The Democrats’ plan of moving a cap-and-trade bill this summer plays into GOP hands because as the cost of gasoline spikes, so does the public’s awareness of energy prices, Republican leadership aides say.

Rep. Adam Putnam (R-Fla.), the former House GOP conference chairman, said that the cost of gas is not likely to hit last summer’s national high of $4 a gallon, but he noted that oil prices have been creeping up recently.

Putnam said most Americans want to increase oil production, not restrict consumption, adding, “At some point, gas prices become a very potent political weapon again.”

There are few truisms in the land of Washington policy-making, where messaging is king and success often slave to public perception. But one is this: In times of economic downturn, the financial health of both people and industries will trump environmental concerns 99 times out of 100. And, as Democrats learned the hard way last summer, Americans faced with $4 a gallon gas have little appetite for policies that threaten to drive those costs higher  — a more tangible effect than climate change for most folks.

Perhaps the Democrats want to rethink their legislative calendar?

“Despite all the public discussion of fuel efficiency, SUVs and trucks are the industry’s biggest sellers right now as a remarkable number of buyers seem to be compelled by three factors: great deals, low gas prices and winter weather,” said Michelle Krebs, Senior Editor of Edmunds‘ AutoObserver.com.

Is anyone else thinking “Scarface” right now? As in: I have this big pile of coke on my desk and I just can’t keep my face out of it.

(Who said gas tax?)

The autos and the utilities could have a nice little symbiotic relationship. While the auto industry has something to build, utility companies have another place to sell their product.

The utilities are hoping for a major shift in vehicles from gasoline to electricity. If such a shift takes place, according to the Pacific Northwest National Laboratory, oil imports would drop by 52 percent.

The talks are exploratory right now, but worth watching.

In the past year, the Obama campaign has made a lot of promises on energy, related to jobs, climate change, clean energy, gas prices and the list goes on. Now energy analysts, the environmental community and Americans struggling with a failing economy want to know exactly how the new president plans to deliver on these promises.

I was interested to see some of these issues broken down by Guy Caruso, a senior adviser at the Center for Strategic and International Studies who formerly headed up the Energy Information Administration (the agency that does independent analysis for the Dept. of Energy). In an interview with E&E TV, Caruso discussed key points that Obama’s administration will need to keep in mind when tackling energy. Here are some that stood out.

Plummeting oil prices: Gas prices getting below $2.50 is good news for consumers faced with grim economic times, said Caruso. “[I]t’s like a tax cut when the average consumer now fills the car up for $40 instead of $60,” he said, implying that low gas prices will help Obama take on financial problems. But, that assumes Americans will use the same amount of gas that they used over the summer when gas was $4 a gallon. It’s still unclear whether consumer behaviors will change or remain the same, as I reported here.

Offshore drilling: Caruso says there’s no telling what position Obama will ultimately take on this. Obama, who initially opposed offshore drilling, eventually caved and publicly supported lifting the moratorium on drilling in coastal areas. This is exactly the same thing his opponent Sen. John McCain did — although Obama’s support didn’t quite reach the “Drill, Baby, Drill” levels that McCain’s did. Now, environmentalists are hoping Obama will flip-flop again, this time in their favor. Already, Obama Transition Team co-chair John Podesta, has said that the President-elect may reverse an executive order by lame duck President Bush which allows drilling in Utah. However, Caruso says, Obama may continue to support offshore drilling in other domestic areas in order to hold onto certain “bargaining chips.”

Green jobs: Over and over again, Obama has talked about creating 5 million green jobs. “And I think now reality sets in,” Caruso said. “I mean 5 million jobs is a huge number of jobs.” Plus, certain factors which could create green jobs could also eliminate other jobs. For example, Caruso talked about regulatory policies that affect fossil fuel industries. If a carbon tax is implemented, clean energy will gain a competitive advantage and green jobs will open up; but, that could potentially lose jobs for the oil, gas and coal industries.

Renewable Energy: While Caruso didn’t go into too much detail about how the new White House should think about clean energy, he mentioned a couple significant points. First off, the transition from dirty fuels to clean fuels will probably take decades. Obama, like most politicians, said Caruso, don’t like to talk about things in terms of decades. As for his administration’s first 100 days, Caruso suspects that Obama will have trouble getting a renewables-heavy energy package to pass Congress, even with a strong Democratic majority. However, incentives for renewable energy are sure to show up in a financial package, Caruso believes, so environmentalists can at least rest easy on that note.

Hearing the news, Sen. John McCain accused Sen. Barack Obama of being in the pockets of Big Oil, a charge Obama has repeatedly leveled at McCain in campaign ads. McCain blasted Obama for supporting tax breaks for oil companies in a 2005 energy bill.

The Arizona senator didn’t mention, however, that he and Obama recently voted for a piece of legislation — the energy package tacked onto the $700-billion bailout bill — that gave even more tax breaks to oil companies. Passage of the energy package — whose primary purpose was to bolster clean energy — was continually delayed because Republicans in Congress refused to support a bill that didn’t help fossil-fuel companies.

Neither presidential candidate has talked about how much money his campaign has received from the big, bad oil companies. Here are the numbers: The McCain campaign has received $1.3 million, while the Obama team has gotten $400,000.

Stick that in your barrel and refine it.

Industry analysts for Kelley Blue Book, an auto valuation company, are pessimistic. Spokeswoman Robyn Eckard told TradingMarkets, “People don’t have money and it’s harder to get credit, and they have other financial priorities right now. … What we’re seeing is that lower gas prices are literally having zero effect right now.” Kelley Blue Book has found that 31 percent of prospective car buyers are delaying their purchases for at least a year.

Other industry folks, however, including the auto information website Edmunds.com, expect SUV and big- car sales to start going up again.

Still, new-car sales for October are expected to be the lowest since January 2002. In addition, according to the Dept. of Transportation, Americans drove 15 billion fewer miles in August 2008, compared with August 2007. That’s a 5.6 percent drop — and the biggest single-month drop since 1942.

While this is bad news for car companies and dealers, it’s certainly boosts the conservation effort that so many environmentalists — and some economists — are pushing for.

Flickr: Lodigs

After a summer of grimacing at the pump — with gas prices reaching an average of $4 a gallon — consumers are finally getting some relief. Just a few months ago, the cost of crude oil was as high as $140 a barrel. Now it is down below $65 a barrel, the lowest point in more than a year.

This is clearly good news for consumers — at least in the short term — and bad news for oil companies — whose stocks are plummeting. It’s really bad news for the Organization for Petroleum Exporting Countries, which Firday hastily cut daily output by 1.5 million barrels a day Friday. The oil cartel is predicting a decline in global oil demand for 2009.

Over this year, oil consumption has dropped significantly. From January to August 2008, petroleum demand declined by 4 percent, according to the American Petroleum Institute. That’s the biggest drop in the U.S. since 1982, say API economists.

Illustration by:Matt Mahurin

Faced with high energy prices, individuals and businesses had changed their everyday lives. But now that energy prices are falling, economists are asking what consumers will do next.

Some expect to see a consumers return to  their old oil habits. Others say Americans have learned and internalized an important lesson about the risks of depending on oil. Most economists and analysts agree, though, that since cheap oil comes within the context of a faltering economy, consumers will act accordingly.

“Everyone’s continually getting surprised,” said David Pumphrey, deputy director of the energy and national security program at the Center for Strategic and International Studies, or CSIS. When it comes to fluctuating oil prices, he said, “We’re in such uncharted territory right now that it’s pretty hard to get a sense of what might happen next.”

With petroleum demand shrinking, Pumphrey said, the U.S. is in an unusual situation. The continuing financial crisis and accelerating global economic crisis are also unprecedented. In this context, Pumphrey expects the price of oil to hover between $75 and $90 a barrel for the rest of this year, and probably into next year as well. Economists at the Energy Dept.’s Energy Information Admin. project the “absolute floor” for oil to be between $60 and $65 a barrel.

In an email, Adam Sieminski, chief energy economist at Deutsche Bank, discussed what realistically constitutes an extreme low in this day and age. For oil prices to return to “long-run historical averages,” said Sieminski, they would have to reach $35 a barrel. “However, we believe that important changes in the market, especially the geographic location of marginal demand and supply, suggest that $60/barrel represents a more realistic characterization of ‘cheap’ oil.” That’s largely because OPEC has cut production.

Those who study oil markets have differing opinions on how consumers will respond. Pumphrey of CSIS expects that consumers may revert to earlier behavior. “I would not be at all surprised,” Pumphrey said, “to see a return somewhat to the habits that we had before.”

This summer, he said, when gas prices rapidly climbed, “people responded very quickly.” Such a reaction could potentially take place in the opposite direction. “One of the big questions is: Have we seen a structural change in the way people behave or is it just a temporary phenomenon?” he said.

It’s probably a little from Column A and a little from Column B, he says. For example, the increase in small-car sales may suggest a structural shift, but Pumphrey says we’re also likely to see more gas-guzzling SUVs on the road if gas prices stay low over some time — which he believes they will. Pumphrey says the prospect of new oil production overseas  will bring some slack to the oil market, preventing major price spikes next year.

But some groups say the price of oil is likely to climb once the economy recovers. “Next spring,” said Sierra Club spokesman Josh Dorner, “gas is going to climb up again to $4 a gallon.”

Skyrocketing gas prices “kickstarted” efforts to reduce oil dependence, Dorner said. Americans have become aware of the extreme price volatility of oil, he continued, and it has significantly affected consumption habits.

“Obviously, as the price is lower, people are going to consume more,” he said, “but people understand that we need to make a change. I think that message got through loud and clear [this year], so I don’t think [lower prices] are going to dampen enthusiasm for moving in a new direction.”

With the current economic crisis, Dorner explained, businesses and individuals have an interest in cutting energy use. “Anytime the economy is hurting, we use less oil and less energy in general,” Dorner said.

People now realize, he added, that “cheap gas” is a thing of the past. “$2 gas is not coming back. $3 gas maybe, but that’s still not cheap,” he said.

Michael Morris, an economist for the Energy Dept.’s Energy Information Admin., agrees that oil prices won’t stay low for long. He also agrees that consumers won’t significantly increase their energy use in this economic crisis. “I think we’re entering into a recession, so oil prices are not going to do much,” he said.

In addition, Morris says the current pump price is still higher than before gas costs soared this year. The price of oil is unlikely to drop much more than it already has, he said. “I don’t think there’s much more room for downward movement in the price unless the worldwide economy really collapsed,” he noted.

Ron Planting, an economist with the American Petroleum Institute, the trade group for the oil and gas industry, says the sharp decline in consumer demand indicates fundamental behavioral changes. “Some of the changes are persistent,” he said. “People who are thinking about more fuel-efficient cars are going to keep doing that…. People changing jobs think more about their commuting patterns…. People have learned a little more about planning trips — like I’ve discovered that the train works very well.”

As for where oil prices will go next, answers vary, Planting says. “No one has a single-point forecast, because we know how volatile prices can be,” he said. “That kind of risk is just part of the business in terms of exploring for oil and natural gas.”

In the middle of economic and energy crises, says the Dept. of Energy’s Morris, the one thing that can be certain is uncertainty.

“We know this is a very uncertain time; it’s very hard to make predictions,” he said, echoing many other economists and energy experts.

With the global economy in shambles, oil demand and consumption continues to fall. It’s been on the decline since January 2008 and sharp spikes in oil prices this summer — up to $147 a barrel — certainly didn’t help.

One of the uncertain parts of this equation is the variable of what consumers will do next. How will businesses and individuals respond to oil as low as $63 a barrel and gas prices as low as $2.82?

I’ll have some of these answers in a piece later today.

The stocks of alternative-energy companies, which had enjoyed boom times, have been slashed.

In the last three months, according to a report in today’s Wall Street Journal, renewable-energy stocks have dropped 45 percent, according to New Energy Finance, a London-based consultancy. But this could change.

Congress’ renewal of federal tax credits for solar- and wind-energy companies a couple weeks ago is expected to attract tens of billions of dollars in new private investment.  But it’s unclear what will happen to these companies if tighter credit standards dry up bank lending. Green businesses that use newer technologies have the most to lose because they may entail more risk in the eyes of bankers.

I’ll be reporting more on the economic future of renewable energy. Meantime, green businesses still say that while there’s a lot to worry about, there’s also a lot to be hopeful for.

Solar panels (Flickr: Chandra Marsono)

Dennis Markatos-Soriano has been worried. And so are, probably, the hundreds of thousands of other workers in the renewable-energy sector.

Markatos-Soriano, an employee of Carolina Solar Energy, and his fellow clean-energy workers could lose their jobs if the existing federal tax credits for wind and solar energy companies are allowed to expire. He works as a campus outreach coordinator for his company, which distributes solar power.

On his blog for the public-radio business show “Marketplace,” Markatos-Soriano echoed the fears throughout his industry. In a post titled “Congress: Please save my Main St. job, not that fat cat’s Wall St. job,” he wrote:

I got that call today.

The one no one wants to hear from their CEO — that it’s possible the company I work for will run out of money for my part-time position and have to let me go. But, unlike some investment bank officials who got a similar call, our solar energy company didn’t do anything wrong.

We are just prisoner to the waiting game that Congress keeps us in by not renewing the green energy tax credits that help our country deal with the energy crisis…And now many members of Congress are instead considering bailing out a financial industry that has acted recklessly and twisted rules to gain tremendous, unsustainable profits.

Illustration by: Matt Mahurin

But last night, the Senate tacked the renewable energy bill extending the tax credits onto the $700 billion financial bailout plan that congressional leaders hope to pass by the week’s end. Leaders in the Senate voted to pass the bailout bill, along with the tax credits for solar and wind power. Now the entire package is scheduled for a vote by the House on Friday.

All year, the Senate and the House have been battling with different versions of this tax bill.. This week is the last chance for Congress to save the green economy from an uncertain future, according to employees and representatives of the solar and wind industries.

If the tax credits aren’t renewed, 116,000 jobs and $19 billion in private investment could be lost through 2009 (pdf here). With the country’s economy faltering, unemployment rising and energy prices wildly fluctuating, representatives of the solar and wind industries say they would be surprised if lawmakers let a “bright spot” in the economy fall to the wayside.

There’s been a lot of talk about creating green jobs this election cycle. But the reality is that many such jobs already exist because the renewable-energy industry is rapidly growing.

Solar installations grew by 40 percent in 2006, and by an additional 40 percent last year. And wind-powered generating capacity jumped 45 percent in 2007.

According to green workers and trade associations, this growth is the product of the federal tax credits for renewable energies. Allowing the credits to expire. they say, would result in huge layoffs, strain the budgets of green companies or put them out of business.

Markatos-Soriano talked to TWI about the fate of his job at Carolina Solar Energy. He works with universities in North Carolina to hook them up to solar-powered electrical grids at no cost to the institutions.

“We’ve used a financing model that includes the federal tax credit and other incentives to sell electricity directly to the grid,” he said. “So, my job is definitely at risk.”

As for his company if the tax credits went away?

“It would have to get creative,” he said. “I had a conversation with the CEO last week, and [he wanted to push ahead] but the business model is really set to work with tax credits.”

Carolina Solar isn’t the only company running into problems because Congress has not renewed the credits. A solar installation company in Revere, Pa., lost a $300,000 project, according to the Solar Energy Industries Assn., or SEIA, the industry trade association.

In Merrimack, N.H., one of the world’s largest manufacturers of solar-panel equipment told SEIA, according to the trade group’s report, that it would build its next factory in Asia if the tax credits expire.

And in San Diego, Calif., a solar company estimated that its revenues would drop by $60 million in 2009, and $90 million in 2010, if the tax credits die. The company told SEIA that it would have to lay off about 30 workers, starting in 2009, and postpone plans to expand its workforce by 30 to 55 employees. (SEIA did not publish the names of these companies in its study — pdf here.)

SEIA spokeswoman Monique Hanis said in an interview that she and her colleagues were astonished that it had taken Congress so long to extend these tax credits — it has been in the works for almost two years — since they face little opposition from either Democrats or Republicans. “Honestly, we are really surprised,” said Hanis. “We saw huge momentum in both chambers [of Congress]. …. There’s huge public support to move into renewable energy — and solar in particular.”

There’s another reason Hanis is surprised: The renewable energy bill that would prolong the tax credits “won’t cost the government anything” because the bill includes revenue offsets. House and Senate Republicans introduced incentive provisions that are expected to generate enough revenue to offset the $70 billion in tax credits.

Some solar companies have told SEIA that they would move their factories and jobs overseas if Congress fails to act. That would hurt the global competitiveness of the U.S. renewable-energy business.

“[The industry] is sort of on the tipping point of really expanding with a lot of investment from global companies,” Hanis said. “[Renewing the tax credits] would signal to global investors that the U.S. is committed to renewable energy.”

The American Wind Energy Assn. paints a similar picture for the wind-power industry if the tax credits for wind energy expire.

All the new projects planned for next year would be “in limbo,” says AWEA spokeswoman Christine Real de Azua. “Come January,” she said, “new projects will come to a full stop, with construction jobs stopping, contracts being on hold, and increased costs for the companies. And with each month that goes by, things will get worse and worse.”

Real de Azua says such a bleak scenario is not far-feteched. When the credits were allowed to expire in 1999, 2001 and 2003, “new [wind] installations declined by as much as 70 to 90 percent in the following year.”

But not everyone thinks that the end of the tax credits would be the end of the world as far as wind and solar energy is concerned. A wind-turbine-blade manufacturer for General Electric told The Wall Street Journal’s Keith Johnson that the industries will likely roll with the punches.

Richard Morrison, chief executive of Molded Fiber Glass Companies had this to say:

The failure of the U.S. Congress to extend the production credit is not a good thing. Now how bad of a thing is it? It’s hard to predict because things are a little bit different now in 2008 than back in the 1990s when it was a fledgling industry. There is a real business here and a big business and a growing business.

For one thing, according to Morrison, the cost of wind-turbine technology has come down. For another, states will continue to provide incentives even though the federal government doesn’t.

Dept. of Energy solar expert Peter Wong, who works in the agency’s Energy Information Administration, agrees that state incentives would be key in sustaining renewable-energy businesses if the credits aren’t renewed.

“I would say that the industry is not going to collapse because there are still some state incentives in place,” Wong said. For example, solar and winds programs in California and Texas are bolstered by significant state incentives.

In addition, he says that the absence of the federal renewable energy tax credits could drive companies to develop more efficient technology more quickly to bolster their bottom lines.

Opponents in Congress have another reason for voting against the tax-credit extension. During negotiations in June, Senate Minority Leader Mitch McConnell (R-Ky.) argued that the tax credits for wind and solar power won’t reduce the cost of gasoline because it doesn’t focus on increasing the country’s oil supply. “This bill isn’t a serious response to high gas prices,” McConnell said. “It’s just a gimmick.”

Many people working in the renewable-energy industry say companies won’t require tax credits forever–they are just short-term insurance to sustain the boom.

“Solar will get better,” said Markatos-Soriano. “But at this point, the technology needs a boost from federal and state policies that can help [the companies] grow — not only to provide a great deal of energy and reduce the use of fossil fuels but to provide good jobs.”