London, 6 August 2009 

Oil companies have leapt on an EIA study of Waxman-Markey to step up their anti-bill campaign. 

Figures released by the Energy Information Agency (EIA) yesterday estimated oil prices could rise by as much as 33.5% by 2030 to reach $5.10 a gallon under the proposed House of Representatives’ cap-and-trade legislation.

This extreme case scenario from the EIA has been flagged up today by the Association of Petroleum Institute (API), a trade body, which warns that Waxman-Markey bill unfairly penalises the oil industry, and will lead to oil refining shifting overseas without significantly reducing emissions.

“This is an even steeper rise that was previously estimated by the Heritage Foundation,” said Lou Hayden, a policy analyst, referring to the conservative think tank.

The API’s main gripe is the focus of Waxman-Markey on upstream oil-related emissions and the distribution of allowances. Under the bill, domestic refiners receive just 2.25 per cent of their carbon allowances for free in the first years of the scheme, but will be accountable for 44 per cent of the emissions, Hayden points out, far less than any other major sector. Oil refiners will not only be responsible for the 4 per cent of the emissions releases in the refining of oil, but also the carbon output from transport, such as cars, and from heating oil.

“This goes against President Obama’s stated intention of a fair market,” he said. He adds the US emission trading scheme will quickly lead to a sharp contraction in oil refining capacity. The US currently refines 85% of its gasoline, but the API fears production will move overseas when the impact of buying carbon permits squeezes profit margins, a phenomenon known as carbon leakage. 

Senators are currently writing their own version of the Waxman-Markey bill, which is planned for release in September, although the ongoing wrangle of the healthcare bill may delay proceedings.

The API say it has a mandate from its members to oppose Waxman-Markey, although has no position on cap-and-trade itself as opinion is divided. Allocation focus

Oil lobbying is focussing on the free distribution of allowances in the House of Representatives legislation, which favours power companies. The Waxman-Markey bill allocates 35% of allowances for free to the electricity sector – 30% of this goes to local electric distribution companies (LDCs) and 5% to merchant coal generators.

The EIA provided a range of forecasts yesterday, with their most basic estimate suggesting cap-and-trade will cause a mild $0.20 rise in gasoline prices by 2020, and a $0.35 by 2030. However, these figures assume there will be an environment of low-emission technologies, such as nuclear power and clean coal, as well as wide use of international carbon offset credits.

The API has dismissed the figures as unrealistic, and doubt there is enough Senate support to pass a similar version of Waxman-Markey. “If they had 60 senators ready to pass a climate bill, they would already have done so,” said Hayden. The API has spent has spent $3.7 million on lobbying this year, up 60% on 2008.

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