Energy Policy Unchanged by War's Outcome

Fox. Friday, April 18, 2003 By Kelley Beaucar Vlahos

WASHINGTON — While victory in Iraq may have increased the likelihood for stability in the Persian Gulf and freed up oil from Iraq’s previously sanctioned markets, policy experts say the new circumstances probably won’t change the energy debate on Capitol Hill.

“We're moving forward business as usual,” said Marnie Funk, communications director for the Senate Energy and Natural Resources Committee, which is in the process of marking up its long-awaited energy package.

Asked whether any changes to the package have resulted as a result of the war, Funk said, “Absolutely none.”

One House Energy and Commerce Committee aide who asked not to be named said it's uncertain whether the war will have any impact on the final legislation passed by Congress.

“After a few months, who knows how the war will influence it?  Right now it’s too early to know,” the aide said.

The House passed its energy package 247-175 on April 10. It closely resembled the bill passed by the House last year that eventually died during negotiations with the Senate.

Among other provisions, the House bill includes a proposal to drill for oil in the Alaska National Wildlife Refuge, a measure lacking support in the Senate and the source of intense bickering last legislative season.

The ANWR provision is popular among Republicans who say the country needs to reduce its dependence on foreign oil. Opponents agree on the goal, but say regulating  fuel efficiency standards for automobiles and pursuing alternative sources of energy like hydrogen fuel cells are better methods of getting there than drilling in the nation's protected wilderness.

The expected debate on the measure is unlikely to change because of the victory in Iraq and the corresponding drop in oil prices, energy experts said.

“It’s not as if the end of the war made the arguments change,” said H. Sterling Burnett, a senior fellow with the Center for Policy Analysis in Dallas, Texas.

“The conservatives interested in national security issues and the oil link, they will still say we need to be less dependent on those sources,” Burnett said. “The liberals are still going to say we need to produce alternative sources.”

Myron Ebell, an analyst with the Competitive Enterprise Institute in Washington, D.C., said the fact remains that the greatest need lies in changing domestic manufacturing and distribution processes.

Ebell said the energy infrastructure comprised of antiquated and inadequate oil refineries, gas pipelines and electricity transmission sources is in desperate need of an overhaul. At the same time, massive consumption of energy has left the country in need of more and more practical  uses for natural resources in the future.

None of that will be changed by the availability of Iraqi oil, he said.

“I don’t know how the Iraq situation is going to color our energy policy,” Ebell said. “We’re for more energy production here in that it creates more wealth for America.”

The House bill passed in April addresses some of those domestic concerns, including $6.7 billion in tax incentives for conservation methods such as solar heating equipment and more efficient appliance purchases. The bill also calls for $31.7 billion in research and development involving renewable energy drawn from nuclear power, oil and gas.

Debate is also expected over an electricity deregulation measure in the House bill, which is opposed by both Republicans and Democrats in the Senate.

The House and Senate bills do include $18.7 billion and $15.7 billion in tax incentives respectively, the bulk of which would be directed at the oil, gas, nuclear and coal industries.  The credits are virtually unchanged from the bills in the last congressional session.

Daphne Wysham, an energy expert with the Institute for Public Policy in Washington, D.C., said the return to tax motivators is exactly the “business as usual” that Funk described.

“Basically, these incentives are an invisible hand manipulating the market in favor of traditional  dirty automobiles and reliance on old sources of energy rather than in favor of the new, cleaner sources of energy,” Wysham said.

“There are a host of economic, social and political reasons why we should be using that invisible hand of the market to steer our country toward sources of energy that  will make us more self-reliant,” she added.

Nobody expects the opening of the Iraqi oilfields to stop the Bush administration from pursuing other oil sources -- both foreign and domestic -- outside of the Middle East. Currently, the United States imports about 55 percent of its oil from foreign sources, the bulk of which comes from Venezuela, Mexico, Saudi Arabia and Canada.

If anything, Burnett said, the war might make the domestic drilling question less urgent, at least for the current Congress.

“I don’t think [the debate] will go away, but [ANWR] may not make it into a final energy bill.”

The war has led to a drop in oil prices to around $30 a barrel, and prices are expected to fall to a more historically average rate of around $18 a barrel, said Ebell.

This will result in lower prices at the pump, but it won’t eliminate all the problems in the market. Nor will it solve domestic consumption pressures, he added.

“I think in a rational world, the debate is the same today as it was a month ago, but you know how Congress is. We’ll see.”