Washington (Platts)--8Oct2008

From US foreign policy to global warming to a question about top domestic
priorities, Senators Barack Obama and John McCain kept returning to major
energy and environmental issues during Tuesday night's second presidential
debate.

During the town hall-style debate in Nashville, Tennessee, the candidates
tied US energy development to their solutions for an ailing economy and
overseas challenges, putting Russia, Iran and some Middle Eastern energy
exporters on notice that cutting US and European reliance on their oil is a
top foreign policy priority.

"We can't simply drill our way out of the problem," Obama said, noting
that the US has 3% of the world's oil reserves but consumes nearly 25% of
global oil supply.

"We're not going to be able to deal with the climate crisis if the only
solution is to use more fossil fuels that create global warming," said the
Illinois Democrat.

Energy would be his top priority, Obama asserted, ahead of health care
and Social Security reform. And he pushed his proposed $150 billion program to
help develop and commercialize alternative and renewable energy.

"Energy we have to deal with today," he said, "because you're paying
$3.80 here in Nashville for gasoline and it could go up. It's a strain on your
family budget, but it's also bad for our national security, because countries
like Russia and Venezuela and in some cases countries like Iran are benefiting
from higher oil prices."

McCain said energy should be the focus of an economic stimulus program.
Offshore oil and natural gas drilling and building a fleet of new nuclear
power plants are keys to jumpstarting the US economy, said the Arizona
Republican.

"Energy independence is the way to do that. It's one of them," McCain
said. "Drilling offshore and nuclear power are two vital elements of that.
I've been supporting those and I know how to fix this economy and eliminate
our dependence on foreign oil and stop sending $700 billion a year overseas."

Calling it "fundamental economics," McCain repeated his assertion that
increasing oil exploration off the East and West Coasts will inject enough
confidence in the global oil market to bring down oil prices. "We've got to
drill offshore, my friends, and we've got to do it now," he said.

ENERGY IS 'THE ENGINE'

McCain insisted the government can address top voter issues all at once,
especially energy, despite concern about congressional wherewithal to address
expensive big-ticket domestic items after just agreeing to a $700 billion
financial bailout of US banking institutions.

Obama accused McCain of repeatedly voting against incentives for
renewable fuels, and McCain emphasized the idea that he supports development
of most domestic fuels, especially nuclear. "We can work on nuclear power
plants, build a whole bunch of them, create millions of new jobs," McCain
said. "We can have all of the above: alternative fuels, wind, tide, solar,
natural gas and clean-coal technology."

On the issue of climate change, McCain aggressively distanced himself
from almost eight years of Bush administration opposition to mandatory caps on
greenhouse gas emissions from power plants and the industrial sector.

Still, neither McCain nor Obama discussed specific policy plans,
including pending proposals to create programs that ratchet down emissions by
putting a price on carbon dioxide, creating a system for trading pollution
rights and encouraging electric utilities to retool and buy cleaner fuels.

"I have disagreed strongly with the Bush administration on this issue,"
McCain said. "What's the best way to fix it? Nuclear power," he said. "Nuclear
power is safe and it's clean, and it creates hundreds of thousands of jobs,
and I know we can reprocess the spent nuclear fuel. The Japanese, the British
and the French do it. We can do it, too."

Obama said he favors nuclear power as "one component" of an expanding
overall energy mix. Five million new jobs could be created in the energy
sector if there's a sustained effort by the next president, he said.

"It can be an engine that drives us into the future the same way the
computer was the engine for economic growth over the last couple of decades,"
Obama said. "We've got to understand this is a national security issue as
well, and that's why we're going to have to make some investments."

The US and private sector will work closely to export innovative clean
energy solutions to China and other developing countries, Obama said.

Perhaps the toughest talk came in the area of foreign policy. Some of the
$700 billion sent overseas to oil-producing countries ends up in the hands of
terrorists, said the candidates.

"If we can reduce our energy consumption through alternative energy so
that Iran has less money," Obama said. "If we can prevent them from importing
the gasoline they need and the refined petroleum products they need, that
starts changing their cost-benefit analysis. That starts putting the squeeze
on them."

Obama stuck to the same theme when discussing US-Russia relations.
"Energy is going to be key in dealing with Russia," he said. "If we can reduce
our energy consumption, [then] that reduces the amount of petro-dollars they
have to make mischief around the world."
-Joel Kirkland, joel_kirkland@platts.com