The cost of oil peaked above $140 a barrel this summer, nearly double the price of a year earlier and 40% higher than worst-case scenarios discussed just months earlier. Gas prices followed suit, going well above $4 a gallon during peak driving season and sending drivers, carmakers and politicians into fits. Heating oil prices started climbing to record levels months before heating season.
The cost of coal, too, tripled in about a years time, leading electric power producers who produce 50% of U.S. electricity by burning coal to raise rates. Natural gas, also a major source of U.S. electricity, doubled in a years time before plummeting in July.
The increase in the price of energy, largely due to the global nature of the market and rising demand in China, India and other nations, has led to the first significant reductions in vehicle miles traveled, large cars bought and homes renovated for efficiency in a generation. As painful as higher prices are, some argue that they are precisely what the Untied States needs to embrace more efficient and alternative technologies that cost more up front, but pay themselves off by using less energy over time.
Most experts answer, when it comes to gas prices, not much. At least, not in the short term. Todays president can often have more influence on energy prices a decade from now than prices next month.
John McCain tops his agenda with expanding domestic production of oil and natural gas, though experts criticize the idea because it would have no effect on prices for about a decade, and then only a small one. He would offer a $5,000 tax break to those who buy zero-carbon vehicles, which dont now exist (McCain is counting on a hefty tax credit to create an incentive for carmakers to develop such cars) and a $300 million prize for anyone who develops a battery good enough to make electric cars feasible. Hed eliminate the 54-cent-a-gallon tariff on imported ethanol, which experts say would have a modest effect on price. He opposes a windfall profits tax on oil companies, which could presumably mean oil companies might pass record profits on to consumers in the form of lower prices, not that theyve ever done that before.
McCain would focus on improving the energy efficiency of the federal government, the largest single power user in the U.S., which would save taxpayers some on energy costs and could drive down price by slackening demand. He would also try to deploy SmartMeters in households so individuals can better monitor their energy consumption and its cost, with the goal of inspiring people to use and spend less. He would create predictable tax incentives for wind, solar and other renewable energy sources, thereby decreasing dependence on volatile fossil fuels.
Obama would also enact a windfall profits tax on oil companies and use the money to give families a $1,000 Emergency Energy Rebate. By investing in plug-in hybrid cars and boosting fuel economy, he would aim to reduce oil imports and fuel consumed dramatically through increasing efficiency. He would also take expensive grades of oil stored in the Strategic Petroleum Reserve and swap it for cheaper grades, a scheme many experts have dismissed as pandering.
Obama has pledged to spend money generated by a cap-and-trade regulation designed to lower carbon emissions on projects to boost home energy efficiency, and to provide credits to people struggling to pay higher electricity bills. He would require local utilities to derive 25% of energy from renewable sources by 2025, thereby decreasing reliance on volatile fossil fuels. His $150 billion energy plan aims to transform the way America uses energy, which would no doubt cost more in the short term, but would likely cost much less than the status quo in the long term.
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