McCain, Obama Energy Plans Won't Help Ease High Gasoline Prices

By Matthew Benjamin

Sept. 24 (Bloomberg) -- John McCain and Sarah Palin have a reliable way to fire up Republican crowds, prodding supporters to chant their three-word solution to high gasoline prices: ``Drill, baby, drill.''

It isn't that simple, say energy experts: Increased domestic drilling would have little or no short-term impact on fuel prices. Nor, they say, would Democrat Barack Obama's plan to promote clean energy, biofuels and hybrid cars reduce dependence on imported oil in the foreseeable future.

Both plans are too optimistic, said Joseph Stanislaw, former head of Cambridge Energy Research Associates and co- author of ``The Commanding Heights: The Battle for the World Economy.'' ``To be energy independent would require massive effort over a generation,'' he said.

When Americans last voted for president, in November 2004, oil was near $50 a barrel and a gallon of gasoline cost less than $2. As unleaded gasoline topped $4 per gallon for the first time last June, McCain began promising to promote oil production on parts of the Outer Continental Shelf, reversing his previous support for a moratorium against offshore drilling.

``We're going to drill offshore and we're going to drill now and we're going to drill,'' he said on Sept. 9 in Lancaster, Pennsylvania.

The new mantra has galvanized Republicans and diverted attention from the fact that President George W. Bush was in charge when gasoline hit record prices, said Stuart Rothenberg, editor of the Rothenberg Political Report.

The Republican candidates ``jujitsu-ed the whole issue of energy'' and ``minimized the damage,'' Rothenberg said.

Obama's Energy Plan

House Democrats last night dropped their opposition to drilling, as part of a year-end spending bill.

Still, voters point to Obama, by a margin of 46 percent to 31 percent, as the candidate better able to guide U.S. energy policy, a new Bloomberg/Los Angeles Times poll shows. About half of registered voters said they prefer Obama's energy plan, compared with 38 percent who back McCain's. The poll was conducted Sept. 19-22.

In the most optimistic scenario, McCain's program of additional drilling would take a decade or more to produce fewer than 1 million additional barrels of oil a day, according to estimates by the Energy Information Administration, the research arm of the U.S. Department of Energy. That's a fraction of the approximately 13 million barrels of oil and petroleum products the U.S. imports each day.

Banking on drilling for lower prices and energy independence is ``a nice promise to make to the American public, but it's not really doable,'' said Robert Ebel, chairman of the energy program at the Center for Strategic and International Studies in Washington.

Negligible Impact

Because the amount of oil likely to be produced from offshore drilling and exploration in Alaska's Arctic National Wildlife Refuge is a small portion of U.S. imports, and because it could take years to develop the oil there, domestic drilling's impact on gasoline and heating prices in the near- and mid-term would be negligible, energy analysts said.

Drilling is just part of the McCain plan, said Douglas Holtz-Eakin, McCain's top economic adviser. ``If you're going to get from where we are to where we want to be in 2050, you have to put everything on the table,'' he said. ``In the near term, fossil fuels are going to be part of the equation.''

McCain also pledges to encourage alternative-energy sources such as wind and solar power. His plan includes building 45 new nuclear power plants by 2030 and upgrading the national electricity grid.

Change of Position

The record gasoline prices and the Republicans' pro- drilling rhetoric prompted Obama to ease his opposition to offshore exploration. He now says he would accept limited drilling as part of a broader energy plan.

House Democrats will also abandon their fight to keep the 26-year ban on offshore drilling as part of a spending bill that would fund the government until March 6, Appropriations Committee Chairman David Obey said last night.

Obey said Democrats are giving up their battle with Republicans over whether to overturn the ban so they can get a bill that Bush will sign into law. ``At least temporarily the moratorium is lifted,'' Obey told reporters.

Obama's energy plan includes raising fuel-efficiency standards, investing $150 billion over 10 years in clean energy projects, encouraging the use of hybrid cars and biofuels, and tapping the Strategic Petroleum Reserve to boost short-term supply.

Cutting Consumption

``We, in 10 years time, I believe, can reduce our consumption of oil by the equivalent of what we import from the Middle East,'' Obama said on Sept. 9 in Lebanon, Virginia.

Meeting that goal is ``going to be a struggle,'' Stanislaw said, because a transition from gasoline-powered cars to vehicles using biofuels, electricity or other energy sources would take years and massive investments.

Jason Grumet, Obama's senior energy adviser, agreed that moving the U.S. from coal and oil to clean energy sources ``is one of the largest challenges this country has ever faced.'' The goal, however, is worth the effort, he said.

Even with Obama's edge in the poll, Americans are so desperate for relief at the pump that drilling may yet prove to be the more effective message, Rothenberg said.

``Even though there may be no impact, or the impact may be years away, people just want government to do something,'' he said.

To contact the reporters on this story: Matthew Benjamin in Washington at mbenjamin2@bloomberg.net;