Posts Tagged ‘government’

The American Clean Energy and Security Act was recently passed by the House of Representatives Committee on Energy & Commerce. The legislation, introduced by Congressmen Henry Waxman and Ed Markey, proposes to tackle climate changes by reducing greenhouse gas emissions. Oil companies, when they refine oil in the U.S., would have to buy allowances for carbon dioxide spewed from their plants and from vehicles when motorists use their fuel. Instead of refining oil in the U.S. if oil companies import oil, they would need to buy permits only for emissions from motor vehicles and not for emission from their plants. Oil companies say this would favor oil imports rather than production in the U.S.

ConocoPhillips Chief Executive Officer Jim Mulva said: “It will lead to the opportunity for foreign sources to bring in transportation fuels at a lower cost, which will have an adverse impact to our industry, potential shutdown of refineries and investment and, ultimately, employment.” Roger Ihne, a consultant at Deloitte Consulting, believes that about 2 million barrels of daily U.S. refining capacity will shut down because carbon costs will be several times the operating profits for some plants. Some analysts believe that the saber rattling by the oil companies is with an aim to get concessions from the government to offset increased costs on account of compliance with carbon legislation. John Coequyt, a lobbyist with the Sierra Club, an environmental organization, said: “The strategic value of this is pretty obvious. They want to qualify for rebates under the competitiveness test, which of course they do not.”

According to the Commerce Department, the nation’s gross domestic product contracted at a 5.5% annual rate in the first quarter of this year, as against 6.3% in the fourth quarter of last year. Economists believe that the economy is contracting at about 2% this quarter. “The economic data we’ve seen so far for the second quarter suggest the preliminary number for the second quarter will show a modest decline, maybe half the rate we saw in the first quarter,” said Gary Thayer, senior economist with Wells Fargo Advisors.

Despite the good news, economists are worried about unemployment not showing any signs of sustained reduction. This week, the Labor Department said jobless claims for last week jumped unexpectedly by 15,000 to a seasonally-adjusted total of 627,000. Continued claims, which denote the number of workers still on jobless rolls after an initial week of claims, rose 29,000 to 6.738 million in the week ended June 13, the latest period for which the data was published. “We still firmly believe that the underlying trends in claims is downwards, but it is slow and uneven,” says Ian Shepherdson, chief U.S. economist for High Frequency Economics.

The government, through its $787 billion stimulus package, hopes to create more than 600,000 jobs. Federal agencies have injected billions into public works and other projects in an attempt to create employment. President Obama reiterated his commitment to stimulate the economy in a statement yesterday. “Surely and steadily, we will turn this economy around,” said Obama. Unemployment has reached a 25-year high and hundreds of thousands of Americans are losing jobs each month. Skeptics are questioning whether the stimulus package, which was approved for funding in February, has been effective. Senate Minority Leader Mitch McConnell says, “I think the economy is just as likely to begin to recover on its own, wholly aside from this, before much of this has an impact. So I’m very skeptical that this massive sort of spending binge that we’ve engaged in is going to have much of an impact.” David Axelrod, an adviser to President Obama, argues that the drop in job cuts in May is a si gn of effectiveness of the stimulus program. “It feels as if we’re moving and the stimulus package now is not nearly done, it’s just really at its beginnings,” said Axelrod.