OUTLOOK ’12: US elections could bring major industry changes

30 December 2011 20:15  [Source: ICIS news]

Control of US Congress and White House at stakeBy Joe Kamalick

WASHINGTON (ICIS)--The November 2012 national elections could present a major turning point in US political life and perhaps bring changes in policies that many in the nation's energy, refining and chemicals industries consider hostile to their interests.

In the Congressional contests that will be decided on 6 November 2012, each of the 435 members of the House of Representatives is up for re-election, as are 33 of the 100 members of the Senate.

In addition, President Barack Obama will be seeking a second four-year term in the White House, hoping to best whoever the Republicans put forward as their presidential candidate.  

In the House, Republicans now hold the majority, with 241 seats against the 194 Democrat members.

To win control of the House in November, Democrats would have to see a net gain of 24 seats to reach a simple 218-member majority.

The House Republicans need only to hang on to their majority, which they won in the 2010 mid-term elections halfway through Obama’s presidency.

According to Real Clear Politics, a Chicago, Illinois-based polling aggregator, about 22 incumbent House Democrats are seen to be at risk of losing their re-election bids, while 27 Republican House seats are said to be “in play” and just as easily could go to Democrats.

Although it is quite conceivable that Democrats could keep enough and take enough seats to win back the majority in the House, most pundits see that outcome as a bit of a stretch.

The story in the Senate is closer still, and the Democrat majority in Congress' upper chamber is seen to be at considerable risk.

The Democrats hold a slim majority in the 100-seat Senate, although their 51-vote strength is bolstered to a 53 head-count by support from two independent senators who caucus with them – meaning they confer and agree strategies with the Democrats and generally adhere to the party's policies and objectives.

In the Senate, where members serve six-year terms, one third of its members faces re-election every two years. 

Significantly, in the November 2012 vote, of the 33 senators running for re-election only 10 are Republicans and the other 23 are Democrats (including the two independents).

Of the Republicans, four are considered to be safe and likely to be returned to Congress. Only six are thought to be at risk. But as many as 20 Democrats are said to be in jeopardy.

Consequently, the odds would seem to favour a Republican take-over in the Senate, although that is by no means a sure bet.

The outcome in both the House and Senate could in large measure turn on Obama's political fate.  He heads the national Democrat ballot and, if he goes down to defeat, he could take with him several Democrat members of Congress who otherwise might have prevailed.

On the other hand, if Obama’s popular and political fortunes improve in the next 10 months or so, his re-election could help Democrats retain control of the Senate and increase the odds of their taking back the House.

Right now, according to an average of eight polls, 49% of Americans disapprove of Obama’s performance as president and only 45% think he is doing a good job.

But a lot can happen in 10 months and the outcome of the November elections – especially for the president – depends in large part on how well the US economy is doing in the month or so leading up to the vote.

If unemployment remains above 8% through 2012 or even edges higher, Obama’s re-election prospects look decidedly grim. If the unemployment figures at least trend downwards from January through October, his chances will improve proportionately, even if the jobless rate is still relatively high by election day.

According to even the White House’s own economic forecasts, US unemployment is likely to remain high through 2012. Although it dipped to 8.6% in November from 9% in October, many forecasts expect the rate to remain near or at 9% throughout the year.

To bring the jobless rate down in any significant measure in the next 10 months, the US economy would have to show immediate and significant improvement, and few economists expect that to happen.

The US Federal Reserve Board, the US central bank, recently cut back its national growth forecasts for 2012 and business economists also see only moderate US expansion for next year.

The consensus for US gross domestic product (GDP) growth in 2012 ranges from 2% to perhaps 2.5%. To make any headway in reducing the nation's unemployment figures, its economy would have to grow at a pace of 3.5% or better for several consecutive quarters.

Even that moderate growth forecast of 2% or slightly better could be wishful thinking if the European debt crisis worsens or if the new eurozone recession – already developing as 2011 drew to a close – should worsen.

Whatever the state of the US economy in November 2012, President Obama and the Democrats in Congress probably won’t be given a lot of support from among US energy, refining and chemical sector officials.

“The Obama administration and some in Congress continue to pursue an extremist anti-oil and anti-gas agenda that hurts American workers, hurts American consumers and hurts the American economy,” National Petrochemical & Refiners Association (NPRA) president Charles Drevna said.

He said that “it’s tragic that, while millions of Americans are unable to find work and while our nation continues to export jobs and import more and more products”, the Obama administration opposes job-generating energy developments, such as the Keystone XL pipeline project that would bring Canadian oil to US refineries.

The Obama administration earlier this year moved to delay approval of the oil pipeline from Canada to the US Gulf until 2013 so that the environmental ramifications of the project could be studied at length. Critics argued such a delay could kill the project.

However, Obama earlier this month signed a payroll tax credit extension bill that includes a provision that could force him to act on the pipeline project within 60 days.

Bill Allmond, vice president for government relations at the Society of Chemical Manufacturers and Affiliates (SOCMA), is another who does not feel particularly warm towards the Obama administration.

“Generally, our industry prefers a government that answers to them and not the reverse,” he said about the administration.

He said the specialty, batch and custom chemicals manufacturers that are SOCMA members are already heavily regulated, “and we conform to those obligations”.

But he added: "However, our industry sees little in return. At stake in this election is whether we continue down this path or whether Washington recognises our ability to flourish if permitted a more competitive playing field.

“We have an opportunity through this election to improve our lot in Washington, and we’re increasingly optimistic that the next government will side with industry over intrusion and stalemate, which we’ve been forced to reckon with the past several years.”

Cal Dooley, president of the American Chemistry Council (ACC), declined to voice support or opposition for any candidate or party.

“We will support through the political process and in a positive way those in Congress who have shown that they are intent on providing leadership on issues that are consistent with our priorities,” Dooley told a teleconference this month.

A seven-term veteran of the House, where he served as a Democrat from California, Dooley noted that approval ratings for incumbents are low, especially for members of Congress, “and that makes incumbents vulnerable”.

Against the background of his own political experience, he said Obama’s re-election chances are to a large extent a function of future economic conditions.

“If Europe goes into a double-dip recession, that will have a lot of impact on the US,” he said. “If there is no improvement in economic indicators, if unemployment remains high and consumer confidence is low, that will create significant headwinds for Obama.”

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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