US Senate leaders added US$17 billion (Dh62.6bn) in funding for alternative energy such as wind and solar power projects into the proposed bill to rescue the American banking system hours before the vote yesterday. In bundling the measures together, Senate leaders aimed to bolster support for the legislation that went down in flames in the House of Representatives on Monday, and tied the future of the alternative energy industry to what is perhaps the most important vote of the year.
The bundling of the laws made use of a classic move in congressional politics to bring wavering members on board for the bank rescue package, analysts said, but also underlined the role that energy plays in perceptions of US economic vulnerability. "As soon as this legislation passes, good-paying jobs will open up in the green energy sector as wind and solar projects get up and running," said Max Baucus, a Montana Democrat who is chairman of the Senate finance committee.
The Senate was set to vote on the package hours after The National went to press. The extra measures would extend $17bn in tax breaks for wind farm operators, biofuels producers and solar plant owners. Other measures including research funding, income tax breaks and insurance for bank accounts were also added to make the legislation more appealing. "It's what's being called a sweetener," said Michael Hudson, a professor at Georgetown University in Washington DC who specialises in US politics and the Middle East.
"It's been done to assuage the extremes on both the Democratic left and the Republican right," he said. But the legislation also played into larger fears that high oil prices are sapping the strength of the American economy, at the same time as credit markets tighten and confidence in banks is falling, he said. A boost in alternative energy is popularly seen as a way to escape high oil prices. "The price of gas is still up, and this is a kind of multiplier effect accounting for the great pessimism sweeping over the country," he said. "I think it's something for which the subjective aspects may be more serious than the objective reality. People do feel it, they feel it every day."
The deepening financial crisis has followed a record run-up in crude prices, and economists have long noted a strong correlation between high oil prices and economic downturns. Higher prices take a larger proportion of consumers' income in the short- to medium-run, leaving less disposable income to be injected into the economy. Oil prices have struck an angry chord in American politics and popular culture since hitting a record high in July. Members of Congress, pundits and politicians running for office have blamed everyone from Wall Street speculators to Opec exporters for driving up the price of oil.
T Boone Pickens, a Texas billionaire who made his money in oil, has enraptured many television viewers with a plan to boost production of electricity from wind and switch the nation's car fleet from petrol and diesel to compressed natural gas. Mr Pickens has said the hundreds of billions of dollars spent on imported oil every year is funding a war against the US, fuelling American hostility towards the world's largest oil exporters in the Middle East. Other conservatives have argued that the government should immediately lift a ban on offshore oil drilling and encourage development of oil and gas resources at home.
Much of the public's ire has focused on Opec, Prof Hudson said. "It goes back a long way, I think," he said. "I think there's a broad perception that Opec is not helpful." Prof Hudson noted that both Barack Obama and John McCain, the two main candidates for president, have fanned support for their energy plans with a declared goal of making the US less dependent on overseas - and specifically Middle Eastern - energy sources.
Opec has insisted that it was not responsible for the rise in prices to $147 a barrel in July, and has kept to its stated goal of maintaining balance between supply and demand in international oil markets. * With Bloomberg @Email:cstanton@thenational.ae