Washington (Platts)--16Oct2008

Energy took center stage in the final US presidential debate Wednesday
night as both Republican John McCain and Democrat Barack Obama pledged to
eliminate oil imports from the Middle East and Venezuela in the next decade.

The two senators used much of the 90 minute session to spar over their
differing energy priorities. However, neither, when asked by the moderator,
laid out how they would deal with environmental issues such as climate change.

Calls for "energy independence" have become a staple for the campaigns of
the four-term Arizona Republican and the first-term Illinois Democrat. With
Election Day less than three weeks away on November 4, the third and final
debate, which focused on domestic policy, capped a debate season where energy
has become a central issue.

Obama came out forcefully in the beginning, linking American dependence
on foreign oil to the severe economic downturn the US economy is facing.
"We've got to fix our energy policy that's giving our wealth away," he said.

Both candidates weaved portions of their platforms into broader examples
of leadership and economic policy.

McCain highlighted his long support for capping greenhouse gases through
an emissions trading market. Many Republicans opposed his 2003 bill, which was
the first time a carbon cap received a congressional vote.

Obama noted his support of clean coal technologies. "It doesn't make me
popular with environmentalists," he said.

While Obama did sponsor coal-to-liquids legislation, he has modified his
position that it should only be done with carbon capture and storage,
technology believed to be at least a decade away.

DIFFERENCES OVER ENERGY POLICY ACT

McCain hit Obama on his support for the 2005 Energy Policy Act which,
among other things, gave large tax breaks to energy companies. President Bush
signed the bill into law and McCain was one of 26 senators to vote "no" while
Obama joined 74 voting "yes."

"He voted for the energy bill that was full of goodies for the energy
companies," McCain said. Obama has said he opposed many provisions in the bill
but supported it because it helped the nascent renewable fuels industry as
well as renewable power. McCain voted for many of the tax break amendments but
not for the bill as a whole.

McCain focused on the ethanol mandates which Obama supported. "I opposed
subsidies for ethanol because I thought it distorted the market and created
inflation," he said, adding that "I would eliminate the tariff on imported
sugar cane-based ethanol from Brazil."

Obama also highlighted McCain's tax plan, which he says gives $200
billion in tax breaks to the largest American corporations, including $4
billion to oil companies. "They can afford to pay a little more," he said.

Moderator Bob Schieffer of CBS asked how long it would take to get off
Middle Eastern and Venezuelan oil and what each man would do on climate
change. Neither man addressed how they would deal with climate change. Both
support emissions trading plans, but the Obama plan is more stringent.

Neither would represent a significant break from President Bush, who has
opposed carbon caps.

Regarding oil imports, the Energy Information Administration estimates
that last year, the US used about 21 million barrels per day, of which 13.5
million b/d came from foreign sources. Canada and Mexico were the largest US
importers at 4 million b/d combined. Middle Eastern, Venezuelan and Saudi
Arabian imports totaled around 3.6 million b/d.

McCain answered first, noting that "Canadian oil is fine" and through a
greater use of nuclear power, clean coal, natural gas, and renewable power,
the difference could be made up once hybrid electric vehicles reach the
market. "If we put our minds to it, we can eliminate our dependence on the
places in the world that harm our national security," he said.

MAJOR RIFT OVER NUCLEAR POWER

Nuclear power again proved a major rift between the two, as McCain
slammed Obama for being an "extreme environmentalist" in his opposition to new
nuclear power.

Obama did not discuss nuclear power but in the past has said he could
support new build only if issues of waste storage, proliferation and
transportation are adequately addressed. He did, however, address the US
"borrowing $700 billion [per year] or more from China and sending it to Saudi
Arabia" and the transfer of wealth it represented.

"This is the most important issue that our future economy is gong to
face," he said. "It's mortgaging our children's future."

Expanding offshore drilling arose as another key rift. Obama has said he
would support limited expansion only as part of a broader package, while
McCain would open all of the outer continental shelf.

Obama wants to force oil companies to use offshore acreage they currently
lease but do not use. He also pointed out that the US has only 3% of the
world's oil reserves and uses about a quarter of the world's oil.

"I think that we should look at offshore drilling and implement it in a
way that allows us to get some additional oil," he said. "We can't drill our
way out of the problem."

McCain jumped on the remarks, criticizing Obama for masking his
opposition to offshore drilling. "You really have to pay attention to words.
He said we will 'look at' offshore drilling. You get that? 'Look at'," said
McCain, who switched his stance this summer. "Its do-able, the technology's
here and we have to drill now."

Renewable power came up only in passing reference by both men, although
Obama talked more specifically about it. He said that solar, wind, biodiesel,
and geothermal would continue to be important. "These have been priorities of
mine since I got to the senate," he said.
--Alexander Duncan, alexander_duncan@platts.com