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Considering the vast sums of cash allocated to bank bailouts coupled with a sharp decline in tax revenues, many analysts are skeptical as to whether or not the future president, Barack Obama, will be able to fund the alternative energy proposals around which he campaigned.

Unheard during recent times, alternative energy developments will now have to compete in the arena with other urgent requirements for government financing.

Oil prices prove to be an obstacle in the road to cleaner energy.

With such a large percentage of the world depending on oil and gas for electricity, heating and transport, the cost of oil inevitably determines the manner in which investors view the economy. Since the summer, oil and gas prices have dropped at a phenomenal rate as a direct result of the looming recession.

On the 24th of October for example, the oil price reached a low of $62 per barrel, just half the price it was in July. Coincidently, this was on the same day that OPEC, in a desperate bid to drive up oil prices, announced a cut in production of around one hundred and fifty million barrels per day.

With the global economy showing no immediate signs of recovery, it is likely that oil and gas prices will remain relatively low, thus remaining a threat to any further renewable energy projects. It stands to reason that consumers will be less enthusiastic about alternative energy when oil prices are low, and as a result, the average citizen will have less interest in switching from a conventional car to an electric car. Likewise, utility companies also have less incentives to push for solar or nuclear energy.

Financial roadblock

Americans are only too well aware of the fact that the vast majority of the world’s oil reserves are located in countries which are at the best of times, considered to be unstable. This, together with international concern over global warming, is the driving force behind America’s push for renewable energy but the fact remains, without adequate capital, renewable energy cannot become a reality.

Financial institutions as well as investors are reluctant to become involved in a market which they feel cannot offer any guaranteed returns. As a result, companies wanting to develop alternative energy resources are unable to do so due to the lack of available finance. As an example, investment in renewable energy plummeted from twenty three billion dollars in the second quarter, to just seventeen billion in the third quarter while analysts predict a further drop is imminent.

President faces inevitable changes

During the recent campaign, Barack Obama, pledged to spend one hundred and fifty million dollars on alternative energy which in turn would create millions of new jobs. Additionally, he also wants ten percent of America’s electricity to come from renewable sources within the next four years. Obama, will be facing tough challenges as he takes office. With domestic spending and earnings down, the resultant decrease in tax revenue will make it increasingly difficult to fund alternative energy projects, while at the same time maintaining the country’s infrastructure. Interestingly enough, while on the campaign trail, both candidates declined to comment on which projects may need to be abandoned.

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US officials have time and again reminded New Delhi that it would be difficult to get Congressional approval for the implementing 123 Agreement finalized last July in an election year unless it comes up before the legislature before June-end.

India needs to sign an India specific safeguards agreement with the IAEA and get the approval of 45-nation Nuclear Suppliers Group (NSG) before the US Congress can give its go-ahead. Senior government officials in India have announced that it is likely that the NSG step will take at least around a month to be completed.

Officials have also announced that due to the fact that the deal has been stuck in limbo for many months, the initial favorable momentum that India had created at the NSG in favor of the nuclear deal is now no long present.

Even though the NSG step is a largely an US effort, India had also been talking to the NSG countries. Due to the political roadblock, there has been no movement on the NSG front in the last couple of months. There is also opposition to the nuclear deal from some NSG countries itself.

One of the original architect’s of the US-India nuclear deal, Ashley Tellis, has already gone on record declaring that the deal is now dead saying that the political timeline has already expired.

His judgment connects with the timeline afforded by higher-ranking US Congress members who had stated before that the 123 accord has to reach the US Congress for approval by July. The bill also has to lie in the US Congress for a minimal of two to three months before it can be taken up for a vote.

While acknowledging that time was short for getting final approval in the US Congress before President George Bush, who looks at the India deal as a major foreign policy achievement, leaves office in January, the US administration is making all efforts to do so.

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