Obama Bows to Pressure for More Domestic Oil Drilling, Car Companies Resist Higher Fuel Economy Standards

This month marks the one-year anniversary of the BP oil spill in the Gulf of Mexico. However, with controversy continuing to swirl over the safety practices of oil companies, President Obama on Saturday announced new measures that will lead to expanded offshore drilling.

The president has long said that domestic oil production is not a solution to the nation’s energy problems, but with a new campaign season approaching, he is bowing to Republican pressure and public opinion, which is heavily swayed by high fuel prices. 

"I believe that we should expand oil production in America — even as we increase safety and environmental standards," Obama said in his weekly radio address.

He said he will direct the Department of Interior to conduct annual lease sales in Alaska’s National Petroleum Reserve, an area located in the northwest corner of Alaska near the Arctic National Wildlife Refuge (ANWR), that was set aside in 1923 as a fuel source for the U.S. military.

The administration said it remains firmly opposed to drilling in ANWR.

Obama also will order Interior to speed up evaluation of oil and gas resources in the mid and south Atlantic, an area the administration opened to new drilling just weeks before the BP oil spill in the Gulf last summer.

The Interior Department will also extend the lease periods for companies forced to shut down operations in the Gulf following the oil spill.

The White House also indicated that the Interior department will hold additional lease sales in the Gulf of Mexico by mid-2012. House Republicans passed legislation last week that would force Interior to do so.

And finally, Obama said he will create an inter-agency group to streamline the permitting process for drilling in Alaska.

Ending Big Oil Handouts Won’t Raise Gas Prices

The Congressional Research Service (CSR) says that withdrawing subsidies for Big Oil will not raise consumer gas prices. 

The CSR responded to a request from Senator Harry Reid (D-NV) to provide information on the extent to which proposed tax changes on the oil industry are likely to affect domestic gasoline prices.

CSR stated: "There is little reason to believe that the price of oil, or gasoline, consumers face will increase” and that “[Since] prices are well in excess of costs…a small increase in taxes would be less likely to reduce oil output, and hence increase petroleum product (gasoline) prices.”

According to the Climate Progress Blog: "Subsidy by subsidy, the memo furnishes pithy, fact-based support for the Senate’s proposed tax changes to the top five most lucrative oil companies operating in the U.S."

The "bombshell" memo repeatedly referred to the impact on gasoline prices a "small’.

Removing Big Oil handouts from the tax code would also have a small effect on the top five firms–reducing their profits by only a nickel for every dollar.

Automakers Oppose Fuel Efficiency Targets

Meanwhile, major automakers say they are wary of aggressive mandates for increasing the fuel efficiency of vehicles sold in the U.S.

On Thursday, the lobbying group representing GM (NYSE: GM), Ford (NYSE: F), Chrysler (FIA.MI) Toyota (NYSE: TM) and European companies sent a letter to the Obama Administration stating that if they are forced to double fuel efficiency by 2025 it could hurt their sales, employment and safety. 

The administration is considering setting new fuel efficiency standards that would call for a 6% increase in efficiency each year from 2017-2025. At that rate, the average fleet efficiency would be 62 miles per gallon. 

However, that level is the top of the range being considered by the administration, and the automakers want to scale back those ambitions, which are estimated to save 45 billion gallons of oil and reduce carbon pollution by 450 million tons by 2030.

"The alliance believes it is inappropriate to be promoting any specific fuel economy/greenhouse gas at this point," John Whatley, Chief executive of the lobbying group, said in the letter.

The group was responding to a letter sent by 18 Senators last month in support of a tough, new fuel economy standard. The Senators, led by California’s Dianne Feinstein and Olympia Snowe of Maine, said the most ambitious target was "technically feasible and cost effective for consumers." 

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Comments on “Obama Bows to Pressure for More Domestic Oil Drilling, Car Companies Resist Higher Fuel Economy Standards”

  1. w page

    Its a shame that Gov has let big oil and the industrial military complex run the world to ruin.

    We thought Barack Obama would not bow to big oil. Barack has failed miserably.


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