Congress vs. oil prices - round 2

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NEW YORK (CNNMoney.com) -- Americans are screaming about gas prices, and Congress says it's listening.

So far, lawmakers have been unable to get anything done. Democrats are hung up on taxing oil companies and funding renewable energy efforts, while Republicans are pushing for more drilling.

But the stalemate could break soon. After a holiday recess, many lawmakers returned to Washington this week with a new-found urgency about the gas crisis.

"Members returned from their districts shell shocked," said Dave Hamilton, director for global warming and energy projects at the Sierra Club. "There could be another energy bill before the elections."

Congress has been debating four main issues: limiting the role of speculators, increasing domestic oil drilling, taxing Big Oil to fund renewables, and capping greenhouse gas emissions.

The most likely scenario is one in which the Republicans back down, allowing increased regulation of energy speculators, and the Democrats give up some ground on domestic drilling, according to Congressional staffers and other analysts.

Here's a look at each of the issues, and what's holding it up:

Open more areas for domestic drilling. Republicans say it's the only thing that will truly lower gas prices, and have been pushing for more drilling off the East and West Coast and in Alaska.

Democrats say it would only bring a small amount of oil to market over a long period of time, and efforts would be better spent developing alternatives.

"Voters are saying the number one issue is gas prices," said David Kreutzer, an energy economist at the Heritage Foundation, a conservative think tank. "It's going to be hard to sit on billions of barrels of oil and not open it up."

Even the Sierra Club's Hamilton said a compromise bill might involve some limited oil exploration offshore, just to see what's out there.

Limit the role of speculators. There's no question money from investment banks, pension funds, hedge funds and others that don't ultimately use oil has been pouring into oil markets over the last few years.

But whether they are chasing a trend - and actually helping keep prices lower by adding liquidity - or driving up prices in their own right is a matter of debate. So far, most experts say speculators are not to blame for the high prices, but many of them agree that the system is very opaque.

Several bills are floating around Congress to address this issue. At the very least, expect more rules on reporting and disclosure of investment activity in overseas markets - where the government has so far been unable to monitor trades.

Republicans are also likely to ease their opposition to rules restricting how many oil contracts investors can hold, if the Democrats allow more offshore drilling, said one Republican staffer.

Tax big oil, use the money to fund renewables. Democrats say oil companies are not investing enough in renewable energy on their own, and that their record profits are obscene.

Republicans say taxing oil companies will only led to higher prices at the pump.

It looks like a windfall profits tax seems unlikely to pass. Republican opposition to this remains strong. Plus, several Democrats are from energy-producing states like Texas and Louisiana and are unlikely to support higher taxes on their constituents.

Cap greenhouse gas emissions. While not directly tied to oil and gas prices, restricting greenhouse gasses would make fossil fuels more expensive, and ideally encourage the development of alternative energy.

The Lieberman-Warner climate bill recently failed by a wider than expected margin and would not have withstood a presidential veto.

But it still garnered a substantial amount of votes, and both John McCain and Barack Obama have a cap-and-trade policy as a central part of their energy plans. Watch this space post-November.