that this is a supply problem that is causing the gas prices to go up,” Inhofe said to BMI. “You know the Democrats, right down party lines – they do not want to drill in ANWR, they do not want to drill offshore. They don’t want the tar sands. They don’t want more energy. And they don’t want refinery capacity.”

The Senate defeated a measure to drill in ANWR on May 13. The vote, an amendment to another bill, was killed by a vote of 42-56, largely along party lines. Only one Democrat voted for the amendment, Sen. Mary Landrieu (D-La.), and five Republicans voting against it.

Inhofe blamed Democratic policies going as far back as the Clinton administration.

“The Democrats are the reason we have high prices at the pumps, and we’re not going to be able to alleviate that until we start producing again in America,” Inhofe added. “And I knew this was happening way back, well 10 years ago, when President Clinton vetoed the bill that would have allowed us to drill in ANWR. I said on the Senate floor that day 10 years ago that in 10 years we would regret this. It’s now 10 years later.”

[smockers83]

I just wrote a paper on a CO2 emissions cap-and-trade system. A cap-and-trade system will add to the volatility we already see in energy prices. The $5 a gallon increase that they talk about would only happen if CO2 permit prices skyrocket, which really may not even happen, except for maybe very brief periods of time. A carbon tax system is the most economical way to curb CO2 emissions--a tax of $15/ton of emissions would add about $0.14 per gallon. No matter how the government decides on how to reduce CO2 emissions, energy prices will go up.

A great article on the whole idea can be found in the Dec 2007 issue of Scientific American.

[audtatious]

Who benefits from a cap-and-trade system? Regular people or the environmentalists and politicians that have already put companies in place to catch the money thrown at them?

[smockers83]

There are some who are ready to make money in a cap-and-trade. Some of the big investment banks already have trading desks in the European system and are preparing for the US. Also, GE and some other big companies like GM are on with the government to reduce CO2 emissions by 70%. I remember reading that somewhere but I can't find it, so hopefully that's right. But its mainly going to be "regular" people making money as it will be a system 100 times larger than the current sulfur and nitrous oxides cap-and-trade system and the market has an estimated worth of $1 trillion (yes, trillion) by 2020. With that large of a program and the possibility of it going international, its going to be traders making the money just like the stock market works. Last year in Europe and Japan, traders bought/sold $60 billion worth of permits.

Hopefully though we don't get a system just like the European system. What they can do is go to another part of the world, like China, find a company that pollutes greenhouse gases, say a refridgerent manufacture that releases HFC23, something 12,000 times stronger than CO2, that wouldn't otherwise be abating and pull credits from them. So if the refridgerant company wouldn't have otherwise been able to or wasn't planning on it, they could start abating HFC23 and for each ton, they would have 12,000 CO2 credits to make money off of. So if the US decides to go international, hopefully they only deal with other CO2 emitters and have a better way of accepting companies into the program.

Another, more accessible article, explaining cap-and-trade is here:http://money.cnn.com/2008/04/1...x.htm

And some more:http://www.carbontax.org/issue...trade/ ... 11...login

The tax website, is well, for carbon taxes and presents their case. The NY Times article I posted is the same that is posted on the CTC website and towards the end is a good read as they get opinions from economists on both sides.

[audtatious]

It's all assuming that CO2 is causing global warming. What about methane and the other gasses that are worse "greenhouse gasses"?

Everything within a cap-and-trade system is based upon three things, the fact that man is causing climate change in the first place, the fact that we can fix what may or may not be broken and that corporations and gov bodies can own and regulate the atmosphere for everyone. When it fails, like the UK and EU initiatives are, who is penalized? When they go after the individual, like the Personal Carbon Trading programs being kicked around, and they limit what you can do or are allowed to do, what then?

I had far rather see more stringent standards being put in place than a scam that is simply going to make some people rich or richer while doing nothing overall. Instead of companies investing in new technologies they can simply scam up additional carbon credits as they will be a cheaper alternative to R&D.

[smockers83]

Under the European system, any greenhouse gas that can be trapped in some way, such as methane from manure used to generate electricity on a farm, can be turned into carbon credits. Or a green project such as planting trees that wouldn't have otherwise been planted or not cutting down trees for farming that would have otherwise been cut down can be traded in for carbon credits. Or HFC23 like I mentioned before. Each project has to be approved by some board.

The EU system is modeled after the EPA's sulfur and nitrous oxides system causing acid rain. The problem is that CO2 emissions programs can be huge compared to our current system with oxides. The EU just finished its trial session in 2007 I believe and it "failed" because I still feel its in a beta stage right now. At one point they over supplied the market with permits that one permit (1 ton of CO2) started out at $40 and flopped to $1 once businesses figured it out. The cool thing with the cap-and-trade system is that governments can add and pull permits from the market to stabilize prices just as central banks do to control inflation.

The government regulating the atmosphere is just like the government regulating and auctioning off property rights to use the public airwaves for radio, TV, satellites, etc. Having permits will induce investment in abatement technology. For some firms it will be cheaper to invest in such technology while others will find it cheaper to buy up permits. There also will be situations where a firm will pay another firm to abate if the price is right.

Another porblem with CO2 abatement is that technology for it isn't as available as it is or was for the EPA acid rain program. So technology needs to be developed as well and with a government emissions program, it will spur this development.

The key differences between cap-and-trade and a carbon tax is that a cap-and-trade sets an explicit limit on emissions and abatement costs are shared among firms. A tax system is the most economic way to do it though, is easier to implement and the least costly way. If we're going to have such programs in place, what we need is a hybrid of the two, but instead of handing out permits mainly for free, auction most of them off.

Whether CO2 emissions is a cause for global warming or not will no longer be the issue once this is in place, and in fact, the debate is no longer about if its the issue, the debate now is how to curb it.

[audtatious]

Sorry, but I don't care. I would trust the innovation of a free market economy over a gov't controlled system anyday.

If CO2 itself was the cause of global warming then I would be more open to it. At this point, that has not been validated nor verified. Hell, the computer models used by the IPCC can't even predict todays weather if they punched in the numbers from a year ago and people want to take their word on it?

Please.....

What are they going to do if we go into a global cooling cycle as some are starting to predict? Pat themselves on the back for a job well done while still carrying out their scheme "just in case"?