In Nod to Rising Gas Prices, Obama Discusses Energy Policy

Speaking to students at the University of Miami, in a swing state where gas averages $3.69 a gallon, Mr. Obama said: “Just like last year, gas prices are climbing across the country; this time, it’s happening even earlier. And when gas prices go up, it hurts everybody.”

The president offered what he called an “all-of-the-above” response, based on more domestic oil production, development of alternative energy sources and stricter fuel-efficiency standards.

Drawing a sharp contrast with Republicans and anticipating potential attacks on the campaign trail, Mr. Obama ridiculed his opponents for recycling a “three-point plan for $2 gas.”

“Step one is to drill, and step two is to drill, and then step three is to keep drilling,” he said.

This was the president’s first major effort to tackle an issue that has surfaced in the last few weeks as oil prices have been driven up by tensions in the Middle East, where Iran has threatened to retaliate against the West because of sanctions over its nuclear program.

Mr. Obama seemed keenly aware of the risk posed by oil prices. A previous cycle of price increases played briefly to the benefit of Senator John McCain during the 2008 campaign, when his running mate, Sarah Palin, revved up crowds with the chant, “drill, baby, drill.”

The president said that the United States is producing more oil now than at any time during the last eight years, with a record number of rigs pumping. The White House, he said, was prepared to open new areas in the Arctic Ocean and the Gulf of Mexico to exploration.

But Mr. Obama warned that no amount of domestic production could offset the broader forces driving up gas prices, chief among them Middle East instability and the ravenous energy appetite of China, which he said added 10 million cars in 2010.

“Anybody who tells you we can drill our way out of this problem doesn’t know what they’re talking about, or just isn’t telling you the truth,” he said to whoops from the crowd of nearly 1,500.

Mr. Obama’s remarks, tinged with humor and sarcasm, were bluntly political, on a trip that included fund-raising events in Miami and Orlando. But his message was sober: neither he nor anyone else can do much about oil prices, which he said were likely to keep rising.

The White House contends that the public has grown accustomed to these periodic spikes and will credit him for speaking honestly about the underlying economic realities rather than offering “gimmicky” fixes — something he eschewed in 2008.

Still, with gasoline prices nationally about 12 percent higher than a year ago, Democratic political analysts believe Mr. Obama needs to get ahead of the issue quickly. Newt Gingrich, for example promised this week to bring gas down to $2.50 a gallon.

“Four dollars per gallon has typically been the tipping point when people go from complacency to exasperation,” said Geoff Garin, a Democratic pollster, who notes that people have begun mentioning gas prices with increasing urgency in his focus groups.

Gas prices did not figure prominently in the Republican debate on Wednesday in Arizona, where the candidates trained most of their fire on one another. But Republicans in Congress criticized Mr. Obama for not opening more federal land to exploration, and for not approving the Keystone XL pipeline.

“The president would like everyone to forget that gas prices have doubled over the past three years while he consistently blocked and slowed the production of American-made energy,” a spokesman for House Speaker John A. Boehner, Brendan Buck, said in a statement.

Even Mr. Obama, they noted, once referred to his “all-of-the-above” policy as a “hodgepodge.”

Among Mr. Obama’s proposals are opening 75 percent of the nation’s offshore oil and natural gas resources by 2017; fuel-economy and emissions standards for trucks, vans and buses; and an administration effort to prevent bottlenecks in the oil market.

Michael Levi, an energy expert at the Council on Foreign Relations, said, “Any effective energy policy is almost inevitably going to be a hodgepodge.” He credited the president with stimulating production, though he said the rejection of Keystone sent a weak signal.

The American Petroleum Institute, the industry’s lobbying group, said Mr. Obama had restricted opportunities to produce more oil by shortening leases and slowing permit approvals.

The president fired back, repeating his demand that Congress end subsidies for the oil and gas industries.

“It’s outrageous,” he said. “Every politician who’s been fighting to keep these subsidies in place should explain to the American people why the oil industry needs more of their money.”

None of Mr. Obama’s proposals were new, and some were aspirational. He said gasoline and diesel produced from algae could replace up to 17 percent of imported oil. But experts say such fuel is a long way from being commercially viable on that scale.

Joking that he once bought a car for $500, Mr. Obama said that because of new fuel-economy standards, new cars will average nearly 55 miles per gallon by the middle of the next decade.

Mr. Obama struck his own inadvertent blow for fuel economy, by flying to Florida on a Boeing 757 rather than a 747. The bigger 747, which usually serves as Air Force One, was in the shop.

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APNewsBreak: Report: Energy loans could cost $3B

WASHINGTON (AP) — The government could lose nearly $3 billion on Energy Department loans for green energy programs — far less than the $10 billion Congress set aside for the high-risk program, according to an independent review.

The White House ordered the review after criticism of a $528 million loan to Solyndra Inc., solar company that went bankrupt.

The review, led by former Treasury Department official Herb Allison, looked at 30 loans or loan guarantees totaling $23.8 billion that were offered to green energy companies and auto makers such as Ford and Nissan.

The review did not involve Solyndra or Beacon Power Corp., a Tyngsboro, Mass., energy storage company that also went bankrupt after receiving a federal loan. The government has lost $567 million from those two loans so far, although officials said this week they could recover as much as $28 million from the sale of Beacon to a private equity firm.

The 75-page report, released Friday, says that about one-third of the money allocated — $8.3 billion — had been spent as of Nov. 28.

The government could reduce its losses from the loan program if it withholds money from companies that fail to meet certain benchmarks, the report said. The comment echoes criticism by some Republicans in Congress who say the Obama administration should have cut off money to Solyndra far sooner than it did.

The report recommends several steps the Energy Department can take to improve the loan program, including creation of a chief risk officer to monitor all of the agency's loans. The risk management unit should be separate from the loan program office and should report directly to senior DOE managers, the report says.

Energy Secretary Steven Chu said the report makes clear that the Energy Department is operating under congressional requirements to provide loans to projects that would have trouble obtaining private financing — which is why Congress appropriated $10 billion to cover expected losses.

"We have always known there were inherent risks in backing innovative technologies at full commercial scale, and it is very likely that there will be other companies in the portfolio that won't succeed," Chu said in a statement, "but the vast majority of companies are expected to pay the loans back in full, on time and with about $8 billion in interest."

Counting loans and guarantees to U.S. car makers and the nuclear industry, the loan program is supporting as many as 60,000 jobs and generating up to $40 billion in private investment, Chu said.

A GOP critic of the loan program was not impressed.

"This is less a report than an umbrella to deflect the criticism that's pouring down on the administration," said Rep. Jim Sensenbrenner, R-Wis., adding that he was disappointed the report did not evaluate the Solyndra or Beacon loans.

"How can an evaluation be 'independent' if the administration controls its content? A study that excludes inconvenient evidence isn't independent," Sensenbrenner said.

While the report generally backs department estimates of potential losses from the loan program, it says the loan values are far below what the companies would have to pay a private bank, without a government guarantee. Under a so-called fair-market value, the loans have been discounted by anywhere from $5 billion to $6.8 billion, the report says.

A White House spokesman said the purpose of the program was to spark investment in alternative and renewable energy programs that otherwise would not qualify for a private loan.

The finding about subsidies "simply means that a private bank wouldn't be willing to buy the (Energy) Department's loans at face value unless they could charge a higher interest rate," said spokesman Eric Schultz. He called that unsurprising, "since the entire point of the program ... was to make loans available for emerging clean energy companies so they have the best chance of succeeding in early stages, when innovative technologies traditionally have a difficult time accessing private capital."

Schultz called the report thorough, substantive and objective and said it confirms that the overall loan portfolio is expected to perform well.

The White House ordered the review in October as congressional Republicans investigated the Solyndra bankruptcy amid embarrassing revelations that federal officials were warned the company had problems but nonetheless continued to support it. Chu attended a 2009 groundbreaking at the company's California headquarters, and President Barack Obama visited the company in 2010.

Solyndra, of Fremont, Calif., was the first renewable-energy company to receive a loan guarantee under a stimulus-law program to encourage green energy and was frequently touted by the Obama administration as a model.

Since then, the company's implosion and revelations that the administration hurried to finish its review of the loan in time for its September 2009 groundbreaking has become an embarrassment for Obama and a rallying cry for GOP critics of his clean-energy program.

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Follow Matthew Daly's energy coverage at Twitter.com/MatthewDalyWDC

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