President Bush signed the Energy Policy Act of 2005 into law just days before Congress left on its August recess. All sides of the political spectrum declared the bill a disaster. The conservative Heritage Foundation said the legislation would “cost us both as energy consumers and as taxpayers.” The left leaning U.S. Public Interest Research Group said, “the bill allows big oil companies to pollute water supplies, plunder the Treasury and attack our coastlines.” The moderate Citizens Against Government Waste said that, “while the energy bill does not decrease dependence on foreign oil, it does increase dependence on federal handouts.”
Senior Democrat Edward Markey lashed out stating the Act, “fails to do anything to increase the fuel efficiency of our cars and S.U.V.'s, even though more than two-thirds of the oil we consume goes into gasoline tanks.” He further noted, “It fails to mandate (the) increased use of renewable energy sources, such as solar and wind."
In the last five years global demand for oil from large and small economies has grown dramatically. China and India, in particular, are driving forces in the demand for greater supplies oil and other energy products. Moreover, the U.S. Energy Information Administration reports that global energy consumption is expected to grow 57% by 2025.Less SupplyThere have been 14 refinery shutdowns in the last month alone. Experts estimates these shutdowns have already reduced between 12% and 20% of the U.S. crude oil supply. The Energy Department reported U.S. gasoline inventories were down 2.1 million barrels in August, which is the lowest since November 2004, and the sixth straight decline. The major refiners plan to shut down even more refineries as the summer driving season comes to an
The Market Votes
Crude prices have zoomed from $22 a barrel three years ago to more than $60 with no end in sight. On the day of the law was signed oil prices jumped to their highest price ever. Indeed, oil prices set new historical highs every day of the week after the legislation was signed. In the end, gasoline futures closed out the week with a 9.4% gain, up a whopping 69.7% year to date.
The legislation will hand over billions of taxpayer dollars to the most profitable companies in America and abroad. ExxonMobil, ChevronTexaco, Shell, British Petroleum (BP) and other large oil companies have booked record profits as energy costs have reached stratospheric levels. ExxonMobil recorded the highest profits in the history of American business and surpassed GE as the largest public company in the world.
The law includes more than $11.5 billion in tax breaks for the oil and coal industries. It also authorizes government subsidies for private companies who drill on public lands, scour our oceans for oil and burn more coal. In addition, the law provides federal loan guarantees to build at least 16 new coal-fired power plants. The legislation also authorizes a payment of $20 billion to private companies that will take even more oil off the private market. This will lead to lower oil supplies and even higher prices at the pump.
The legislation has numerous provisions which make it even easier for energy companies to damage the environment and endanger local communities. The Energy Policy Act strips state and local governments’ ability to prohibit the construction of natural gas facilities in hazardous areas. In addition, oil and gas companies will now have free rein to inject chemicals waste products into the ground without regulation.
If anything the market has signaled the Energy Policy Act of 2005 will lead to lower supplies of gas, less refined gasoline and higher fuel prices. This will produce even greater profits for energy companies and less money in the pockets of average consumers. Additionally, energy companies will now have a freer hand to degrade the environment and endanger local communities.
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