On the heels of the 2008 election season, the nation is left with an almost total regime change in Washington. With the Democratic Party taking the reins of the legislative and executive branches, those in the petroleum industry, among others in the business world, are wondering what’s in store for the future of their respective marketplaces.
If President-elect Barack Obama keeps his campaign promises, the country could be looking at a completely different energy industry. For instance, his energy policy includes wanting to spend $150 billion over ten years to spur the private sector to bring cleaner energy to market.
“There will be an enormous push to expand renewable fuels,” said Dan Gilligan, president of the Petroleum Marketers Association of America. With the new seats grabbed by the Democrats, “Those ideas will get a lot more attention in the coming Congress.”
“Since Obama is from Illinois, he has a strong allegiance to biofuel,” said John Eichberger, the vice president of government relations for the National Association of Convenience Stores. But as he pointed out, there is much to be worked out in the industry before broad shifts in U.S. energy policy take hold, such as major changes in the infrastructure of the retail petroleum industry if the heavy-ethanol blend, E85, is to ever be sold widely.
“We’re going to see a push for E15 and E20 coming from the ethanol industry,” Eichberger said. Ethanol advocates maintain those blends can be handled by current retail equipment as well as the current fleet of cars. However, Eichberger said until Underwriters Laboratory certifies those blends, any retailer selling it is at a huge liability. Car manufacturers also have to guarantee their cars can handle the blends as well.
“We’re (petroleum marketers) ready for higher levels of ethanol,” Gilligan said, “if we are assured it will perform.” He suggested a lot more studies need to be done to prove that the higher ethanol blends won’t damage equipment or cause other catastrophes.
“But if we’re to meet the Renewable Fuel Standard, we really have no choice,” he said of the higher ethanol blends. “That’s the way to go.”
Producing more renewable fuels could have its challenges, as corn-based ethanol is struggling with charges that it is causing problems with food supplies. “Cellulosic has a great opportunity, if they can figure it out,” Gilligan said and added that he believes biodiesel has great potential, as long as producers don’t depend too heavily on soybeans.
Big oil could be taking a hit since President-elect Obama has pushed for a windfall profits tax. Gilligan thinks this will probably happen because the Democrats appear to be united on the issue. However, with the dire state of the economy, he questions whether any major tax and climate bills will go through before the economy is taken care of.
Lower crude oil prices could have stopped the momentum on the offshore drilling issue. “They (Congress) let the ban on offshore drilling expire at the end of September,” said Eichberger, which, in his opinion, means they’ll most likely reinstate it.
However, what could be more telling about the future energy policy than the campaign proposals are the recent developments in Congress, specifically the House Government Reform Committee Chairman Henry Waxman (D-Calif.) successfully challenging Michigan Democratic Congressman John Dingell for his chairmanship of the powerful Energy and Commerce committee.
Rep. John Dingell has been known for his support of Detroit’s automakers and is seen as more of a centrist. He also has a reportedly strained relationship with Speaker of the House Nancy Pelosi (D-Calif.), who created a special committee to advocate for action on climate change legislation chaired by Rep. Ed Markey (D-Mass.).
“We’re going to see a sharp change in climate change (policy),” Eichberger said in regards to Rep.Waxman becoming the new head of the Energy and Commerce committee.
Gilligan warns that cap and trade policies to control emissions could add an enormous cost for the petroleum industry. “The cap and trade on refineries will add 50 cents to a $1 to the cost of a gallon of gas,” he said.
However, the president can’t do everything since Congress has to be a check on him. But as Eichberger suggested, in this instance it could be the other way around. “President-elect Obama has an opportunity and the responsibility to be a break on Congress,” he said, adding that presidents’ world perspectives change once they get into office, usually becoming more moderate. “It’s up to him to draw the line, so we don’t overreach.”
“When politicians overreach,” Gilligan said, “legislation will fail.”