MSDI Andrews/Price

–Emerging SQ. (1) 2008

Alternative Energy Incentives in The Near Future

The Elections and Soaring Gas Prices Insure a Major Incentive Bill Within the Year
Nichola Groom and Matt Daily (Writers and analysts for Reuters), 6/2/2008, “Alternative Energy on Edge in Us”, Reuters, accessed: 06/30/08,
http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4065180526&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4065180531&cisb=22_T4065180530&tre
eMax=true&treeWidth=0&csi=8357&docNo=9

The alternative energy industry still relies heavily on subsidies to make prices of renewable power competitive with
electricity generated from coal and natural gas.Several attempts to extend the tax credits have failed in recent months as lawmakers argue over how to pay for them. In
February, the House of Representatives approved an extension by taking away billions of dollars in tax credits
from big oil companies, but the measure was opposed by the Senate.The latest bill includes about $20 billion of
incentives that extend for one year the federal tax credit for companies that produce electricity from wind, and extend it for three years for power generated
from biomass, geothermal, hydropower, landfill gas and solid waste. Businesses and homeowners would also be able to offset 30 percent of the cost of solar or fuel-cell equipment purchased before 2014 with a one-time tax

credit.The measure passed in the House last month, but the White House threatened to veto it.Democrats have said election-year pressures and soaring gasoline prices will
eventually lead to an extension of the subsidies.

The Status Quo is currently pushing away from the oil sector. It is only a mater of time
before the US has adopted alternative energy as a mainstay policy.
RICHARD VALDMANIS June 2008 geopolitical balance; Spurring search for energy alternatives reuters Surging
oil prices threatening global growth, The Gazette (Montreal) June 3, 2008 Tuesday Final Edition (Lexis, Date
accessed 6-30-08 )
The silver lining could be in how the world fights back. Whereas in the '70s, governments looked mainly to
conservation as a way to ease price woes, this era is looking to increased investment in alternative energies and
better oil-field technology to reach more resources."Our time is very definitely coming," said Jeremy Leggett,
chairman of British solar-power company Solarcentury and former environmental campaigner. "The world is
going to be beating a path to our doors ... The oil crunch is coming soon."In a sign of the shifting mentality, Texas
oilman T. Boone Pickens has gone green with a plan to spend $10 billion to build the world's biggest wind farm.
Energy analyst and oil historian Daniel Yergin said earlier this month that record U.S. crude oil prices have
reached a "break point" that will spur a shift away from an oil-centric transportation sector toward alternatives.
Alternative fuels have already made big inroads into energy markets, with ethanol making up some seven per cent
of the U.S. gasoline pool thanks to government mandates and subsidies. Americans have already tapped the brakes
on their notoriously voracious road travel and are also starting to buy more fuel-efficient cars in a shift away from
SUV's. But the move isn't all green. Rising prices and the scarcity of conventional supplies have triggered an
inflow of cash into development of nonconventional petroleum sources - like the Alberta oilsands, gas shale in
Colorado and technology to turn coal into motor fuel - that could be harmful to the environment. Companies have
already poured $100 billion into the Alberta oilsands and hope to triple production by 2015.In the meantime;
continued price hikes are darkening the clouds on the global economic horizon. Energy experts said a continued
rise could worsen an economic slowdown in Europe and the United States, already hit by a housing slump and
credit crisis and potentially trigger a decisive recession. It's also bad news for the developing Asian economies that
fueled the spike, threatening to slow down their pace of growth."We'll see growth slow globally," said Jay Bryson,
global economist at Wachovia Bank."But the big losers are the oil importers of the world, including (South) Korea,
Japan, China and a lot of other Asian economies in general."China has enjoyed double-digit economic growth
despite a surge in the cost of oil and commodity inputs, but the expansion could slow if prices climb even higher,
especially if Beijing rolls back fuel subsidies. Russia and the big oil exporters of the Middle East have the most to
gain, analysts said."Obviously, the winners in this game are those who export oil," said George Friedman, founder
of intelligence group Stratfor."The victory is not only economic, but political as well. The ability to control where
exports go and where they don't go transforms into political power."

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MSDI Andrews/Price
–Emerging SQ. (1) 2008

NU: Windfall Profits Tax

A Windfall Profits Tax Bill is on the Table And Close to Passing
Sean Lengell, (Writer for the Washington Times), June 11 2008, “Windfall profits tax on Big Oil halted in Senate”, Washington Times,
http://www.lexisnexis.com/us/lnacademic /results/docview/docview.do?doc
LinkInd=true&risb=21_T4065434144&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4065434147&cisb=22_T4065434146&treeMax=true&treeWidth=0&csi=8176&docNo=3, date accessed: june 30
2008

Senate Democrats failed on a vote to 51-43 to get the 60 needed to overcome a Republican filibuster on a proposal
to increase the development of renewable energy sources and a proposed "windfall profits" tax on big oil
companies.Six Republicans voted for the measure, while only one Democrat, Sen. Mary L. Landrieu of Louisiana,
supported the measure. Senate Majority Leader Harry Reid, Nevada Democrat, switched his vote to "no" on a
procedural move that will allow Democrats to reintroduce the measure in the future.

The Bill Includes Massive Profit Taxes on Oil Companies, Tax Breaks For Alternative
Energy Consumers Through Redistributing Company Profits, and Would Illegalize Oil
Price Gouging
Sean Lengell, (Writer for the Washington Times), June 11 2008, “Windfall profits tax on Big Oil halted in Senate”, Washington Times,
http://www.lexisnexis.com/us/lnacademic /results/docview/docview.do?doc
LinkInd=true&risb=21_T4065434144&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4065434147&cisb=22_T4065434146&treeMax=true&treeWidth=0&csi=8176&docNo=3, date accessed: june 30
2008

The bill would have imposed a 25 percent "windfall profits" tax on large oil companies over profits determined as
"reasonable" when compared with previous years. The oil companies could have avoided the tax if they invested the money in alternative energy projects or refinery expansion.It also would have
rescinded oil company tax breaks - worth $17 billion over the next 10 years - with the revenue to be used for tax
incentives to producers of wind, solar and other alternative energy sources, and for energy conservation.The legislation included provisions
designed to curb oil speculation - which many experts say is a big cause for the recent gas price increases - by requiring traders to put up more collateral
in the energy futures markets, and for federal regulation of traders who are based in the United States but use foreign
trade platforms.The plan also called for making oil and gas price gouging a federal crime, and would have given
the Justice Department authority to file price fixing charges against countries that belong to the Organization of Petroleum Exporting
Countries (OPEC) oil cartel.

Oil Companies Won’t Oppose the Bill, Democrats Are Threatening to Make Big Oil Pay a
Portion Of The Gas Tax If They Appose It.
Nick Snow, (Washington Editor/Analyst/writer for Gas and Oil), May 12 2008, “Windfall profits Tax Reemerges” Gas and Oil,
http://www.lexisnexis.com/us/lnacademic/resul ts/docview/docview.do?docLinkIn d=true&risb=21
_T4065680009&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4065680012&cisb=22_T4065680011&treeMax=true&treeWidth=0&csi=8039&docNo=6, date accessed: 06/30/08

How serious are the prospects of Congress' reviving the windfall profits tax? Serious enough for US Sen. Pete V.
Domenici(R-NM) to ask the chief executives of the five largest US oil companies for detailed explanations of how they use their
profits to reinvest in energy production.in a n Apr. 30 letter to assess how proposals to increase taxes on domestic production would affect their companies."In order to help me
gain a better understanding of your investments and your activities related to helping meet our nation's future energy needs, I am writing to request a summary of all public information in this area," Domenici said in his letter."In
your summary, please include the amounts that you are re-investing in domestic and international oil and gas production. Additionally, I am particularly interested in the extent of your investment in clean energy sources such as

Domenici's letter came two days after Sen. Hillary R. Clinton (D-NY), in her campaign for the
wind, solar, biomass, and geothermal energy," he continued.Gasoline tax proposal

Democratic presidential nomination , proposed using a windfall profits tax to pay for suspending the federal tax for gasoline of 18.4¢/gal and
24.4¢/gal for diesel fuel during this summer's driving season.Clinton said on Apr. 28 that she also would like to repeal $7.5 billion in incentives that were part of the 2005 Energy Policy Act, stop filling the Strategic Petroleum

We have a choice. We can choose to

Reserve, crack down on speculation and market manipulation, and press the Organization of Petroleum Exporting Countries to increase production."

have you continue to pay the federal gas tax this summer or we can choose to have the oil companies pay for it out
of their record profits," she said at a May 2 "Get Out the Vote" event in Hendersonville, NC.

The Bill Will Hurt Us Business Through Taxing Oil

Nick Snow, (Washington Editor/Analyst/writer for Gas and Oil), May 12 2008, “Windfall profits Tax Reemerges” Gas and Oil,
http://www.lexisnexis.com/us/lnacademic/resul ts/docview/docview.do?docLinkIn d=true&risb=21
_T4065680009&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4065680012&cisb=22_T4065680011&treeMax=true&treeWidth=0&csi=8039&docNo=6, date accessed: 06/30/08

Obama responded on Apr. 29 in Winston-Salem, NC, that suspending federal motor fuel taxes this summer, which was first proposed by presumed Republican presidential nominee Sen. John McCain (Ariz.), was an
election year gimmick. But he added that he also favors taxing oil companies' excess profits.Oil and gas industry associations are trying to counter

what clearly is election year rhetoric. "Siphoning away earnings from the industry through new tax schemes won't help address the

current market situation. It won't increase investments, it won't produce more supply, and it won't help
consumers," American Petroleum Institute Chief Economist John C. Felmy said on May 6."It will hurt oil and natural gas
company owners, 98.5% of whom have no connection with the oil industry other than through the pensions they receive
invested in oil company stock, or through their 401(k) programs, individual retirement accounts, and other stock
holdings," he told a House Transportation and Infrastructure subcommittee.

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–Emerging SQ. (1) 2008

NU: Peak Oil Transition

The current system is in trouble. OPEC realizes they will no longer be able to distribute
enough oil to meet demand in the near future; in which this problem if not addressed will
lead to a vast economic downturn throughout the world.
Yetiv 2008 FEARS AND TENSIONS The challenges of peak oil We may not be doomed, but we also may not be
ready for all of its effects Copyright 2008 Houston Chronicle Yetiv is author of "Crude Awakenings" (Cornell, 2004)
and the Pulitzer Prize-nominated book, "The Absence of Grand Strategy," (Johns Hopkins, 2008). He is a professor
of political science at Old Dominion University in Virginia. (Date accessed 6-30-08)
http://www.chron.com/disp/story.mpl/editorial/outlook/5861525.html

Americans are feeling serious pain at the gasoline pump, and scratching their heads as to why. Part of the answer
may be that we are approaching peak oil sooner than many people would have guessed. Peak oil refers to a key
turning point when global oil production peaks, signaling a future of slowly decreasing world oil production. No
one can say when peak oil will arrive, but one fact at least suggests that it may come sooner rather than later: Until
recently, the Organization for Petroleum Exporting Countries barely tried to stem the rise of oil prices from $50
dollars per barrel in February 2007 to more than $130 per barrel today. In the past, OPEC, and especially Saudi
Arabia, have often increased oil production to try to prevent prices from rising high enough to trigger alternative
energy exploration; a Western political backlash; and the ire of the gendarme of the Persian Gulf — the United
States. In fact, when I visited OPEC headquarters in May 2003, OPEC researchers underscored how OPEC was
keeping the price of the OPEC oil basket at around $22-28 per barrel (roughly $25-31 on the New York Mercantile
Exchange). And, OPEC did succeed in doing so more than 80 percent of the days from June 2001 to June
2003.Recently, the Saudis announced that they will boost daily oil production by 200,000 barrels per day by the
end of July, though most of this oil will probably not be sweet crude, which the world most needs. Moreover,
Saudi Arabia reiterated that it has a $50 billion plan to increase production by another 30 percent in the coming
years. But, even so, how can we explain the lack of any action until now, as prices have spiked dramatically? The
answer is multipronged, but peak oil may be a factor. OPEC behavior may be a signal that OPEC cannot easily
meet long-run global oil demand, on demand. Even if the Saudis reach 12.5 million barrels per day, that would still
be well short of meeting such demand, unless they can boost production further. For its part, the International
Energy Agency recently underscored its concern that future global oil demand will outstrip oil supply. And the
U.S. Energy Information Administration significantly scaled back how many barrels of oil it expected the Saudis
to produce in 2010. In 2000, its forecast for Saudi production in 2010 was 14.7 million barrels per day. But last
year, it dropped that figure to just 11.4 million barrels per day. That is no small change. A growing number of oil
industry executives, including the CEOs of ConocoPhillips and TOTAL, believe peak global oil production will hit
at 100 million barrels per day. We're at 85 million barrels per day already .If peak oil is creeping up slowly, does
this mean we're doomed? Well, no. But, depending on when oil does peak, it may produce some effects for which
we are not prepared. Oil prices could spike possibly to more than $200 per barrel, triggering economic dislocation.
Such prices will increasingly spur work on affordable alternatives to oil, as we are already seeing today in nascent
form, but it will take a long time for such alternatives to penetrate the market. Our infrastructure is designed for
oil. We can't switch overnight. In addition, Middle East oil will become even more important. The region now
accounts for about one-third of global oil production, but holds two-thirds of the world's oil reserves. These will be
the last left as the rest of the world's production declines, from Africa to Russia and the United States. Threats to
the free flow of Persian Gulf oil have been largely exaggerated by oil markets in the past decade (there have been
few serious disruptions, despite all the angst) but disruptions can occur at any time, and will certainly have far
more serious consequences as Middle East oil production becomes even more vital. Fears about peak oil could
also exacerbate tensions among great powers. For example, note China's obsessive concern about energy and
Washington's growing concern about China's rising power. Imagine how tense Sino-American relations could
become against the backdrop of dwindling oil supplies or even the rising perception of such dwindling supplies.
Or consider that Russia is already using energy to coerce countries such as Ukraine. What will the future hold?
The upshot is that we need to hedge better against the effects of the oil era, including the peak oil issue. The
United States clearly needs a far more serious energy plan, coordinated with the other major global powers. And
such a plan must target transportation, where much global oil is used, while not wrecking the U.S. and global
economy.