It's the Energy, Stupid!

Supply and demand.

The phrase not only describes the basic principle that underlies free-market economics. It neatly sums up the fundamental difference between the two major presidential candidates' stances on oil.

In a campaign season when politicians have frequently tried to elide the stark ideological differences that separate them, oil is one of the areas in which George Bush and Al Gore are polar opposites.

High oil prices have emerged as a political issue this fall. Last month, President Clinton sought to alleviate the growing pressure on the economy -- and on his loyal vice president -- by releasing 30 million barrels from the Strategic Petroleum Reserve. And now that the political flare-up over Clinton's decision has burned off, it is worth taking a look at the candidates' long-term plans.

The Republican ticket is composed of two Texas oil executives. One, vice presidential nominee Dick Cheney, the former CEO of oil services giant Halliburton, was rather successful. The other, presidential nominee Bush, was rather unsuccessful. (Bush's Arbusto Energy company pretty much went el busto in the 1980s.)

By contrast, the Democratic ticket is headlined by a self-proclaimed environmentalist whose best-selling book, Earth in the Balance, heretically identified the internal combustion engine as a potential enemy of mankind. And Gore -- whom George Bush the elder tagged with the sobriquet "ozone man" -- has been running hard against "big oil." In his acceptance speech in Los Angeles, he identified big oil -- along with tobacco, HMOs and drug companies -- as one of the four horsemen of the corporate apocalypse.

There is no doubt that a Bush-Cheney administration would be more friendly to the interests of ExxonMobil (XOM:NYSE - news - boards), Chevron (CHV:NYSE - news - boards), BP Amoco (BP:NYSE ADR - news - boards) and the dwindling ranks of large U.S. oil firms than a Gore-Lieberman administration.

Simply put, Bush believes the U.S. must produce more oil, and that the government can help. In a speech last week, he noted that America's demand for 20 million barrels a day is growing, and that the nation's need for imported oil has left us at the mercy of the Organization of Petroleum Exporting Countries. So aside from promoting development in non-OPEC regions, Bush would open 8% of Alaska's 20-million acre Arctic National Wildlife Refuge to exploration, and would consider developing natural gas reserves on other federal lands.

These moves would be good news not only for big oil producers, but also for the companies that provide the equipment and services they need. Think Cheney's former employer Halliburton, along with Schlumberger (SLB:NYSE - news - boards), Baker Hughes (BHI:NYSE - news - boards) and Global Marine (GLM:NYSE - news - boards).

Bush was careful to couch his proposals in environmentally friendly language. Companies, he noted, would remove energy, "leaving only footprints." And he pledged to use royalties and other fees generated by the new development to fund conservation and alternative fuel efforts: $1.2 billion in research for alternative energy sources, and $1.4 billion in tax credits for electricity produced from renewable and alternative fuels. Add in support for heating oil programs for low-income residents, and the price tag for Bush's energy plan comes to about $7.1 billion over 10 years.

Gore's program differs dramatically in both size and scope. Gore opposes opening any part of the South Carolina-sized Arctic National Wildlife Refuge. The vice president says it would take seven to 12 years to get any oil out of the region, that the oil, "would yield just months of increased oil supply," and cause incalculable environmental damage. (Gore's campaign Web site features photos of caribou grazing on the unblemished tundra.)

Instead of boosting supply, Gore proposes to start using government resources to cut demand for fossil fuels today. He wants to use the budget surplus to create a $171-billion Energy Security and Environment Trust Fund. The fund would invest in a range of energy-conservation programs -- nearly all of which are bad news for big oil.

For example, Gore would give families tax credits for purchasing more fuel-efficient cars, SUVs and trucks. He also proposes a tax credit of up to $2,000 to buy new energy-efficient homes, and wants to expand tax credits for use of solar energy. Under Gore, the federal government would provide more funds for light rail, bus and train systems, and double the existing tax credit for operating costs associated with generating electrical energy through wind and biomass.

Bush, who has frequently done battle with the English language, concisely summed up the difference between the two candidates on oil: "My opponent believes the consumption of energy is the problem, and must be discouraged." On this point, Gore essentially agrees. The intended result of his expansive set of programs is to (jargon alert!) incentivize consumers, homeowners and companies to use less oil.

Supply and demand.

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Daniel Gross (www.danielgross.com) is the author of Bull Run: Wall Street, the Democrats, and the New Politics of Personal Finance. The New York-based journalist has written about the intersection of business and politics for The Washington Post, New York magazine, The New York Times and The New York Observer. He welcomes your feedback at [e-mail]