The Return of Political Risk in the Energy Sector

This week, TheStreet and RealMoney will be exploring the aftermath of Lehman Brothers' bankruptcy filing and the ensuing market chaos it brought to a head a year ago. This guest column by Erik Mielke, an MPA candidate at Harvard Kennedy School and a former oil sector analyst at Merrill Lynch, appeared yesterday on RealMoney. Click here for a free trial, and enjoy incisive commentary all day, every day.

A year after the fall of Lehman Brothers, Washington is not only busy overhauling the regulatory framework of the financial sector and kick-starting the economy, it's also embroiled in a wrangle over health care reform. As such, it's tempting to dismiss the current political risk to the U.S. energy sector as low or declining.

The question we must ask ourselves, therefore, is whether President Obama can possibly have the stomach for energy reform after the health care imbroglio? Well, yes, he can.

Climate change -- and with it, energy policy -- is set to return to the spotlight as the world prepares for the Copenhagen climate summit in December. And if the past year is anything to go by, the administration is determined to change U.S. energy policy regardless of other economic or political challenges it may face at the time. As a result, it would be a mistake to equate no news with no change.

Energy was one of the early leading issues during the election campaign, spurred on by ever-higher commodity prices. The post-Lehman financial meltdown and the collapse in oil prices changed the campaign dynamic and energy was relegated down the political agenda. But not for long.

In June 2009, with the president's support, the House passed a comprehensive energy and climate bill (American Clean Energy and Security Act, also known as the Waxman-Markey bill). The bill, which has not been approved by the Senate, sets an important marker for the Copenhagen summit and has significantly increased the likelihood that a global deal on issues such as alternative energy and carbon emissions can be reached. So, expect U.S. energy policy to resurface in the next couple of months, even if the Senate drags its feet on the energy bill.