Study estimates Obama budget's cap-and-trade impacts on industry
The Obama administration's cap-and-trade program in its fiscal 2010 budget proposal would have substantial impacts on the oil and gas industry, a new study by Charles River Associates said.
WASHINGTON, DC, Apr. 30 -- The administration of US President Barack Obama's cap-and-trade program in its fiscal 2010 budget proposal would have substantial impacts on the oil and gas industry, a new study by Charles River Associates said.
The conclusion is part of a larger examination commissioned by the Coalition for Affordable Energy, a group of 180 trade associations and the US Chamber of Commerce. Overall, it found that US energy cost increases resulting from the proposed program would cost 3 million jobs by 2030.
Specifically, it said that energy impacts would include a shift toward more natural gas to generate electricity. Gas demand would grow by an estimate 3 tcf, resulting in consumers paying an additional $7.20/MMBtu or 56% more by 2025.
"By 2030, the impact on demand lessens to 1.5 tcf. This is due to the need to move away from gas-fired generation in order to comply with the ever more stringent emission caps," the study said.
Increased gas imports, not domestic production, are expected to meet most of the gas demand growth because US producers' costs would climb too, it continued. By 2025, gas imports could rise an estimated 2 tcf, or 160%, while US gas production would increase only 700 MMcf, or 5%, it said.
"The projected increased costs imposed on US-located refineries to cover facility [greenhouse gas] emissions under the Obama administration's proposed cap-and-trade provision would not be faced by many refineries outside the US, which would put US refineries at a competitive disadvantage," it continued.
Less product demand
Refined product demand would decrease, with US processors feeling the drop disproportionately, the study said. It said that the drop in US oil product demand over the 2020-30 period could be 604,000 to 2.151 million b/d annually as a result.
"Overall, the cap-and-trade proposal in the Obama administration's fiscal 2010 budget is designed to raise the cost of using conventional energy by requiring emission allowances for the use of that energy, effectively restriction [its] use in the US economy. Higher energy costs would likely reduce total consumption, employment and economic output," the study said.
"This study proves that the pending bill will be a massive weight on an economy that is barely treading water. All consumers and businesses would face steep increases in energy costs, leading to a spike in the cost of goods and services throughout the US economy," said Bruce Josten, executive vice president of government affairs at the US Chamber of Commerce.
US Sen. James M. Inhofe (R-Okla.), the Environment and Natural Resources Committee's ranking minority member, said that the study shows that the administration's proposal for a carbon cap-and-trade program would destroy jobs, raise energy prices and harm consumers.
"The American people are suffering enough without an additional national energy tax. Congress instead should focus on passing an energy policy that encourages innovation, new technologies, and allows all forms of domestic energy production," he said.
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