Obama Struggles to Explain Drop of Windfall Profits Tax for Oil and Gas Industry

Barack Obama may already be losing credibility over his explanation as to why he dropped the windfall profits tax on the oil and gas industry from his administration's agenda. During his campaign, President-elect Obama promised to enact a windfall profits tax on the oil and gas industry, which would help finance a $1,000 emergency energy rebate for American families.....More

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Credit Aftershocks Damage Nation’s Growth Prospects; Oil Holds the Key to Fed’s Next Move, Says Georgia State Forecaster

The aftershocks from the credit crisis which continue to spread to other sectors have not only put the economy into a recessionary state but also have damaged its growth prospects until 2010, according to Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. In his Forecast of the Nation, released today, Dhawan warns that any additional uptick in oil prices could put the economy further at risk and recovery further away.

“Despite all of the aftershocks from the credit fallout, oil has been the wild card testing the Fed’s patience,” he said. “If the price of oil does not retreat below $100 per barrel by October on a sustained basis, worries of inflation will cause the Fed to raise rates much earlier than expected.”

Dhawan expects the price of oil will drop to an average of $89 per barrel in the fourth quarter of 2008 allowing the Fed to hold off on rate hikes until next spring. However, he anticipates that the Fed will be somewhat aggressive raising the federal funds rate by 250 basis points by mid-2010.

“The Fed hikes will begin even before growth catches its stride which is a departure from the norm,” he said. “But rather than waiting until job growth picks up to normal levels, the Fed will hike the federal funds rate to show it is serious about containing inflation.”

While Dhawan says that the Fed will be able to stave off inflation, he cautions that the fragile health of the banks will cause the economy to recover at a slow rate.

“Despite efforts by the Fed and the Treasury to help bail out the financial industry, lenders still need to keep liquidity or cash on hand to deal with charge-offs that they will have to take as loans continue to go sour,” he said. “Still, some banks are on the brink of failure and it will be up to the FDIC to bail them out and should they run short of funds, look for the government to bail out the FDIC leaving taxpayers with the tab. Thus my forecast calls for an anemic recovery in 2009 and a below potential growth in 2010.”

Highlights from the Economic Forecasting Center's National Report:
The GDP growth fails to cross the 2.0% mark until late-2009. Overall, real GDP growth for 2008 will be 1.4%, decelerating to a 0.5% rate in 2009. In 2010, real GDP will grow by 2.2%, still below the trend rate of 3.0%.
For 2008, consumption growth will be 1.0%, before moderating to 0.3% in 2009. It will rise by 1.9% in 2010. Durable goods consumption will decline by 2.8% in 2008 and 3.7% in 2009, before experiencing a sharp 3.9% rise in 2010.
For the year 2008, oil prices will average $106.7 per barrel, before moderating to just below $90.0 per barrel in 2009 and 2010.
Housing starts will average 0.949 million units in 2008 and will drop to 0.900 million units in 2009. Housing starts will rise to 1.209 million units in 2010.
For 2008, the inflation rate will average 4.3% but will moderate sharply to a 2.2% rate in 2009. In 2010, the inflation rate will average 2.0%. Meanwhile, the core CPI inflation rate will average 2.3% in 2008 and 2009, before rising mildly to 2.4% in 2010.
The unemployment rate will average 5.5% in 2008, but it will rise to 6.3% in 2009, dropping slightly to 6.2% in 2010.

Georgia and Atlanta—Georgia’s Boat Tied to National Woes

Georgia’s job picture continues to look bleak despite gains in education, healthcare, and government jobs during the second quarter of 2008. According to Dhawan, the problem stems from the housing downturn which has had a negative ripple effect throughout Georgia’s economy. Additionally, high gas prices and the credit crisis have added to the area’s problems and, like the national economy, Georgia’s growth prospects will not return until 2010.

In his Forecast of Georgia and Atlanta, Dhawan says that Georgia’s residential and commercial real estate sector continues to show signs of weakness which not only impacts construction jobs but has spread to supporting sector jobs as well. While future construction growth depends on what the economy’s growth warrants, it is also a function of credit market conditions.

“Ultimately, it is the willingness of the banking sector to make new construction loans that makes future construction activity possible. The ability to finance construction in turn depends on the quality of the bank’s balance sheet,” says Dhawan. “Unfortunately, Georgia has been hard hit by the credit crisis with a proportion of unprofitable lending institutions currently at 25%, almost double the national rate.”

In addition, high gas prices are negatively impacting consumer spending and are wreaking havoc with Delta, the area’s largest employer, which has already announced major cutbacks in routes and jobs.

Net-net, says Dhawan, the prognosis for Georgia’s growth in the coming quarters is bleak. The question is when can the area expect to see job growth return?

“I expect job losses to continue at a somewhat heavy rate for the rest of the year and anticipate a net loss of 35,300 jobs for calendar year 2008,” he said. “In 2009, we’ll see the decline slow to 2,600 losses before the recovery strengthens in 2010 where we can expect to see 61,700 new jobs.”

However, he cautions, “Like the national picture, this forecast assumes that oil prices moderate below $100 per barrel by late October and stay low.”

Highlights from the Economic Forecasting Center's Local Report:
For calendar year 2008, we anticipate 35,300 net losses (14,600 premium jobs). In 2009, 13,900 job losses are expected in the first half of the year, followed by 11,300 job gains in the second half, making for 2,600 job losses (11,000 premium jobs losses). The recovery will strengthen in 2010 when 61,700 jobs will be created (12,000 premium jobs).

Atlanta’s employment growth will remain negative for the remainder of 2008 for a total loss of 20,600 jobs (8,000 premium job losses). For calendar year 2009, Atlanta will post 3,900 job gains, but 4,100 premium job losses. The recovery will strengthen in 2010 when 44,200 jobs are created (10,200 premium job gains).

Atlanta's total housing permits will plummet by posting a 52.1% drop in 2008 after a 34.6% decline in 2007. Permit activity will again decrease at a slower rate of 5.0% in 2009 but will inch up in 2010, posting an 18.4% increase.

Most MSAs in Georgia will exhibit slower employment growth in 2008, with Albany, Columbus, Dalton, and Macon observing job losses. Only Savannah, Gainesville and Warner Robins will see any increase in employment in 2008, though increases will average below 1.0%.

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New Survey Finds Georgians Support Increased Access to Domestic Oil and Natural Gas Resources

PRNewswire-USNewswire/ -- Georgians are concerned about the price of gasoline and the majority of them support increased access to domestic oil and natural gas resources, a new survey finds.

"This research confirms what every recent poll has shown. Georgians, like Americans everywhere, are feeling the crush of high gasoline costs and support increasing domestic supplies of oil and natural gas," said Ric Cobb, executive director of the Georgia Petroleum Council (GPC). "Sadly, some in Congress are ignoring this groundswell and blocking a balanced energy policy that includes development of America's vast natural resources, along with more conservation, energy efficiency and increased supplies of all sources of energy."

The poll was conducted by telephone between July 10 and July 27, 2008 by Harris Interactive and commissioned by API. The survey of 501 registered Georgia voters who are likely to vote in the upcoming presidential election found 66 percent of those surveyed said they somewhat or strongly support increased access to domestic oil and natural gas resources. Only 23 percent of respondents said they opposed increased access. An overwhelming 97 percent said they are somewhat or very concerned about the price of gasoline.

"America's oil and natural gas companies are ready to work with government at all levels to enact a comprehensive energy plan that includes increasing domestic supplies while protecting our environment," said Cobb. "It's time for Congress to lift the ban on offshore drilling."

Currently, Congress is blocking the exploration and development of abundant oil and natural gas reserves beneath non-park federal lands and coastal waters. Advanced technology means America's oil and natural gas companies can efficiently explore for these resources while protecting the environment. Based on federal government data, these resources could provide enough oil to fuel more than 65 million cars for 60 years and enough natural gas to heat 60 million homes for 160 years.

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Isakson: Congress Must Put Aside Partisanship, Work Together to Address High Energy Prices

U.S. Senator Johnny Isakson, R-Ga., today (July 15, 2008) urged members of Congress to work together to develop a comprehensive plan to address high energy prices during a speech on the Senate floor. Isakson said solutions that embrace all ideas – from conservation to increased domestic exploration – are at our fingertips if only members of Congress would put aside their partisan differences.

“The Congress of the United States is sitting on a ham sandwich starving to death,” Isakson said. “America has within its reach every resource necessary to be self-sufficient when it comes to energy. All we have to do is have the political will and the common sense to make it happen.”

In his remarks, Isakson outlined a number of initiatives he believes will provide a balanced approach to America’s long-term energy needs, including oil and natural gas exploration on the Outer Continental Shelf, nuclear energy, conservation and renewable resources such as solar and wind energy.

“I call on my colleagues, Republican and Democrat alike, to put their elephants and donkeys in the barn and look at the needs of the American people,” Isakson said. “If we leave this year without a comprehensive policy for energy independence, we have done a disservice to the people of the United States and we will not have fulfilled our Constitutional responsibility.”

Isakson praised the administration for its announcement on Monday that it is lifting the ban on offshore exploration, saying that we cannot decrease our dependence on foreign oil if we fail to explore our potential domestic supply.

“That is absolutely something that we ought to do,” Isakson said of the offshore exploration. “We should be exploring every resource that we have.”

Isakson is a part of a bipartisan group of senators led by Saxby Chambliss, R-Ga. and Kent Conrad, D-N.D., that are committed to working together on legislation to address the nation’s energy crisis.

175 in House sign Westmoreland Pledge

Millions of Americans have signed petitions telling Congress to take action on energy prices. And U.S. Rep. Lynn Westmoreland responded by taking the petition straight to the members of the House.

By Friday, 175 members of Congress signed the Westmoreland Pledge on the floor of the House this week. The pledge reads “I will vote to increase U.S. oil production to lower gas prices for Americans.” Westmoreland looks to add more members in the coming week and hopes more Democratic members will sign on to help Americans pay less at the pump.

“I made this simple so there would be no wiggle room for members of Congress,” Westmoreland said. “I pushed hard all week to get my colleagues to sign the pledge and I’m very happy that we’re closing in on 180 names. We are saying that supplying our energy needs requires ‘all of the above’: conservation, alternative energy development and increased supply of oil.”

Westmoreland’s petition aims to create momentum on Capitol Hill to open up new energy production offshore on the Outer Continental Shelf and on federal lands such as ANWR. Westmoreland further supports building new refineries for the first time in more than 30 years.

“With prices at $4 a gallon, families and businesses are feeling the squeeze. Higher gas prices lead to higher prices for food and every other product that has to travel to a store. Americans are cutting back. Unless Congress takes action, we’re going to erode our American quality of life and our economy is going to grow less and lose good-paying jobs.”

Public opinion surveys indicate that large majorities of Americans believe it is possible to drill for energy in untapped regions of Alaska and deep ocean areas far off the U.S. coast in an environmentally responsible manner, and they support reforms that would allow such drilling to finally begin.

“At least 175 members of the House are saying to the American people, we support ‘all of the above’ when it comes to solving America’s energy crunch,” Westmoreland said. “We need to continue to research and develop alternative fuels. We need to continue conservation efforts. But for right now, we also need more traditional energy sources to bring down the cost of gas to help our economy thrive as we transition into new forms of energy.

“We still have a way to go with our petition. Finding solutions for our energy crunch should be a bipartisan effort and I would like to see more Democrats sign. Their constituents are hurting just as much as mine are. So far, we have one Democrat, my good friend Neil Abercrombie of Hawaii. Neil said to me that he knows more oil production won’t solve the problem, but that it is part of the solution. I think a lot of his colleagues on the other side of the aisle would agree with that assessment, and we hope to get their names on the pledge.”

Westmoreland encourages Americans to sign petitions calling for more energy exploration and to call their members of Congress to ask that they sign the Westmoreland pledge to increase oil production to lower gas prices for Americans. Find the list of all the members of Congress who have signed at www.house.gov/westmoreland.

Brian Robinson
Deputy Chief of Staff