Oil crisis: Obama vs. McCain

The Democrat wants the government to do more to encourage conservation and find alternatives, while the Republican sees a bigger role for the free market.

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By Steve Hargreaves, CNNMoney.com staff writer

This year, my family finances are ...
  • Better than ever
  • Managing to get by
  • Struggling to keep up
  • In very bad shape
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America's Money: Gas crunch hits home America's Money: Gas crunch hits home America's Money: Gas crunch hits home
The record-high price of gasoline is putting a strain on motorists - and spurring some to shift their habits. Here are their stories.

NEW YORK (CNNMoney.com) -- Energy issues have arguably never received so much public scrutiny.

Record gas prices are taking a big chunk out of people's budgets, and take a big part of the blame for our shaky economy.

But it isn't just high prices that are worrying voters. Oil supplies are tight, and global warming threatens major disruptions to life on Earth.

Whoever wins the White House this fall may spend more time tackling theses energy challenges than any other president in history.

The energy policies of Barack Obama and John McCain differ widely and voters can bet on some spirited political debate.

McCain would mandate reductions in greenhouse gasses, then largely rely on the free market to spur conservation. In order to ease the pain of high gas prices he also wants to suspend the federal gas tax.

Obama would tax oil companies and use the money to help low income people. He would also restrict greenhouse gasses, but charge more for companies to pollute and use the money to fund renewable energy research. He also sees a bigger role for government in encouraging conservation.

CNNMoney.com asked the candidates questions which we feel are central to solving the world's energy challenge. Here's what they said:

How they'd help consumers

• Should Americans get direct rebates from the government? Some say the government should tax big oil or issue rebate checks out of the general fund to help people deal with pricier gas. Others say revenue from more oil company taxes would be marginal, and more borrowing would hurt the dollar and send oil prices higher. (more)

McCain: Yes, but not right away. McCain's rebate would go to low income people and would come from an eventual sale of pollution permits to companies. He doesn't say when this sale would take place. He also supports eliminating a current tax break for oil companies.

Obama: Yes. Obama would close a tax credit for oil companies and institute a windfall profits tax - charging big oil companies a higher rate when oil is over $80 a barrel. The money would be used to ease the burden of high energy prices on low income people.

• Should the role of speculators be limited? Should traders be required to put more of their own money down to buy oil futures? Should trading in oil contracts be limited only to bulk oil users, such as refiners and airlines? Some say too many speculators are creating an oil price bubble. Others say they are merely following the trend, and provide much-needed liquidity. (more)

McCain: Maybe. The government needs to review how much money traders are required to put up, but McCain hasn't specifically called for raising that amount.

Obama: Maybe. The candidate would require more information gathering by the government, but it's unclear if he'd enact more restrictions.

• Should the gas tax be suspended? Some say suspending the 18.4 cent a gallon federal gas tax would give motorists much needed relief. Others say it would leave road repairs underfunded and encourage more driving. (more)

McCain: Yes.

Obama: No.

How they'd limit demand

• Should fuel efficiency standards be raised more? Congress hiked them last fall for the first time in three decades, from 25 miles per gallon to 35 miles per gallon by 2020. Where should they go beyond 2020? (more)

McCain: See how automakers do with the new rules before passing new ones.

Obama: Wants to double fuel economy standards within 18 years to 50 mpg by 2026.

• Should the government do more to promote conservation? Some ideas include government incentives for walking to work, a luxury tax on large cars, a tax rebate for small or electric cars, tax incentives and public wireless networks for people who telecommute, lowering the speed limit, among others.

McCain: Supports market incentives for more Internet coverage to help telecommuters. He would rely on laws restricting greenhouse gas emissions to spur innovative conservation.

Obama: Wants to make all new buildings carbon neutral, or produce zero emissions, by 2030. Promotes investment in a smart utility grid that can better manage energy demand. Has a lengthy section on his Web site talking about better urban development plans, and government incentives for towns that follow them. Obama wants to give utilities incentives to conserve energy. Lift cap on tax credit for more efficient cars, increase funding for public transport.

Candidate plans for boosting supply

• Should more areas be open for drilling in the U.S.? Some 1 to 2 million barrels a day, maybe more, of new production could be brought online by opening areas in the U.S. currently closed to drilling, most coming from Alaska's Arctic National Wildlife Refuge. Critics of more drilling say by the time production is ramped up, the amount will be too small to matter. (more)

McCain: Would keep ANWR closed, but open up some coastal areas.

Obama: No.

• Should refiners be required to make more gasoline even if their profit margins are small? Should the government streamline the number of fuel blends the refiners make, or ease some clean air requirements? (more)

McCain: Would not relax air quality standards, but would limit the number of fuel blends.

Obama: Would require fuel suppliers to reduce the carbon their fuel emits by 10% by 2020.

• Should the ethanol tariff be lifted in an attempt to lower gas prices? Ethanol is a required component of gasoline. But in an effort to protect the domestic ethanol industry, there's a 54 cent a gallon tax on imported ethanol. (more)

McCain: Yes

Obama: No

• Should the government release supplies from the Strategic Petroleum Reserve to calm oil markets? Critics of the calls to release SPR oil say the supplies should only be used in a genuine emergency, and drawing them down now could send prices higher by shrinking that buffer. (more)

McCain: No

Obama: No

Developing alternatives

• Should the government increase funding for renewable and cleaner energy? Some say the government should embark on a massive project - akin to the Apollo Project that put a man on the moon - in an effort to rapidly make technologies like solar, geothermal, advanced biofuels or clean coal cheaper, especially when electricity is expected to replace oil as the main fuel for cars. Others say this is best left to the free market.

McCain: No, says market forces created by restricting carbon dioxide emissions would do the trick.

Obama: Yes. The candidate would commit $150 billion over 10 years. The money would come from auctioning off permits for polluters to emit greenhouse gasses.

• Should the government require utilities to buy renewable energy? A bill requiring utilities to buy a certain percent of their energy from renewable sources recently failed in the Senate. Supporters said it would create a much-needed market for renewable power. Opponents said it was a one-size-fits-all solution. (more)

McCain: No

Obama: Yes, 25% by 2025.

Global warming

Despite the fact that most economists say a carbon tax is a more efficient way to reduce greenhouse gasses, most politicians that want to restrict greenhouse gas emissions support a cap and trade system, including McCain and Obama. (more)

A cap and trade is where the government issues permits to emit carbon dioxide, then reduces those permits every year. That's the cap part. Companies are then required to buy these permits from each other on an open market - hence the trade.

The idea is to reduce greenhouse gas emissions, but give companies the option of either paying to pollute or installing better equipment. Paying to pollute would get more expensive each year as the number of permits declines.

While a cap and trade bill recently failed in the Senate on grounds that it would be too costly, both Obama and McCain said they would have voted for it had they been present, and the issue is certain to reemerge. But Obama's and McCain's approach to cap and trade do differ.

McCain: Would give away permits at first. Aims to reduce emissions 60% below 1990 levels by 2050.

Obama: Wants to charge companies for the permits right from the beginning. Aims to reduce emissions 80% below 1990 levels by 2050.  To top of page

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