Electricity Prices DA

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Electricity Prices DA
Electricity Prices DA.......................................................................................... ..............................1
Electricity Prices 1 NC Shell ....................................................................................................... .....5
Uniqueness – Energy Prices are low ...............................................................................................6
Renewables Expensive....................................................................................................... .............7
Solar Energy Expensive ........................................................................................................... .......8
Hydrogen Cars Expensive.............................................................................. ...............................13
Hydroelectric Power Expensive.....................................................................................................14
Wind Power Expensive..................................................................................... .............................16
Links- RPS...................................................................................................................................... 19
Links- TPS............................................................................................................................ ..........20
Internal Link – Price spikes will happen ........................................................................................23
Internal Link – Price Spikes will hurt the economy ........................................................................24
Steel................................................................................................................................... ...........38
Uniqueness/Brink – Steel Prices barely manageable.....................................................................39
Uniqueness/Brink – steel industry weak........................................................................................40
Uniqueness – steel industry recovering/good................................................................................41
Link – Alt Energy Increases Steel Prices........................................................................................44
Internal Link – high prices bad for domestic industry....................................................................47
Impact – Steel Prices................................................................................................. ....................48
Impact – Military .................................................................................................................... .......51
Impact – government spending ........................................................................................... .........60
Domestic Steel Industry Good – Laundry List ...............................................................................61
Impact Scenario – collapse of the auto industry............................................................................62
A2: Non-Unique........................................................................................................ .....................63
A2: People will cut demand for steel.............................................................................................64
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A2: China low prices ............................................................................................................ .........65
A2: alternatives to steel......................................................................................... .......................66
A2: Weak Dollar....................................................................................................................... ......67
Auto Industry............................................................................................................................... ..68
Links...................................................................................................................................... ........69
Brink......................................................................................................................................... .....71
Internal Link – Industry Collapse...................................................................................................72
Internal Link – Fuel Standards ......................................................................................................73
Impact – Economy .......................................................................................................... .............74
Impact - Competitiveness.............................................................................................................77
Competitiveness – China ............................................................................................... ...............78
China Stable...................................................................................................................... ............79
Aluminum............................................................................................................................ ..........80
Internal Link – high energy prices hurt aluminum.........................................................................81
Internal Link – Aluminum industry key to auto industry................................................................83
Impact – Competitiveness.......................................................................................... ...................84
Semi Conductors......................................................................................................... ..................85
HIGH ENERGY PRICES HURTS SEMICONDUCTER............................................................................86
HIGH ENERGY PRICES HELP SEMICONDUCTORS............................................................................90
SEMI CONDUCTERS KEY........................................................................................ ........................91
SEMICONDUCTORS HURT MILLITARY.............................................................................................97
SEMICONDUCTORS HURT MILLITARY.............................................................................................98
SEMICONDUCTOR INDUSTRY ON BRINK......................................................................................100
SEMICONDUCTOR MARKET IS STRONG......................................................................................102
SEMICONDUCTOR MARKET STRONG...........................................................................................104
SEMICONDUCTORS MARKET WEAK.............................................................................................105
SEMICONDUCTOR MARKET IS GREEN................................................................................ ..........110
RENEWABLES KILL SEMICONDUCTOR MARKET............................................................................111

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SEMICONDUCTORS KEY TO ALL RENEWABLES............................................................................112
SOLAR GOOD FOR SEMICONDUCTORS.............................................................................. ..........113
SEMICONDUCTORS KEY FOR NUKE POWER.................................................................................116
SEMICONDUCTOR KEY TO WIND POWER.....................................................................................117
AFF Answers .................................................................................................................... ...........118
Non Unique – Prices High............................................................................... .............................119
Link Turn – Renewables Stabilize Prices................................................................................... ....120
No Internal Link – Spikes Won’t hurt Econ ..................................................................................122
No Internal Link – Spikes Won’t hurt Econ- A/T: Kills grid.............................................................129
Spikes Inevitable ................................................................................................... .....................131
Spikes Won’t happen........................................................................................................... ........136
Internal Link Turn – Spikes help Econ..........................................................................................140
AT Spikes  Inflation........................................................................................................ ...........142
Steel................................................................................................................................. ...........143
AFF – Non Unique................................................................................................... .....................144
AFF – Imports Solve........................................................................................................... ..........147
AFF – alternatives to steel solve high prices...............................................................................148
AFF – Impact Takeout – Steel Industry Collapse...........................................................................150
AFF – collapse inevitable – there are other threats......................................................................151
AFF – steel not key to military ................................................................................. ...................152
AFF – Uniqueness O/w the Link...................................................................................................155
Auto Industry............................................................................................................................. ..161
Non-Unique – Auto Industry Weak Now.......................................................................................162
Alt Cause/ Uniqueness o/w Link................................................................................................... 165
AT China Threat ................................................................................................................ .........167
New Tech Key to Auto Industry........................................................................................ ...........168
Auto Industry Resilient......................................................................................... .......................169
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Alt Energy Solves Auto Industry ................................................................................................170
Auto Industry Collapse Inevitable........................................................................................... .....171
Aluminum.......................................................................................................................... ..........172
Non Unique – already uses alternative energy............................................................................173
Non Unique – Aluminum costs will rise.............................................................................. ..........175
No Link – energy use declining ........................................................................................... ........176
No link – aluminum industry durable .................................................................................. ........177
No Link – Carbon price.................................................................................. ..............................178
No Impact – industry wont collapse.......................................................................................... ...179
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Electricity Prices 1 NC Shell
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Uniqueness – Energy Prices are low

Energy prices will lower because China will decrease comsuption
Saulwick and Garnaut 8 (Jacob and John, Writers for The Sydney Morning Herald; “World oil price falls as China cuts fuel subsidies”;
http://www.smh.com.au/news/national/world-oil-price-falls-as-china-cuts-fuel-subsidies/2008/06/20/1213770924137.html; June 21, 2008
Following the news, world oil prices immediately dropped $5 a barrel. In Sydney the average price fell by more than two cents
to 165.6 cents a litre overnight. The Chinese Government has been under pressure to cut its fuel subsidies, but the
decision to raise prices by about 18 per cent took motorists and oil analysts by surprise. The New York oil price slid
$US4.75 ($5) to $US131.17 a barrel in response to the decision, after touching $US140 a barrel earlier in the week. Citigroup's Beijing
economist, Shen Minggao, said it was only the beginning of bringing prices into line with rising international oil costs. "If
the international oil price creeps up further, more adjustments are possible after the Olympic Games," he said in a research note.
Subsidised fuel has helped China prevent oil's rising costspilling into price rises in other goods, which would worsen the country's
inflation problem. Mr Minggao said the partial removal of the subsidy was likely to improve the efficiency of energy use, and could
also lead to a small slowdown in industrial output. "More idle capacity could mean less demand for oil, which will probably
have some impact on the global oil price."
Electricity prices are reasonable because of no carbon tax
Kauffman 8 (Richard, The Huffington Post; “An Open Door to Global Warming”; http://www.huffingtonpost.com/richard-
kauffman/an-open-door-to-global-wa_b_111283.html; July 7, 2008)
Business owners are making rational economic decisions. Probably true. It may be that increased electricity costs are offset by
more business. Electricity costs are reasonable in the US, with no "cost of carbon" in current electricity prices. There is
an inadequate economic incentive to be more efficient. It may also be that there is a free rider problem going on. A
particular business owner may not like the idea of contributing to global warming but is worried that if every other
business has its doors open, he may have to keep his doors open, too, because he will be otherwise disadvantaged. It may also be
that the scope of the problem seems so overwhelming that participants will keep "cheating" as long as they can. Several Washington
Senators and Members of Congress have called for another "Manhattan Project" to fund new renewable energy technologies. We
don't need a technology breakthrough to have business owners shut their doors in the middle of the summer (some by
the way do, the same in the winter, for apparently similar reasons). But perhaps we should spend some money to figure out
why they don't.
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Renewables Expensive
Renewable energy costs more than non-renewable energy
CNN, 7/2/08 (“Va. utility proposal hinges on renewable energy”,
http://money.cnn.com/news/newsfeeds/articles/apwire/22d88fcc09197d9c5a7b212ccd6a3fe1.htm)
NEW YORK (Associated Press) - Utility Appalachian Power wants to give its Virginia customers the option of choosing
renewable sources for their energy needs.
The subsidiary of American Electric Power Co. Inc. asked the Virginia State Corporation Commission on Tuesday to approve a billing
option that would charge customers to select renewable energy sources.
Customers who select a renewable energy source will pay an additional $1.50 over their usual power costs for each
100 kilowatt hours of that energy source.
The program will initially use energy and renewable energy credits associated with the Summersville, W.Va., Hydro Plant.
An increase in renewable energy would increase electricity prices

David Enke, Faculty fellow of finance and professor at University of Tulsa, 6/30/08 (“Will Electric Power Cause the Next Price
Shock”, http://www.istockanalyst.com/article/viewarticle+articleid_2351049&title=Will_Electric_Power.html)
According to the Energy Information Administration (EIA), 49.0% of electricity is generated from coal, 20.0% from natural gas, 19.4%
from nuclear, 7% from hydro, 1.6% from petroleum, with the remaining 3.1% from other sources, part of which are alternative energy
sources not listed (solar, wind, etc.). Approximately 9.5% of electricity generation is currently from renewable sources. If
Congress has its way, this number will increase as restrictions on carbon emissions get enacted. While everyone would like to
see lower carbon emissions and a cleaner environment, such legislation will have consequences, many of which will be
unintended (ethanol anyone?). Hopefully some of these consequences will be considered as we move forward as a country toward
developing some type of energy policy, because while we all know about the high cost of gasoline, and the impact that burning this
fuel has on our environment, we are also beginning to feel the effects of ethanol mandates, which even with their good intentions are
producing unintended consequences of higher food and commodity costs. Unfortunately, electricity prices are the next form of
energy that is likely to feel the effects of high commodity prices, regulation, and legislation in a way that is similar to
the current impact of high crude oil prices.
Renewable energy mandates will increase electricity prices

Statesman Journal, 7/2/08 (“Expected Power Rates to Rise”,
http://www.statesmanjournal.com/apps/pbcs.dll/article?AID=/20080702/NEWS/807020439/1001)
PORTLAND — Already faced with higher food and gas prices, consumers can expect to pay more for power as regional utilities
buy expensive wholesale electricity to meet rising customer demand while investing heavily to meet renewable energy
mandates.
Ratepayer advocates contend the increases could rival those from the 2000-01 energy crisis, when residential rates rose
roughly 30 percent and industrial rates increased about 50 percent.
Renewable energy is unpopular with states- customer prices and implementation costs are too
high
Forbes, 6/27/08 (Ray Henry, “Rhode Island governor vetoes renewable energy bill”,
http://www.forbes.com/feeds/ap/2008/06/27/ap5163444.html)
Gov. Don Carcieri said Friday he has vetoed a bill that would force the state's major power company to buy renewable
energy for 10 years at a time, a requirement that lawmakers approved to stimulate investment in wind turbines and solar power
projects.
The proposal was supposed to fix a problem that renewable power advocates say blocks the construction of major green energy
projects here: a lack of large customers willing to buy the power. Without a dedicated buyer, banks and investors will not fund the
projects.
As a solution, lawmakers voted to force National Grid, the state's largest electricity distributor, to buy enough renewable power to
supply about 9 percent of Rhode Island's electricity needs by 2013. In return, National Grid, which supported the bill, would receive a
payment equal to 3 percent of the renewable power it bought.
In a letter to lawmakers explaining his veto, Carcieri said the bill could increase costs for customers. He said the bonus
payment to National Grid was too generous and faulted the legislation because it gives preferential treatment to solar
power projects, which Carcieri believes are too expensive.
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Solar Energy Expensive

The installation and usage of solar energy is expensive
redOrbit, 7/1/08 (Greg Ninness“Market Warming to Cheaper Solar Panels”,
http://www.redorbit.com/news/business/1458851/market_warming_to_cheaper_solar_panels/)
This week Elemental Energy, half- owned by giant power company Meridian Energy, will start leasing solar panels and micro wind
turbines to its customers, allowing businesses to treat the cost as a tax deductible expense and considerably improving the
technology's economic viability.
The total cost of installing solar panels, the most viable renewable energy system for urban environments, is in the range of
$9 to $13 per watt of power they produce, according to the Energy Efficiency and Conservation Authority.
That means a system producing 2kW of electricity, enough to power an electric heater, would cost $18,000 to $26,000.
And the bigger the system is, the more it costs.
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Solar energy is more expensive than existing non-renewable and renewable energy
The Age, 5/14/08 (Alan Moran, “Why a solar system still lacks power”, lexis)
IN THE range of energy supply systems designed to reduce greenhouse gases, the most expensive is photovoltaic cells,
or solar panels. Engineering firm SKM has estimated that rooftop solar power is eight to 12 times more costly than regular
electricity. The panels also cost three to five times more than the inefficient wind turbines that, on the back of subsidies, are
increasingly dotting the landscape.
Even with government subsidies solar power is expensive

Wall Street Journal, 6/30/08 (Yuliya Chernova, “Shedding Light on Solar”,
http://online.wsj.com/article/SB121432258309100153.html?mod=googlenews_wsj)
The idea of solar power sounds so simple. And it seems like it should be cheap compared to other sources of energy. After
all, the sun is there, and it's free.
But despite federal and some state government subsidies that have helped push up demand, solar power still accounts
for less than 1% of power generation in the U.S. That's because even with subsidies, solar power remains expensive
compared with energy based on traditional fuels like coal and natural gas.
High upfront costs deter the growth of solar energy in the status quo
The Arizona Republic, 6/30/08 (Shaun McKinnon, “Costs remain impediment to AZ's use of solar power”, lexis)
Cost remains a high hurdle for people who seek sustainable alternatives. Solar energy comes with a steep upfront cost,
from tens of thousands of dollars for homeowners to millions of dollars for businesses that want to install systems.
Lee Feliciano thinks he can help larger businesses take their first sustainable steps into solar power. A former solar-system installer,
Feliciano started SolEquity as a way to finance solar projects and get big rooftops wired for the sun sooner.
He packages deals that let businesses go solar and then his company keeps the incentives and tax credits in return. Most of his
customers will spend $1 million or more on the projects.
"With solar and with wind, as renewable energy, 90 percent of your costs or more is front-loaded," he said. "There are not
a lot of people with that sort of long-term perspective. Financing is the key to unlocking it."
Even sunny places don’t adopt solar energy- Solar plant costs
The Arizona Republic, 6/30/08 (Shaun McKinnon, “Costs remain impediment to AZ's use of solar power”, lexis)
It's the question visitors to Arizona ask often when the subject is sustainability: With so much sunshine and so much
empty land - and empty rooftops - where's all the solar power?
The quickest explanation is cost. Building solar power plants is expensive and would spike electricity bills in a state
where prices are comparatively low. Rooftop panels also have high up-front costs.
Solar energy is expensive- Inefficient technology and lack of support

St. Petersburg Times, 7/22/07 (“Time to Harness the Sun”, Lexis)
The truth is, generating electricity using the sun is expensive. While a kilowatt hour of electricity can be produced from
conventional sources for less than 10 cents, the same amount using solar thermal technology costs at least 50 percent
more, according to an analysis by CNET News. To bring the cost down there needs to be a technological breakthrough on
solar energy, particularly in storing it when the sun is not shining.
The problem is that while the sun has worshippers, it lacks a powerful political constituency. The U.S. Energy Department
will spend $427-million researching new uses of coal, $303-million on nuclear technology but only $159-million on
solar energy this year, the New York Times reported.
Solar energy can only be affordable after massive subsidization and taxes
The Arizona Republic, 6/13/08 (“Green energy will be costly for Arizonans”,
http://www.azcentral.com/arizonarepublic/opinions/articles/0612robb13.html)
Well, unsubsidized solar generation is five times more expensive than conventional sources. The only way to make it
even marginally thinkable at present is through heavy subsidization.
The solar concentrating plant APS is considering is only feasible if federal taxpayers pick up 30 percent of its
construction cost.
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ASU recently got a bunch of great publicity for committing to put solar panels on many of its rooftops. In reality, it's cost-effective
for ASU only because of tax breaks and a subsidy from a surcharge the Corporation Commission has imposed on
electricity to underwrite the renewable mandate.
Last year, ratepayers paid over $12 million in such surcharges, and the renewable mandate was just 1.5 percent. Hold
onto your wallet as it rises to 15 percent.
So, the rest of us get to pay more in taxes and for electricity so ASU can preen about its environmental conscience. Not
such a good deal.
Solar power is based on federal incentive reliance- too expensive for consumers
Norwich Bulletin, 6/22/08 (“Our View: Focus effort on 1 form of renewable
energy”,http://www.norwichbulletin.com/opinions/x1165649865/Our-View-Focus-effort-on-1-form-of-renewable-energy)
Nor are solar powered systems practical in terms of being a primary alternative source of renewable energy. They’re
too expensive. Until major advances are made in lowering the cost of the solar panels, they are out of the price range
for most consumers. Without the financial incentives, it is unlikely many of today’s solar-powered projects would have
been developed.
Solar Energy Expensive

Solar energy is too expensive without current subsidies
Christian Science Monitor, 6/26/08 (“The Real Price of Solar Power”, http://www.csmonitor.com/2008/0626/p08s01-
comv.html)
Unsubsidized, solar energy still can't compete in most energy markets. The pay-back period is too long. Reports of more
efficient solar panels are helping reduce costs but about half of the expense for solar is still borne by taxpayers.
Some advocates want Congress to commit to $420 billion in solar subsidies – nearly the same cost to build the
Interstate Highway System. This might allow solar to reach price parity with other major energy sources within a decade.
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Hydrogen Cars Expensive

The electricity necessary to power hydrogen cars will be more expensive compared to current
gas prices
David Enke, Faculty fellow of finance and professor at University of Tulsa, 6/30/08 (“Will Electric Power Cause the Next Price
Shock”, http://www.istockanalyst.com/article/viewarticle+articleid_2351049&title=Will_Electric_Power.html)
And of course, all of this says nothing of the expected increase in hybrids and electric cars, or other green vehicles expected to run
on hydrogen (which requires electricity to separate the hydrogen), or even run on natural gas itself. Each will facilitate an
increase in natural gas and electricity prices. So in short, if you though that the inconvenience of not being able to take
your normal Sunday drive or extra trip to Grandma's house was painful, you may experience even greater stress on your
wallet as electricity prices begin responding to current commodity prices. When consumers have to cut back on air
conditioning, reduce lighting, realize that their hybrids are not quite as economical as they thought, suffer planned
brownouts, or even worse, an unplanned blackout, then Congress will begin to see the you know what hit the fan -
assuming of course that there is any inexpensive electricity around to actually power the fan.
Hydrogen cars are expensive- requires precious metals

LA Times, 7/3/08 (DAWN C. CHMIELEWSKI, “Green cars the in thing in Hollywood”,
http://www.modbee.com/life/cars/story/349728.html)
But critics say hydrogen fuel is difficult to store and, at least for now, energy inefficient. It requires more energy to
produce than it provides once it's in the car's tank. Moreover, the process of making hydrogen can create greenhouse gases.
And fuel cells are very expensive because they contain precious metals such as platinum and palladium .
"It's a least a couple hundred thousand dollars per vehicle," said Spencer Quong of the Union of Concerned Scientists, a
nonprofit environmental group. "They have to reduce those costs."
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Hydroelectric Power Expensive

Hydropower is costly-contracts from owned utilities raise prices
Meanwhile, the utility faces the expiration of long-term contracts for hydropower it buys from municipally owned utilities
on the mid-Columbia River. PGE buys that hydropower today for between $10 and $24 per megawatt hour. To replace it
on the open market will cost about $70 per megawatt hour.
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"It's like watching an accident in slow motion," said Jason Eisdorfer, a lawyer for the Citizens Utility Board of Oregon. "All
of these different market dynamics are coming together."
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Wind Power Expensive

Wind power drives up electricity prices- turbine demand, dollar value depletion, and
transportation costs
Renewable power is one answer, and PGE, like other utilities, is adding wind farms to meet a new state mandate requiring
it to generate 25 percent of its electricity from renewable sources by 2025.
The wind is free, but it costs hundreds of millions to build large wind farms. Moreover, the price is escalating because of
the worldwide demand for turbines, a plummeting dollar and rising costs for everything from steel and concrete to
transportation.
Wind energy is expensive- demand for turbines outstrips supplies

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Renewable Energy World, 7/1/08 (Lisa Cohn, “Westward Ho! US utilities scramble for wind”,
http://www.renewableenergyworld.com/rea/news/reworld/story?id=52691)
‘It doesn’t matter what it costs to build,’ says Mark Tallman, vice president of renewable resource acquisition for PacifiCorp, also
based in Portland. ‘It’s what people ask when they want to sell the output. California has set a market price referent (MPR) close
to $100/MWh. Given that they’re allowed to spend that much, the price might go that high,’ adds Tallman.
In addition, global issues are at play, with the weak value of the dollar, worldwide shortages of turbines and the
increased cost of manufacturing the components needed to get projects up and running, all affecting prices.
‘The real shortage is the supply of wind turbines. It’s not the wind energy. It’s not the projects. Demand outstripping supply
is a worldwide phenomenon,’ says Stuart Hemphill, director of renewable and alternative power for Southern California
Edison (SCE).
Wind power will increase consumer’s electricity bills- development of turbines and wind farms
Tony Lodge, Research Fellow, Centre for Policy Studies, 7/7/08 (“Wind Chill – Why wind energy will not fill the UK’s energy gap”,
http://www.egovmonitor.com/node/19842)
This huge increase in renewables, particularly wind, will require a substantial increase in the amount of money taken from
consumers’ electricity bills to subsidise new wind farms through the Renewables Obligation (RO). The RO is the Government’s
principal policy instrument to encourage the development of the renewable electricity sector. It is an indirect subsidy system drawing
funds from consumer bills and passing them to the renewable electricity sector. This currently amounts to £1 billion a year, an
amount which will have to rise significantly to fund the construction and development of thousands of new turbines.
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Links- RPS
RPS hurts the economy and drives up the price of electricity
Power 08 [Provides information to the energy market, “Legal & Regulatory: Why RPS programs may raise renewable
energy prices”, May, http://findarticles.com/p/articles/mi_qa5392/is_200805/ai_n25500358/pg_1?tag=artBody;col1]
Something unexpected, however, happened along the way. Though more than half of U.S. states have adopted renewable
portfolio standards (RPS) that require utilities to meet specific generation targets, and investment in green projects and
technology development has increased significantly, recent data suggest that the price of green electricity has risen
and will continue to spiral upward. What happened?
The economic Achilles heel of current state RPS programs is that they carve out a portion of the larger energy market
and unbalance it by imposing legislatively determined demand. In the pre-RPS era, utilities aligned their resource
planning with demand forecasts largely irrespective of generating technology. Procurement decisions were based
primarily on need, price, and 'fit' (dispatchability and 'black start' capability). As a result, coal, gas-fired, nuclear, hydro, and
renewable energy plants competed against each other for a piece of the utility demand pie. The overall market
benefited from the increased competition, which--to some extent--also provided a hedge against raising fuel costs. For
instance, if biomass prices rose, utilities could procure more gas-fired generation.
In stark contrast, the RPS regime mandates specific renewable procurement targets, generally a percentage of a
utility's overall load. Legislatively imposed capacity targets--and penalties for failing to meet them--often obligate market
participants to subordinate their own (and their customers') economic interests to the desires of states. Utilities must
purchase RPS-compliant power even if its price cannot otherwise be justified. The economic consequences for utilities
seeking to be RPS-compliant include higher costs for facility sites, fuel, and generating equipment.
Moreover, although in theory there is competition among different renewable technologies, external forces (such as siting and transmission constraints) effectively limit the
availability of resources that can meet a utility's needs--as well as the benefits that competition can provide consumers. Legislative directives that artificially increase demand will
also increase prices when supply cannot keep pace. The net result is a skewed market in which power produced from renewable resources commands a price premium just for
being 'green,' irrespective of the benefits of the project that generated it.
Upward price pressure on RPS-compliant power is further sustained by fast-approaching RPS compliance deadlines. In California, for example, utilities are currently scrambling to
procure significant amounts of renewable resources in order to meet the state's 20% target by 2010. In such a market, rising prices should be no surprise: Prices rise when
demand exceeds supply, regardless of the reasons for the imbalance.
In economic theory, competition enables markets to respond with an 'invisible hand.' When the movements of a market are precipitated by government fiat, they are subject to a
visible and very heavy hand.
Wind farms are feasible only where it's windy, and photovoltaic arrays only where it's sunny. Access to fuel similarly limits potential sites for geothermal and biomass projects.
Though these geographic realities should be evident, overly ambitious RPS programs such as California's suggest a failure by regulators to meaningfully assess whether regional
renewable energy 'reserves' are sufficient to meet RPS-imposed demand.
The shortage of viable in-state resources has prompted utilities to look to neighboring states to meet RPS requirements. But extending the search for renewable power beyond
state borders can have negative consequences for both the consuming state (higher prices resulting from increased transmission costs) and the producing state (the energy that
could be delivered locally at the lowest price is exported).
The bottom line: Although governmental edicts to increase demand promise some short-term benefits, long-term gains won't be possible unless RPS targets are based on a
realistic assessment of available supply--not simply on au courant political correctness.
Fostering the development and use of green generation is good policy that should be continued for several reasons. If implemented wisely, RPS programs can significantly benefit
both consumers and the environment by reducing dependence on foreign oil, diversifying generation fuels, cutting greenhouse gas emissions, and ultimately by lowering the
overall cost of power.
If they are ill-conceived, however, RPS programs create artificial market demand that does not reflect real-world limitations
on renewable project development. The net effects could be much higher electric bills and a likely public backlash. If
policy makers do not carefully consider the possible downsides of their fervor to make power generation less of a
contributor to global warming now--whatever the cost--history may remember RPS as yet another expensive 'green'
façade.
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Links- TPS
TPS increases electricity prices
Kolstad and Wolak 03 [Jonathon and Frank, professors @ Stanford, Using Environmental Emissions Permit Prices
to Raise Electricity Prices: Evidence from the California Electricity Market, May 1,
http://repositories.cdlib.org/ucei/csem/CSEMWP-113/]
This paper analyzes the extent to which the conditions in the emissions permit market for oxides of nitrogen (NOx) operated by
the South Coast Air Quality Management District (SCAQMD) in the Los Angeles metropolitan area interacted with competitive
conditions in the California electricity market to enhance the ability of electricity suppliers with some or all of their
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generation units located in SCAQMD to exercise unilateral market power. We present evidence consistent with the view
that NOx emissions permits were a convenient vehicle for enhancing the ability of suppliers to exercise unilateral
market power in the California electricity market. We find that generation unit owners with some of their plants located in the
SCAQMD paid statistically significantly higher prices for 2000 and 2001 NOx emissions permits than other participants in the
SCAQMD emissions market, despite the fact the prices they paid for 1998 and 1999 vintage permits were no different from other
SCAQMD participants. We then present evidence consistent with the view that wholesale electricity suppliers did not operate
and bid their generation units requiring NOx emissions permits in a manner consistent with higher emission permit
prices being a cause of increased production costs. Taken together, this evidence suggests that NOx emission permit
prices during 2000 and 2001 were primarily used by these generation unit owners to cost-justify higher bids into the
California electricity market that would set higher prices for all electricity they produced.
Trading increases electricity prices- 6 reasons

Greenhouse Policy Coalition 07 [GPC was formally set up in 1996 and has played an active and constructive
part in the Climate Change debate since that time, Climate Change Policy Could Cause Large Increase In Electricity
Costs, http://www.gpcnz.co.nz/Site/News_Releases/Archive/Climate_Change_Policy.aspx]
“It has been hard for industry to properly respond to the range of policy options on the table because there is a lack of quantitative
analysis to assist us to judge the relative merits of the different options. We asked LECG to undertake an examination of
emissions trading applied to the electricity sector between 2008 and 2012 because we suspected that it would add
substantially to the cost of electricity to consumers, while achieving dubious benefits, and this has proven to be the
case.”
Toby Stevenson, co-author of the report, says there are a number of reasons that a narrow emission trading scheme applied
to the electricity sector would be an expensive option for electricity consumers.
“Under this option it is going to be difficult to produce material emission reductions from the electricity sector without imposing
significant costs on consumers for a range of reasons, such as;
· the relatively low contribution of electricity generation emissions to total greenhouse gas emission in New Zealand
· the existing generation mix and the influence of hydro in the market
· the limited number of participants in the electricity market
· the way the spot market operates
· the range of conditions that would be required for new renewable generation to displace existing thermal generation
between 2008-12
· the transaction and other costs over such a low base.
Toby Stevenson said that they had looked at a range of scenarios for emissions trading in the electricity sector, using a range of
possible prices of carbon. “The results indicate that there will be an immediate impact on consumer electricity costs as
soon as credits need to be purchased, rather than being gradually introduced to electricity prices as the credit
purchase costs to generators might be under some scenarios.”
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Internal Link – Price spikes will happen
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Internal Link – Price Spikes will hurt

the economy
High energy prices will hurt the economy
Fox News, June 17, 2008
Rising Prices, Growth Help Slow Economy, http://fox40.trb.com/news/ktxl-
061708econ,0,7319916.story
WASHINGTON — Wholesale prices barreled ahead while housing and industrial activity faltered - a blend of high-costs and slow
growth that ensures the Federal Reserve's most likely move on interest rates next week will be no move whatsoever .
There's some Catch 22 for the Fed in all of this, and Chairman Ben Bernanke and his colleagues have made increasingly clear they're
not inclined to cut interest rates further for fear of aggravating inflation. On the other hand, if they act too quickly at the June 24-25
meeting to boost rates to fend off inflation, it would hurt an economy already battered by housing, credit and financial woes. "The Fed
is in a box," Ken Mayland, president of ClearView Economics, said after the latest batch of economic barometers were released
Tuesday. That's why many economists are predicting the Fed will hold rates steady at 2 percent, a four-year low, at next week's
session. The Labor Department's Producer Price Index, which measures the costs of goods before they reach store shelves, leaped 1.4
percent in May, the biggest increase in six months. Galloping energy and food prices, which are especially squeezing business profits,
figured prominently in the index's pickup. The economy's problems and high prices for fuel and raw materials are taking a
toll on manufacturers and others. The Federal Reserve reported that industrial productions fell 0.2 percent in May, the
second straight monthly decline. Plants operated at only a 79.4 percent capacity, the lowest since September 2005
after the Gulf Coast hurricanes. And, there was more fallout from a deeply depressed housing market. The number of
new housing projects started in May fell 3.3 percent to a 975,000 pace - the lowest in 17 years - as builders pulled
back further. Builders are smarting as unsold homes as well as foreclosed homes pile up, adding to already swollen
supply. Sagging demand from would-be buyers and - more recently - rising mortgage rates, are adding to builder headaches.
"Builders are doing the exactly the right thing - cutting back," said David Seiders, chief economist at the National Association of Home
Builders. "Now I'm a little more worried on the interest rate front. I think we'll see mortgage rates recede to some degree. If not, it will
be a tougher road for housing than anticipated," Seiders said. The housing slump has been the biggest drag on the economy, which
has slowed sharply in recent months. The Fed and the Bush administration are hoping that the central bank's powerful rate cuts since
last September - which take months to work through the economy - along with the government's $168 billion stimulus effort - will
help lift the country out of its doldrums. It's a gamble, though, as expensive food and gas could force people and businesses to
hunker down even further. Yet another report Tuesday showed that the country's "current account" deficit, which is the broadest
measure of trade, widened to $176.4 billion in the first quarter, up from $167.2 billion in the final quarter of last year, as the U.S.'
foreign oil bill soared. The current account report covers not only goods and services but also investment flows between the United
States and other countries. Some fear that the nation could be headed for a bout of "stagflation," a toxic mix of stagnant economic
growth and inflation not seen in decades. But Bernanke - who has ramped up his tough anti-inflation talk over the past few weeks -
has said that's not the case. Bernanke also has said he doesn't see a repeat of a 1970s-style situation where workers demanded - and
received - big pay increases to cover rapidly rising prices. In the PPI report, when energy and food costs were disregarded, the so-
called "core" prices rose a much more modest 0.2 percent in May, an improvement from April's 0.4 percent increase. That suggested
that other prices were better behaved. Still, there are growing concerns that rising energy and food costs will eventually force
companies to boost prices for lots of other goods and services, spreading inflation through the economy. That's why Wall Street
investors predict the Fed will be forced to boost rates later this year to combat inflation. Others, however, think the Fed won't have to
start to raise rates until next year. Over the past year, overall producer prices have gone up 7.2 percent, while "core" prices
have increased 3 percent. Energy prices were up 4.9 percent in May, the most since November. Diesel fuel prices jumped
11.2 percent, gasoline prices rose 9.3 percent and home heating oil increased 8 percent. Food prices went up a sharp 0.8 percent, the
most since March. Soaring energy and food prices, which have wracked up a string of record highs in recent days, are
walloping consumers and businesses alike. Energy prices eased a bit Tuesday, with oil hovering around $134.19 a barrel and gas
prices at $4.078 a gallon. Last week, the government reported that consumer prices surged by 0.6 percent in May, the biggest
increase in six months. Those higher prices also are cutting into workers' paychecks - further straining household
budgets. Wholesale prices are rising faster than consumer prices because businesses - for competitive or other
reasons - have been limited in their ability to pass along to consumers all of their higher costs from energy and other
raw materials. The Fed is hoping such restraint will continue. "For now the Fed seems content to talk tough" against inflation, said
Stephen Stanley chief economist at RBS Greenwich Capital. "This strategy is risky."
Perception of high energy prices hurts investment

Herald Tribune, May 19, 2008
Signs that rising energy prices are taking a toll hurt stocks,
http://www.iht.com/articles/2008/05/19/business/19marketsfw.php
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Most U.S. stocks fell after SanDisk said record energy prices hurt sales, spoiling a rally in technology shares . The
Standard & Poor's 500 stock index advanced to the highest level since January, boosted by oil companies. SanDisk tumbled the
most since March after the largest maker of flash-memory cards said April sales were "soft." Goldman Sachs Group,
Morgan Stanley and Lehman Brothers Holdings Inc. led financial shares lower after Citigroup reduced earnings
estimates on Wall Street's biggest firms. Exxon Mobil and Chevron gained, sending energy shares to a record and boosting the
Dow Jones Industrial Average, as crude climbed above $127 a barrel. About 15 stocks retreated for every 14 that rose on the
New York Stock Exchange. The Standard & Poor's 500 Index added 1.28 points to 1,426.63. The Dow average increased 41.36 to
13,028.16. The Nasdaq slipped 12.76 to 2,516.09. "This rally may be in for a pause," said Jeffrey Kleintop, chief market strategist at
LPL Financial in Boston. "We have seen a slowdown in discretionary consumer spending, and boy you'd have to say that
applies to high-tech gadgets." The S&P 500 climbed as much as 1 percent earlier after the Conference Board said its index of
leading U.S. economic indicators rose in April for a second month. The gauge increased 0.1 percent, a sign the economy may recover
in the second half of the year. Economists in a Bloomberg survey forecast the measure to be unchanged. The dollar gained the most
against the euro in four days and strengthened versus the yen after the index of leading U.S. economic indicators unexpectedly rose
in April. The greenback gained versus 13 of the 16 most-actively traded currencies, including the Brazilian real and British pound. The
yuan rose to the highest level since the end of its dollar link in 2005 after U.S. Treasury Under-secretary David McCormick urged China
to quicken currency reforms. "Any hint toward stabilizing in the U.S. could be seen as bearish for the euro," said Benedikt Germanier,
an analyst with UBS AG in Stamford, Connecticut. "Investors are buying the dollar against the euro on dips."
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the economy
High energy prices will cause inflation
Sustainable Facility, September 30, 2000
Energy Prices Eyed as Threat to U.S. Economic Balance,
http://www.sustainablefacility.com/Articles/Industry_News/91562ad74be38010VgnVCM100000f
932a8c0
Economists are keeping a wary eye on energy prices, with some predicting that continued high oil prices and short
supplies of natural gas could contribute to an inflationary spiral. While other factors could also upset the current
equilibrium of the economy, energy prices, for now, appear to be the most volatile. Economists say that rising prices
have already had an impact on economic growth and have added as much as one percentage point to the consumer
price index over the past year. After a price spike earlier in the year, crude oil prices dropped. However, in late August, crude
prices closed at a five-month high of more than $33 a barrel on the New York futures market. That level is up from $10 a barrel in
January 1999. Analysts point out that the economy is less sensitive to oil price increases than it was in the 1970s, but don't discount
the impact that a harsh winter and increased demand could have. In its Short Term Energy Outlook, the Energy Information
Administration (EIA) warned that natural gas market activity "continues to reveal the...vulnerability of the U.S. market to
potential supply shortfalls, particularly in view of burgeoning power sector demands and large potential increases in
heating demand just a few months down the road." Since June, daily spot wellhead prices have been averaging between $3.50
and $4.50 per thousand cubic feet, the EIA report says. This is nearly double the price of one year ago and as much as a $2 per
thousand cubic feet gain since the beginning of the year. Although rising crude oil prices may have encouraged natural gas prices to
grow, the principal basis of these raised gas prices has been the precarious supply situation, according to the report. Contributing to
the low storage injection rate, the EIA said, has been hot summer weather in portions of the country, particularly Texas and California
(which consume large amounts of gas-generated electricity). Natural gas that would normally be added to storage has, to some
extent, been used (indirectly through electric utilities) to run air conditioners. Furthermore, demand for natural gas has been growing
due to the expanding economy over the last 7-8 years and the gowing use of gas at power facilities. Low inventories for distillate will
exert upward pressure on distillate fuel oil prices when the heating season begins in October, the EIA report warned. With the summer
more than half over, the level of distillate stocks remains low, creating the possibility of price instability for the distillate fuels when
the heating season commences. Last February, a similar scenario, including severe weather in the Northeast and extremely low
inventories of distillate fuel, led to heating oil and diesel fuel prices that temporarily averaged more than $2 per gallon in New
England and other areas in the Northeast. Current stocks of high-sulfur distillate fuel oil (heating oil), particularly in the Northeast
where most of the nation's heating oil is consumed, are currently at low levels.
Higher energy prices would devastate the economy

Ron Scherer (Staff writer of The Christian Science Monitor) February 21, 2008
Soaring energy prices bad news for the economy, http://www.csmonitor.com/2008/0221/p03s01-
usec.html
New York - Once again, concern is rising about the price of oil and gasoline. On Tuesday, the price of oil hit a record $100.01 a barrel,
up some $14 in eight trading days. It's the second time since late December that the price has hovered at the $100-a-barrel level.
The sharp rise is already showing up at the gas pump: Between Tuesday and Wednesday, the price of gasoline rose 4 cents a gallon,
reports GasPriceWatch.com. Since Feb. 9, gasoline prices nationally are up 10 cents a gallon, for an average price of $3.05 a gallon .
For the economy, the run-up could not come at a worse time. Many economists believe the US economy is teetering on
the edge of a recession. Higher energy prices act as a tax on consumers, absorbing money that would normally be
used to buy other things. If energy prices remain this high – or go higher – they could begin to eat into the rebate
checks that the government is planning to start sending taxpayers in May. "This is bad for the consumer and the
economy," says Dennis Jacobe, chief economist at the Gallup Organization in Washington. "It will be an offset to the
fiscal stimulus everyone is talking about." Motorists are paying much higher prices than they were a year ago. According to
GasPriceWatch.com, gasoline prices are up 51 cents a gallon from a year ago, when the price of oil was closer to $60 a barrel. On
Wednesday, some of those price increases were reflected in a sharp rise in the Consumer Price Index, which rose by 0.4 percent in
January, compared with December. Energy rose 0.7 percent. Yet even with energy and food excluded, the CPI was up 0.3 percent –
much higher than the Federal Reserve would like to see. The last time oil prices reached this level was at the end of December. Then,
oil prices fell back to about $86 a barrel. Energy analysts talked about the price of a barrel of oil settling in for 2008 in the
low $80s. But since then, reports have surfaced that the Organization of Petroleum Exporting Countries (OPEC) might cut
production when it meets in the first week of March. OPEC currently produces close to 30 million barrels per day. On Feb. 13,
the International Energy Agency (IEA) cut its estimate of demand by 200,000 barrels per day to reflect the slowing US economy. "If
OPEC does follow through and cut, it's not very helpful to the market," says John Felmy, chief economist at the American
Petroleum Institute in Washington. "Why cut at these prices?" Mike Fitzpatrick, who heads up the risk management group at MF Global
in New York, blames the latest spike on hedge funds or wealthy individuals buying energy futures as an inflation hedge. "The logic is
that stock and bond markets are down, so the best bet is commodities," says Mr. Fitzpatrick. But Fitzpatrick says the market
is also being swayed by a number of small events, such as a small refinery fire in Texas, the continued sparring between Exxon-Mobil
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and Venezuela's president, and news reports that oil field violence is heating up again in Nigeria. "We're all scratching our heads," he
says. While oil traders are trying to understand the dynamics of their market, economists are worried about consumers as they
watch oil prices tick up. In Dayton, Ohio, people are doing less driving early in the week, when prices are higher (prices
tend to come down later in the week), says Brad Proctor, founder of GasPriceWatch.com, which is based in Dayton. "People are
adapting," he says. Yet so far, consumers have shown some resilience . On Tuesday, Chicago-based ShopperTrak RCT reported
that retail sales in February rose 5.9 percent for the week ending Feb. 16. For the month, it's running at about a 2 to 3 percent
increase, says Bill Martin, co-founder of ShopperTrak. "Call it moderate spending to this point, not too fast and not too slow ,"
says Mr. Martin. "People are continuing to buy things that they need." But the International Council of Shopping Centers is
reaching different conclusions. On Wednesday, it reported no week-to-week increase in sales and it proclaimed in a press
release that consumers were not in the mood to spend. How much gasoline prices rise may have an effect on
consumer confidence. "A change of 10 cents a gallon either up or down won't make much of a difference in confidence levels,"
says Lynn Franco, director of the Conference Board's Consumer Research Center in New York. "Following hurricane Katrina, some
gasoline prices went up to $3.50 a gallon, and we had lines at gas stations. So there was much greater apprehension." But Mr. Jacobe
says his surveys are starting to show a sharp deterioration in consumer confidence. "It's down considerably from the first
week of January," he says. How high gasoline prices rise could well determine the effectiveness of Congress's attempt to
stimulate the economy. In May, the first checks for $600 for individuals and $1,200 for couples (plus $300 per child) will hit
mailboxes. Assuming that an average person drives 15,000 miles annually and gets about 17 miles per gallon, Martin
estimates that his or her annual gasoline usage is 882 gallons. A rise of 11 cents a gallon would take about $97 out of
his or her federal rebate check. A rise of $1 a gallon would take $882. "It is tenuous times we live in," Martin says.
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the economy
Higher Energy prices hurt economic growth
Bismarck Tribune, April 19th, 2008
High energy prices hindering economy,
http://www.bismarcktribune.com/articles/2008/04/19/news/state/153733.txt
OMAHA, Neb. (AP) - High energy prices have led to languishing economic growth and continued job losses in 10
Midwestern and Plains states, according to a survey of rural bankers. The overall economic index for the region rose slightly to
47.5, from 46.3 in March, still weak and below the nearly two-year low of 50 measured in February. An index greater than
50 indicates growth. Last April's reading was 66.9. Farmers aren't the only ones hurting from higher energy prices,
according to the survey. "Higher fuel costs are crippling loggers and truckers needed to haul wood ," said Brian Nicklason,
president of Woodland Bank in Remer, Minn. The survey includes Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri,
Nebraska, North Dakota, South Dakota and Wyoming. The average community population covered in the survey is
about 1,300. "Higher energy prices appear to be the culprit in the (index's) downturn," said Creighton University economics
professor Ernie Goss. Goss and Bill McQuillan, chief executive officer of City National Bank in Greeley, Neb., created the monthly
survey of rural bank presidents and chief executives. More than 80 percent of bankers expect the fallout from the recent
subprime mortgage crisis to generate higher compliance and regulatory costs. "Any time there are abuses of the
financial system by the large financial firms, community banks pay the price," said Jim Stanosheck, CEO of State Bank in
Odell, Neb. The farm equipment sales index was a strong 71.4 in April, down slightly from 72.5 in March but up from 64.3 in April
2007. The farmland price index stood at 71.3, down from March's 78.1. Retail sales remained unchanged from March. April's home
sales index rose slightly. Bank indicators were mixed for April. Farmers pushed loan volumes up, to 57.3 from 54.5 in March. Checking
deposits declined for a third consecutive month. Meanwhile, certificates of deposit and other savings instruments rebounded to 57.3
from March's 51.5.
An increase in energy prices causes inflation

John W. Schoen, April. 15, 2008
Surge in energy prices stokes inflation, http://www.msnbc.msn.com/id/24129957/
When the economy slows down, the resulting drop in demand normally takes some of the pressure off inflation. But these are not
normal times: Even as the economy is slumping, oil prices are rising and food prices are jumping. All of which could
spell more trouble for consumers in the coming months. Tax filers this week can look forward to some relief from a
massive government rebate program. But that one-time shot in the arm won’t help consumers — or the economy — if
energy and food prices keep rising. On Tuesday, oil prices surged to a new high, passing $113 a barrel, and the
government reported that prices at the wholesale level jumped 1.1 percent in March. “These are going up way too
rapidly,” said economist Joel Naroff of Naroff Economic Advisors. “This is the money that the average person has to spend,
and as a result they don’t have a lot of money left over for other things.” Food and energy prices tend to move up and
down more quickly than other goods, but lately they’ve only been moving in one direction. In the last three months,
gasoline prices are up by a third and food prices are up 10 percent. Analysts take some comfort in the fact that the so-
called “core" inflation rate has — so far — remained in check. The hope is that higher food and energy prices haven’t yet
spilled over into the prices of other goods. But if you break down the list of those goods, the price increases have been
mildest in so-called capital goods — business machinery and equipment. Price of consumer goods other than food and
energy are up 5.5 percent in the past three months. Analysts are expecting that trend to show up in the Consumer
Price Index due out Wednesday. There are multiple causes to the current rise in prices. A falling dollar increases the cost of
the steady stream of imported consumer goods made overseas. As the dollar falls, it takes more of them to buy goods
priced in stronger currencies. Developing economies around the world are bringing increased demand for raw
materials. Rapid expansion of ethanol production in the U.S. has diverted supplies of corn from grocery stores to
gasoline pumps. Underlying all of these is the rising cost of energy, according to Stuart Hoffman, chief economist at PNC
Financial Services Group. “A lot of this gets right back to oil at $113 barrel and that, to me, is just reverberating through the inflation
pipeline — and not just in the in the U.S.,” he said. “We’re seeing global problems on inflation, particularly on the food front
in countries where their subsistence level (income) doesn’t give them any room for leeway.” On Tuesday, Indonesia
became the latest country to clamp down on food shipments out of the country to try to maintain supplies. Rising global prices
prompted more farmers to sell their crops at export prices that are nearly double local rates. The list of other countries that have
placed restrictions on food exports in a bid to secure supplies and limit inflation includes Russia, Vietnam, India, Cambodia and
Argentina — the latter is the world’s fourth largest wheat exporter. In Bangladesh, economists estimate 30 million of the country’s
150 million people could be going hungry. Haiti’s prime minister was ousted over the weekend following food riots there. U.S.
households spend a smaller part of their budgets on foods than any other country — some 7.2 percent in 2006, according to the
USDA. But food costs in the U.S. are rising faster than they have in 17 years. Eggs cost 25 percent more in February than they did a
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year ago, according to the USDA. Milk and other dairy products jumped 13 percent, chicken and other poultry nearly 7 percent. “It’s
eating into a lot of peoples’ budgets,” said Naroff. “And we’re beginning to see it already in the retail sales numbers.” All of which
leaves policymakers at the Federal Reserve between a big rock and very hard place. After the housing slump and mortgage mess
threw sand in the gears of the credit markets last summer, the Fed began flooding the financial system with money to get things
moving again. But it’s a risky move: too much money sloshing around the economy can also feed inflation. Central bankers are
betting that a slowing economy will help take the pressure off demand for goods — which ordinarily would help tame inflation. But if
higher energy prices are the underlying cause of higher prices, the Fed has a lot less room to maneuver. Raising interest rates now
to fight inflation runs the risk of further damaging to the financial system and global economy. “There a lot of bad
things that are coming together when it comes to inflation but not a lot of them can be effected by Fed policy,” said
Naroff. “What’s the Fed going to do — drive the world into recession so the world stops eating?” For the time being, the best central
bankers can do is signal that their rate-cutting days are numbered. After slashing short-term rates in half over the past nine
months, many economists expect the next move to be a relatively modest quarter-point cut when the Federal Open
Market Committee meets at the end of the month.
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the economy
Higher energy prices would hurt the economy
Energy Tech Stocks, June 30th, 2008
U.S. Power Agency Warns High Electricity Prices Could Plague America ‘For Years to Come’,
http://energytechstocks.com/wp/?p=1396
America’s federal power agency has warned that high power prices could plague the nation “for years to come.” Citing
high commodity prices for natural gas and coal, which were the fuel sources for 18% and 50%, respectively, of U.S. electricity
generation in 2007, the Federal Energy Regulatory Commission (FERC) said this “may be the beginning of significantly
higher power prices that will last for years to come. ” The agency didn’t say exactly how high it thinks prices could rise, but
EnergyTechStocks.com has learned that one major U.S. electric utility is now assuming in its internal forecasts that power
prices in its region will double within five years or less. The FERC assessment, rendered on June 19, is particularly
worrisome since sky-high electric rates would appear to represent an even greater threat to the U.S. economy than
high gasoline prices. That’s because electricity is an even more pervasive aspect of American economic life than
gasoline. Indeed, after the oil shocks of the 1970s, all American business essentially became electrified in order to
improve efficiency, meet new environmental regulations, and minimize exposure to another oil shock . With U.S.
presidential candidate John McCain now leading the charge for cars and trucks that run on electricity, the prospect of sharply
higher electric rates for years to come could put a dent in this promising alternative approach to personal
transportation. In discussing the future of power on June 19, FERC chairman Joseph Kelliher outlined what might be described as a
“no-win” situation that the U.S. finds itself in. He reportedly said, “The United States cannot simultaneously make the massive
investments necessary to assure our electricity supply, make additional large investments to confront climate change,
and lower electricity prices. Doing so would likely result in failure.” For a U.S. energy official to make such a dour public
statement is extraordinary – and a clear warning to investors that, as much as inflationary pressures are starting to hit
the U.S. economy, worse lies ahead.
High Energy Prices decrease consumer spending, hurting the economy

CBS News, January 27, 2006
Energy Prices Stall Economy,
http://www.cbsnews.com/stories/2006/01/27/business/main1244471.shtml
(CBS/AP) The economy grew at only a 1.1 percent annual rate in the fourth quarter of last year, the slowest pace in
three years, amid belt-tightening by consumers facing spiraling energy costs. Even with the feeble showing from October
through December, the economy registered respectable overall growth of 3.5 percent for all of 2005, a year when business expansion
was undermined by devastating Gulf Coast hurricanes. The Commerce Department report, released Friday offered the latest
figures on gross domestic product, the best measure of the country's economic standing . The 1.1 percent growth rate in
the fourth quarter marked a considerable loss of momentum from the third quarter's brisk 4.1 percent pace. The fourth-quarter's
performance was even weaker than many analysts were forecasting . Before the release of the report, they were predicting
the GDP to clock in at a 2.8 percent pace. The 1.1 percent growth rate was the smallest gain since the final quarter of 2002, when the
economy expanded at just a 0.2 percent rate. The White House acknowledged the economy's fourth-quarter slowdown was
bigger than expected. But it maintains America's economic fundamentals remains strong, and there's no reason for
President Bush to change course. "We're confident and optimistic about the path that the economy is on because of
the policies that are in place. Our policies are working to keep the economy growing and creating jobs," said White
House spokesman Scott McClellan. McCellan said the downturn reflects the impact of the Gulf Coast hurricanes and the drop in car
sales, CBS News correspondent Mark Knoller reports. Before the report was released, economists felt that the slowdown in the final
quarter was more of a temporary setback rather than any harbinger of a sustained period of economic weakness ahead. In the
fourth quarter, consumers turned cautious as high energy prices and rising borrowing costs took their toll budgets.
Consumer spending rose by just 1.1 percent pace in the fourth quarter, the slowest since the second quarter of 2001
when the economy was suffering through a recession. Most of the weakness came as people sharply cut back on
purchases of big-ticket goods, including cars and appliances. Spending on such "durable" goods dropped by a hefty
17.5 percent rate in the final quarter, the sharpest decline since the first quarter of 1987. Another source of weakness in
the fourth quarter was government spending, which had contributed to overall economic growth in prior quarters. In the fourth
quarter, government spending declined at a 2.4 percent pace, the largest drop since the first quarter of 2000. Businesses, meanwhile,
boosted spending on equipment and software in the final quarter of last year at a 3.5 percent rate, the smallest gain since the first
quarter of 2003. Spending on residential projects also rose at a 3.5 percent pace in the fourth quarter. That was down from a 7.3
percent pace in the prior quarter and an additional sign that the housing boom is losing some of its steam. An inflation gauge tied to
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the GDP report showed prices rose at 2.6 rate in the fourth quarter, down from a 3.7 percent pace in the third quarter. However, when
food and energy prices are excluded, "core" inflation, which the Fed watches closely, rose at a 2.2 percent rate in the fourth quarter, a
pickup from the 1.4 percent growth rate in the third quarter. That suggests inflation is filtering into a variety of other prices. To fend
off inflation, the Federal Reserve is expected to boost interest rates next Tuesday one-quarter percentage point to 4.50 percent. It will
be last meeting for Alan Greenspan, who will retire that day after more than 18 years running the central bank. President Bush, in his
State of the Union address Tuesday evening, plans to put the spotlight on some pocketbook issues, including high energy prices, tax
cuts and expensive health care costs. Also Friday, Mr. Bush moved to fill two vacancies on the Federal Reserve's seven-member board
of governors, nominating Randall Kroszner and Kevin Warsh. Kroszner is an economics professor in the University of Chicago's
graduate school of business and a previous member of the Council of Economic Advisers. Warsh is a special assistant to the president
for economic policy at the White House. Previously, Warsh served as executive director and vice president of mergers and
acquisitions in the investment banking division of Morgan Stanley.
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the economy
High energy prices would weaken the economy
Associated Press, June 11th, 2008
High energy, food prices keeping economy weak,
http://www.komonews.com/news/business/19776439.html
WASHINGTON (AP) - The economy remained "generally weak" heading into summer as rising costs for energy and food
pounded consumers and forced some companies to push their own prices higher. The Fed's new snapshot of business
conditions, released Wednesday in Washington, underscored two big sore spots for the country: listless economic activity
coupled with high energy and food prices. Those rising prices carry the risk of both spreading inflation and putting
another drag on overall economic growth. Chafing under price hikes, "consumer spending slowed ... as incomes were
pinched by rising energy and food prices, " the Fed said. Manufacturing activity, meanwhile, was "generally soft" and the
housing market remained stuck in a rut. Businesses also were hit by higher costs, especially for energy , metals, plastics,
chemicals and food. Such reports were "widespread," the Fed said. To cope, manufacturers in several areas "noted some ability to
pass along higher costs to customers" the Fed said. Retailers, however, reported "mixed results with respect to raising final goods
prices," the Fed said. Over the past week, Federal Reserve Chairman Ben Bernanke and his Fed colleagues have been
sounding an ever-louder alarm against inflation . Given those concerns, Bernanke has signaled the Fed's rate-cutting campaign,
started last September to bolster the weak economy, is probably over for now. Many economists predict the Fed will leave its key rate
at 2 percent, a four-year low, when it meets next, on June 24-25. However, with inflation moving up on the Fed's list of
concerns, Wall Street investors and others are now thinking the Fed might be forced to start boosting rates later this
year to curb inflation. One of the things the Fed will be paying close attention to is the extent to which people think
prices will keep going up, something that can make them act in ways that would worsen the inflation climate. If such
"inflation expectations" were to "drift higher or even to fail to reverse" that would have "troublesome implications,"
Donald Kohn, the Fed's vice chairman, said in a speech Wednesday. James Bullard, president of the Federal Reserve Bank of St. Louis,
echoed that point. "It is rule No. 1 in modern central banking that inflation and inflation expectations be kept under control," he said.
Raising rates too soon, though, could deal a set back to the already fragile economy. It's a dicey situation for Fed policymakers. The
housing, credit and financial crises have badly bruised the economy and sharply slowed its growth. Consumers and businesses alike
have hunkered down. Employers have cut jobs every month so far this year and the unemployment rate zoomed to 5.5 percent in
May, from 5 percent in April - the largest one-month increase since 1986. Bernanke, in a speech earlier this week, downplayed the big
jump in the jobless rates, saying the danger that the economy has fallen into a "substantial downturn" appears to have waned over
the past month or so. The Fed's powerful doses of interest rate cuts, the government's $168 billion stimulus package, further progress
in the repair of problems in financial and credit markets, a gradual ebbing of the drag from the deep housing slump and still solid
demand from abroad for U.S. exports should help the economy over the remainder of this year, Bernanke predicted. At the same
time, Bernanke sent a fresh warning that the Fed will be on heightened alert against inflation dangers, especially any
signs that investors, consumers and businesses are thinking inflation will get worse. The Fed "will strongly resist an erosion
of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for
inflation," the Fed chief said Monday evening. With hiring slowing, the Fed's report on Wednesday suggested there's little danger of
wage inflation taking off. Wage pressures were reported as "moderate or limited for all but a few skilled-labor positions," the Fed said.
That's consistent with Bernanke's recent assessment that he doesn't see a repeat of the 1970s-style situation where workers
demanded - and received - higher wages to keep up with ever-rising prices. The Fed's survey is based on information supplied by the
Fed's 12 regional banks. The information was collected before June 2.
High energy prices would cripple the economy

Jeannine Aversa, July 20th 2006
Bernanke: High Energy Prices Hurt Economy, http://www.washingtonpost.com/wp-
dyn/content/article/2006/07/20/AR2006072001607_pf.html
WASHINGTON -- Surging energy prices are acting like a double whammy on the country's economy, crimping growth
even as they push up inflation, Federal Reserve Chairman Ben Bernanke said Thursday. "The increase in energy prices
is clearly making the economy worse off both in terms of real activity and in terms of inflation. There is no question
about it," Bernanke told the House Financial Services Committee. Although Fed policymakers at their June meeting were
concerned about higher energy prices and the risk of inflation spreading through the economy, they also seemed hopeful
that moderating economic activity could help ease inflation pressures down the road, according to minutes of that closed-door
meeting released Thursday. Oil prices, which set record closing high of $77.03 a barrel last Friday, have retreated and are now
hovering above $73 a barrel. If oil prices were to rise an additional $10 or $15 a barrel, there would be "significant consequences" for
the economy, the Fed chairman added. The economy, which grew in the first quarter of this year at a 5.6 percent pace, the fastest
in 2 1/2 years, is expected to slow to a pace of around 3 percent or less in the second half of the year, according to
private economists' projections. Lofty energy prices, a cooling housing market and less consumer appetite for
spending are figuring prominently in the forecast for slower overall economic activity. The rise in "core" inflation , which
excludes energy and food prices, "seems to be a broad-based phenomenon, so we don't think it is a statistical illusion,"
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Bernanke told the panel. Fed policymakers focus on the core measure to get a better sense of how other prices are acting. For the
first six months of this year, core prices rose at an annual rate of 3.2 percent far outpacing the 2.2 percent rise for all of 2005. Even
though Fed policymakers at the June 28-29 meeting expressed concern about higher readings on core inflation, they thought the
phenomenon was more likely to be temporary rather than persistent, the minutes said. "Inflation was seen by most participants as
likely to edge down," according to the minutes. Striking a similar chord in an appearance Wednesday before the Senate Banking
Committee, Bernanke raised hopes that a respite from two years of interest rate pain may be in sight, a notion that sent stocks
soaring. To fend off inflation, the Fed has boosted interest rates 17 times since June 2004, with the most recent increase coming at
the June meeting. "All eyes are on you ... as we reach a critical point in monetary policy," Rep. Carolyn Maloney, D-N.Y., told Bernanke
at the House hearing. After 17 rate hikes, "people are naturally wondering: When is it going to stop?" Bernanke didn't say. The Fed's
next meeting is Aug. 8, and hopes are rising among investors that the Fed might take a break in credit-tightening campaign then to
assess economic activity. Some economists believe another rate increase will come at the August meeting, but the Fed will move to
the sidelines for a while after that. "With the economy slowing and some of the effects of past tightening still in the
pipeline, members recognized the value of accumulating more information for determining what, if any, additional
policy action would be needed," the Fed minutes said. In other matters, Bernanke, at the House hearing: Observed that the once
high-flying housing market appears to be experiencing a safe landing. "The downturn in the housing market so far appears to be
orderly," he said. Declared that the massive holdings of mortgage giants Fannie Mae and Freddie Mac "present a systemic risk" to the
U.S. financial system. He previously has urged Congress to restrict their holdings. Expected U.S. workers' inflation-adjusted wages to
rise in the coming quarters without necessarily causing an inflation problem. Last year, most workers' paychecks trailed inflation,
putting a strain on some families budgets. Said he believed that market discipline rather than new regulation is the best way to police
the activities of hedge funds.
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the economy
High energy prices cause inflation
AFP, June 13th, 2008
US consumer prices surge as energy costs spike,
http://www.rawstory.com/news/afp/US_consumer_prices_surge_as_energy__06132008.html
US consumer prices jumped by a more-than-expected 0.6 percent in May, largely as energy costs soared, a government
report showed Friday. Economists said they were not surprised that energy costs leapt higher, but said the report could cause some
angst at the Federal Reserve as it suggests inflationary pressures are building. The monthly Labor Department survey said that
core consumer price inflation (CPI), which excludes volatile food and energy costs, gained 0.2 percent during May. The rise in the core
CPI reading matched most economists' predictions. Analysts had expected headline inflation to rise 0.5 percent. Overall consumer
prices showed their strongest spurt in May since November, while the core rate accelerated at its fastest clip since March. The gains
come as world oil prices continue to hover near record highs. Key oil futures contracts in New York and London were trading around
135 dollars a barrel in Friday trading. "The news is not good but not surprising ," said Stephen Gallagher, an economist at Societe
Generale. "The Federal Reserve cannot be surprised by these figures but will be watchful to how these readings along
with further gas and food prices influence inflation expectations, " Gallagher said. Speculation has mounted in recent
weeks that the Fed might be forced to start raising interest rates in a bid to ward off inflationary pressures. The central
bank has aggressively slashed rates in recent months in a bid to fire up flagging US economic momentum in the face
of a lingering housing market downturn, a related credit squeeze and mounting job losses. Inflation picked up in May
as energy costs rocketed 4.4 percent, marking the strongest gain in energy costs since November . Food prices rose a
milder 0.3 percent during the month, despite concerns about rising world commodity costs. The report also revealed that
transportation costs jumped 2.0 percent in May, also registering the biggest gain since November. Transportation costs likely
increased as companies are having to pay more for gasoline and other fuels. The inflation survey was released days after Fed
chairman Ben Bernanke warned about inflationary risks. Bernanke said late Monday that the likelihood of a severe US economic
slump had diminished, but that "upside risks" to inflation were forcing the central bank to be more vigilant, especially because of oil
price spikes. Some stock market traders chalked up the likelihood of rate hikes following Bernanke's remarks. Economists say hikes
are possible, but doubt they will be unleashed anytime soon. Consumer prices have increased 4.2 percent in the year to May, while
the core rate has increased 2.3 percent over the same period.
Higher energy prices increases the risk of inflation

Sue Kirchhoff (writer for USA Today), June 13th, 2008
Bernanke: Energy prices increase risk of inflation, http://www.usatoday.com/money/economy/2008-06-09-bernanke_N.htm
Federal Reserve Chairman Ben Bernanke on Monday said the danger of the economy entering a "substantial downturn"
had eased in the past month or so despite last week's unexpected jump in unemployment. But he cautioned that
soaring energy prices are creating new inflation risks that the Fed will "strongly resist." Bernanke's remarks, prepared for a
conference in Massachusetts, underscore the Fed's growing inflation worry, with oil prices over $130 a barrel and gas averaging more
than $4 a gallon. Crude oil had its biggest one-day rise on Friday, topping $139 before settling back in Monday trading. Central bank
officials since last September have aggressively cut a key interest rate to bolster the faltering economy. The challenge for the Fed
is to ensure it doesn't keep rates too low, too long, and feed inflation pressures. Bernanke noted the slow economy has
so far limited companies' ability to pass on rising prices, while leaving workers with little leverage to push for pay
increases. "The continuation of this pattern is not guaranteed," he cautioned the Boston Fed's economics conference. "The latest
round of increases in energy prices has added to the upside risks to inflation and inflation expectations, " Bernanke said.
The Fed will "strongly resist" an erosion of longer-term inflation expectations. The Fed closely monitors inflation expectations, which
have been jumping in some confidence surveys. If consumers and businesses start planning on a higher rate of inflation, a
one-time price rise can morph into a larger wage-price spiral. The Fed's next scheduled interest rate meeting is June 24-25.
The markets have been expecting the Fed, which has cut a key rate to 2% from 5.25% last year, to hold steady. Bernanke said, "The
risk that the economy has entered a substantial downturn appears to have diminished over the past month or so." He did not,
however, say the nation's economic woes were over. The deep housing downturn and rising energy prices, which also hurt
growth, mean the economy isn't out of the woods yet. Friday's half-point jump in the U.S. unemployment rate to 5.5%, along with
other recent data, has affected the outlook "only modestly," Bernanke said. Previous rate cuts, federal tax-rebate checks and exports
should support the economy through the end of the year. Separately, New York Fed President Timothy Geithner on Monday called for
tougher, uniform regulation of the financial sector, terming the current system a confusing mix that creates perverse incentives for
risk.
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the economy
High energy prices will weaken the economy
Jeannine Aversa (AP Economics Writer), June 11th, 2008
Fed: High energy, food prices keep economy weak,
http://news.yahoo.com/s/ap/20080611/ap_on_go_ot/fed_economy
WASHINGTON - The economy remained "generally weak" heading into summer as rising costs for energy and food pounded
consumers and forced some companies to push their own prices higher. The Federal Reserve's new snapshot of
business conditions, released Wednesday, underscored two big sore spots for the country: listless economic activity
coupled with high energy and food prices. Those rising prices carry the risk of both spreading inflation and putting
another drag on overall economic growth. Chafing under price hikes, "consumer spending slowed ... as incomes were
pinched by rising energy and food prices," the Fed said. Manufacturing activity, meanwhile, was "generally soft" and the housing
market remained stuck in a rut. Businesses also were hit by higher costs, especially for energy, metals, plastics, chemicals and
food. Such reports were "widespread," the Fed said. To cope, manufacturers in several areas "noted some ability to pass
along higher costs to customers" the Fed said. Retailers, however, reported "mixed results with respect to raising final goods
prices," the Fed said. Over the past week, Fed Ben Bernanke and his colleagues have been sounding an ever-louder alarm against
inflation. Given those concerns, Bernanke has signaled the Fed's rate-cutting campaign, started last September to bolster the weak
economy, is probably over. Many economists predict the Fed will leave its key rate at 2 percent, a four-year low, when it meets next,
on June 24-25. For now, "policymakers won't raise rates because of concerns about the economy, but they can't lower them because
of concerns about worsening inflation. So it's basically a stalemate. The right thing for the Fed to do is to leave rates alone," said
Stuart Hoffman, chief economist at PNC Financial Services Group. However, with inflation moving up on the Fed's list of
concerns, Wall Street investors and others are now thinking the Fed might be forced to start boosting rates later this
year to curb inflation. On Wall Street, stocks tumbled as soaring oil prices fanned inflation concerns. The Dow Jones industrials
plunged 205.99 points. Oil prices closed at $136.38 a barrel. Gasoline prices reached another record — a national average of $4.052
a gallon. One of the things the Fed will be paying close attention to is the extent to which people think prices will keep
going up, something that can make them act in ways that would worsen the inflation climate. If such "inflation
expectations" were to "drift higher or even to fail to reverse" that would have "troublesome implications," Donald Kohn,
the Fed's vice chairman, said in a speech Wednesday. James Bullard, president of the Federal Reserve Bank of St. Louis, echoed that
point. "It is rule No. 1 in modern central banking that inflation and inflation expectations be kept under control," he said.
Raising rates too soon, though, could deal a set back to the already fragile economy. It's a dicey situation for Fed policymakers. The
housing, credit and financial crises have badly bruised the economy and sharply slowed its growth. Consumers and businesses
alike have hunkered down. Employers have cut jobs every month so far this year and the unemployment rate zoomed
to 5.5 percent in May, from 5 percent in April — the largest one-month increase since 1986. Bernanke, in a speech earlier this week,
downplayed the big jump in the jobless rate, saying the danger that the economy has fallen into a "substantial downturn" appears to
have waned over the past month or so. The Fed's powerful doses of interest rate cuts, the government's $168 billion stimulus
package, further progress in the repair of problems in financial and credit markets, a gradual ebbing of the drag from the deep
housing slump and still solid demand from abroad for U.S. exports should help the economy over the remainder of this year, Bernanke
predicted. At the same time, Bernanke sent a fresh warning that the Fed will be on heightened alert against inflation dangers,
especially any signs that investors, consumers and businesses are thinking inflation will get worse . The Fed "will strongly
resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as
well as for inflation," the Fed chief said Monday evening. With hiring slowing, the Fed's report on Wednesday suggested there's little
danger of wage inflation taking off. Wage pressures were reported as "moderate or limited for all but a few skilled-labor positions,"
the Fed said. That's consistent with Bernanke's recent assessment that he doesn't see a repeat of the 1970s-style situation where
workers demanded — and received — higher wages to keep up with ever-rising prices. The Fed's survey is based on information
supplied by the Fed's 12 regional banks. The information was collected before June 2. In the short term, it may be that some rise in
both inflation and unemployment will have to be tolerated, Kohn suggested. Setting interest rates "in a manner that balances the
undesirable effects of a shock to the system on both inflation and employment will tend to be more efficient than setting policy so as
to deliver more extreme outcomes in either inflation or unemployment," he said.
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the economy
High energy prices hurts consumer spending, killing the economy
Business Wire, May 7th, 2008
Discover® U.S. Spending Monitor Shows Little Movement in April, as Consumers Try to Balance Their
Budgets in the Wake of High Energy Prices
http://findarticles.com/p/articles/mi_m0EIN/is_2008_May_7/ai_n25385622
RIVERWOODS, Ill. -- The April Discover U.S. Spending Monitor reflected a continuing pattern of economic concern from
consumers in the face of rising expenses. For the last four months including April, the Monitor has remained in the 85-86 range.
The April index rose a scant .3 from March when the index hit its lowest point ever. The up-tick to 85.4 was primarily the result of
higher spending expectations. Confronted with record high gasoline prices and the effects of the sub-prime mortgage crisis,
consumers continue to have little confidence in the U.S. economy. In the meantime, the number of consumers who say they
are spending more, particularly on household expenses, rose for the third straight month to 38 percent. Even with a large majority of
consumers expecting a tax refund and a tax rebate from the federal government's economic stimulus package, the expected
additional money appeared to do little to ease consumers' concern over their personal finances or the economy. Majority Say Tax
Refund and Rebate Will Be Used to Pay Household Expenses, Debt Repayment In the month Americans were filing their income tax
returns, nearly two-in-three (62 percent) said they expected to get a refund this year. But indicative of the strain on households
resulting from the country's economic circumstances, 62 percent of those getting refunds cited that they planned to spend the
windfall on basic household expenses or debt repayment. Another 18 percent said they intended to put their money in savings or
investments. Only 20 percent said they planned to put money back into the economy. Those consumers expecting a tax rebate from
the economic stimulus package showed similar numbers with nearly 59 percent planning to spend their rebate on household
expenses and paying down debt, 18 percent planning to save or invest their rebate, 11 percent planning household improvements
and eight percent planning to take a vacation. The expected tax refunds and rebates did little to change consumer spending habits in
the month ahead. Many consumers are continuing to cut their discretionary spending and even their savings in the wake of higher
household expenses. Nearly 56 percent expect to spend more on household expenses in the next month. To compensate, 51 percent
are expecting to spend less on discretionary personal expenses like dining out or going to the movies, a new Monitor high. Forty-six
percent of consumers expected to cut back on home improvements and major personal purchases like a vacation, also a Monitor
high. Savings remained relatively flat compared to a month ago with 39 percent expecting to save or invest less. "Many consumers
continue to trim family vacations, a night on the town and even their savings to offset higher household expenses,"
said Margo Georgiadis, executive vice-president and chief marketing officer for Discover Financial Services. "With no relief in sight,
consumers seem at the ready to deploy whatever windfalls they may experience - like tax refunds - to help balance
their budgets." Lower and middle income consumers hit record highs in April in curtailing their discretionary spending ,
with 57 percent of those making under $40,000 and nearly 54 percent of consumers making $40,000-$75,000 planning to spend less
on discretionary personal purchases. One positive sign during April was there was a rise by nearly four points in the number of
consumers making over $75,000 who plan to increase their discretionary spending. Those making $75,000+ also intend to spend
more on home improvements, and major personal purchases like a vacation. Half of Consumers Manage to Have Money Left Over
After Paying Monthly Bills, but Tight Budgets Remain The latest numbers from the Monitor suggest many consumers are struggling to
maintain their budgets. Half of all consumers expected to have money left over after paying monthly bills, but over a quarter (27
percent) of those who have money left over say they have less money left over than the previous month. This was unchanged from
March, but up six points since February. Likewise, there is growing concern about added expenses or shortfalls of income.
In April, 42 percent were concerned about a sudden negative impact on income, up another point and up nearly five
points since February. People who earn less than $40,000 a year hit a new low of 31 percent in the number who expected to have
money left over after paying bills. And of those who have money left over, nearly 33 percent expect to have less money
left over than the previous month, up a point from March and eight points higher than the average. It also appears that
lower and middle income consumers don't believe pressures will abate soon, as a Monitor high 52 percent of low income
consumers are expecting an added expense or income shortfall in the coming month. Nearly 40 percent of middle income
consumers expect an income shortfall in the next month , also a Monitor high. Consumers Economic and Personal Finance
Outlook Remains Grim Nearly three-out-of four consumers in the U.S. (74 percent) now think that the economy is getting
worse and, in a related measure, more than one-in-two (52 percent) claim that their personal finances are headed the
same direction. This economic ill will has been gathering steadily since December of last year when 66 percent saw
the economy worsening and 45 percent felt their finances were deteriorating. In April, 64 percent of consumers making
$40,000 or less said their personal finances were getting worse, up four points from March. One of the few positives from the Monitor
showed that upper income consumers may be rebounding. While still low compared to numbers reported last fall, 13 percent of upper
income consumers feel that economic conditions are getting better, up nearly two points from March. And 24 percent rate their
personal finances as excellent, also up two points from March. "We're learning just how adaptable consumers are when it comes to
dealing with a slow economy and rising expense pressures," said Georgiadis. "With rising household expenses, lower and middle
income consumers are continuing to feel the pressure and continuing to cut back their spending. But there are some positive
indicators in the Monitor showing that upper income consumers may be increasing their discretionary spending and may feel the
economy may be on the mend."
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the economy
High energy prices destroy consumer spending crushing the economy
USA Today (Barbara Hagenbaugh) April 18th, 2006
Fed chief sees high energy prices as drain on economy,
http://www.usatoday.com/money/economy/fed/2006-04-18-fed-usat_x.htm
WASHINGTON — High energy prices have sapped consumer and business spending and depressed economic growth by
as much as 1 percentage point since energy prices began to rise in late-2003, Federal Reserve Chairman Ben Bernanke said in a
recent letter. Bernanke also said high energy prices have had a small effect on non-energy prices and would not spark
rapid inflation as long as the Fed stays on top of its game. The statements were in a letter written to Rep. J. Gresham Barrett,
R-S.C., in response to a question after a recent hearing. It's the most explicit Bernanke has been on the impact of rising energy costs
since taking over as Fed chairman at the end of January. Bernanke's opinion on energy prices is important. If he and his Fed
colleagues view the run-up in energy prices as a drain on the economy, not as an inflation spark, policymakers could
lean toward holding interest rates steady in a bid to support the economy rather than raising them to curb inflation.
"The surge in energy prices since late-2003 has significantly reduced the purchasing power of households and
decreased the profits of non-energy firms, thereby restraining both consumer spending and business investment,"
Bernanke wrote in the letter dated April 5 and obtained by USA TODAY Monday. He said "by rough estimate," the increased energy
prices have reduced gross domestic product growth between half a percentage point and a full percentage point per year since late-
2003. That's not insignificant. GDP rose 2.7% in 2003, 4.2% in 2004 and 3.5% in 2005. Oil prices topped $70 a barrel Monday, hitting
a record high, not adjusted for inflation. Bernanke said energy prices so far have had a "relatively modest" impact on core inflation,
which excludes more volatile energy and food costs. "In the longer run, these inflation effects should fade even if energy
prices remain elevated, so long as monetary policy keeps inflation expectations well-anchored," Bernanke wrote. Oil
price increases have often preceded downturns in the U.S. economy. But before he joined the Fed, Bernanke jointly
wrote a paper arguing oil-price shocks were not the cause of downturns — it was the Fed's reaction to the shocks, by
way of higher interest rates, that caused the economy problems. That suggests a Bernanke-led Fed may be more restrained
in response to higher oil prices. The Fed has raised interest rates 15 times since June 2004 to remove the stimulus put in place when
the economy slowed in 2001. The Fed's target for short-term interest rates, which influence borrowing costs across the economy, is
now 4.75%, the highest in five years. The next intere
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Steel
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Uniqueness/Brink – Steel Prices barely

manageable
We are on the brink of seeing unmanageable steel prices
Sterner 6/2 (Stafford, EzineArticles.com Expert Author, Steel Prices Soar - Panic Buying Sends Steel Prices to New Record Highs,
2008, http://ezinearticles.com/?Steel-Prices-Soar---Panic-Buying-Sends-Steel-Prices-to-New-Record-Highs&id=1230335) //am
Today saw steel prices soar to record highs as a report released by world steel producers confirmed worries that
current production has failed to keep pace with world demand. One industry official, who did not wish to be named,
expects the panic buying to continue and noted that "for the past decade, prices of scrap steel fluctuated between
$50-$80 USD/ton. Late last year, that price doubled to $150 -$200 USD/ton. By March 2008 it doubled again to
$345USD. Today's surge to $865 USD/ton reflects a depletion of steel reserves to historic lows and the inability to
increase production to keep pace with world demand." One economist today noted that steel at these price levels will
have a devastating effect on consumers worldwide. The world's economies are built on steel. Without it, the machine
breaks down. Right now there simply isn't enough to go around. Where will it stop? Nobody seems to know. After
today's activity, many feel certain that more increases are ahead. How high will it go? Well, it depends. As the old' saying
goes, there's good news and bad news. First, the good news. The above headline isn't real. The story is fiction and the
record prices described haven't actually happened yet. The bad news is that word "yet." You see, while fiction now, a
good part of what transpires in this story is slowly becoming reality as we speak. Scrap steel, which was cheaply priced for years,
really has risen to over $345.00/ Ton within the past few months. Reserves are being tapped. Worldwide demand for fuel, metals and
food staples are creating shortages, and prices on these items continue to increase. China's recent economic expansion has had a
huge impact on commodity supplies & prices. The same supply/demand fundamentals that have driven crude prices to new highs are
now driving steel prices higher. While demand for crude increases worldwide, US policy has been to conserve, rather than to increase
supply. For years the strong dollar enabled the US to rely on the rest of the world to produce discounted resources that we would
import to meet our nation's growing demand. The resulting complacency resulted in a reliance on aging systems without any new
additions to take their place. Over 30 years have passed since a major nuclear power plant, oil refinery or steel mill has
been built in this country. The last ones we did build, which were state-of-the-art in their time, are becoming aged and
antiquated and are no longer capable of producing enough to sustain current demands.
We are literally on the brink of an energy crisis

Sickinger 7/1 (Ted, The Orgonian, Brace for jolt in Oregon utility costs,
http://www.oregonlive.com/business/index.ssf/2008/07/higher_oregon_utility_costs.html) //am
If gas prices have you down, you'd better brace for rising utility bills the next few years. Regional utilities face rapidly escalating
fuel prices and, in some cases, project wide gaps between their power supply and customer demand. As they purchase
expensive wholesale electricity to meet that demand, pay inflated costs to build power plants and invest heavily to
meet renewable energy and global warming mandates, consumers can expect an extended series of rate increases,
experts say. Although it's difficult to forecast with precision, ratepayer advocates say the collective damage over the next
few years could easily rival the 2000-01 energy crisis. During that period, residential rates rose about 30 percent and
industrial rates increased about 50 percent. "It's like watching an accident in slow motion," said Jason Eisdorfer, a lawyer
for the Citizens' Utility Board of Oregon. "All of these different market dynamics are coming together." Consider just the
immediate term: Northwest Natural Gas Co. is getting set to unveil its annual pass-the-commodity-cost-to-consumers rate
adjustment. By all accounts, this one is going to be a whopper. Natural gas prices are levitating about 70 percent higher than
the level used last year to set rates. And so far, the company has locked in only 30 percent of next year's supply. "It's pretty ugly
across the country," said Kim Heiting, a company spokeswoman. "We're going to hope for the best, but we're obviously
concerned."
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Uniqueness/Brink – steel industry weak

The steel industry is in a crisis which requires governmental action to fix
Phelps 1 (David, American Istitute for International Steel, What's Wrong with the Steel Industry--Again?, February 20th,
http://www.freetrade.org/node/355) //am
The announcement for the forum today says, "For the second time in less than three years, the U.S. steel industry is in crisis
mode." This would make it seem that the domestic steel industry has had a couple of tough years, and that somehow the
sequence of events is an unusual occurrence that requires and deserves special attention by the government. Well, as
I'm sure everybody here must know, it's not an unusual occurrence for the steel industry to be in crisis. But this time the crisis is
serious. The number of bankruptcies makes it different. Why? We believe that the chickens have come home to roost. Thirty years
of living in a protected market have given us a classic example of why protection does not create competitive industries. We believe
that there is a role for the government to play, fashioning a market-based incentive program that would encourage the
consolidation of some companies and facilities and the shutting down of non-economic capacity. It seems to many observers that the
history of the steel industry is one of lurching from crisis to crisis. Each time the steel markets soften, the domestic industry has
successfully persuaded presidents that they need protection to survive. The problem was always imports, and the solution was
protection. We have a different view, outlined in a book we sponsored in June 2000, "Paying the Price for Big Steel: $100 Billion in
Trade Restraints and Corporate Welfare". This book outlined the history of steel trade policy, how the domestic industry has skewed
investment, competition and risk at crucial points in the last half of the 20th century, and instead chose the siren song of protection.
Steel Industry is dependent on the government

PR Newswire 3 (AIIS President Dave Phelps: Section 201 Steel Tariffs Only Delayed Steel Industry Restructuring and Hurt Steel
Consumers, Jan 30th, http://findarticles.com/p/articles/mi_m4PRN/is_2003_Jan_30/ai_n27587898) //am
BUENA PARK, Calif. -- BUENA PARK, Calif., Jan. 30 /PRNewswire/ -- Five weeks shy of the one year anniversary of the Bush
Administration's Section 201 tariffs on steel imports, American Institute for International Steel (AIIS) President David Phelps stated
yesterday that the tariffs legacy to date has caused job losses in the steel consuming sector, complicated international
attempts to negotiate an anti-subsidy agreement at the Organization for Economic Cooperation and Development
(OECD), and delayed restructuring of weak domestic steel companies. In a speech to the Association of Women in the Metal
Industries, Phelps recalled AIIS' prediction that if trade protection were granted to the domestic steel industry, it would
"only delay restructuring, and the weak companies would return to the bad habits that made them weak in the first
place." Now, nearly 11 months after the steel tariffs were imposed on March 5, Phelps stated that the 201 duties "threw the weak
companies a lifeline -- at least for a time.
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Uniqueness – steel industry

recovering/good
The steel industry is rapidly recovering
Droke 1 (Clif, the editor of the weekly Internet Stock Forecast (www.istockforecast.com) newsletter and the author of several books
on trading and technical analysis, War heads closer to home; gold, steel discount its advance, http://www.gold-
eagle.com/gold_digest_01/droke061801.html) //am
It is no secret that the U.S. steel industry, which has undergone one of the most horrific depressions of any domestic
industry over the past 30 years, is emerging from this long decline with remarkable rapidity. We reported in a Gold-Eagle
column in January that shares of leading U.S. steel maker Bethlehem Steel were being enormously accumulated by insiders. Since
that initial report earlier this year, Bethlehem Steel shares have risen in excess of 400%. Such an impressive percentage
gain in such a short period of time (especially considering the slow-moving nature of this sector) bespeaks of something
extremely unusual on the horizon that will improve the fortunes of America's languishing steel industry. Notice also the impressive
bowl-shaped accumulation patterns in the stocks of many domestic steel manufacturing concerns. Take a look, for instance, at the
chart for Gibraltar Steel (ROCK). The chart picture is worth a thousand words. Steel manufacturing shares are being purchased by
insiders for a very good reason. Normally, steel makers cannot expect rising profits and an improved economic outlook in
the face of a developing economic depression (which the U.S. is heading into). So what's to account for the sudden interest in
steel stocks? How about war, or more specifically, the manufacture of munitions and other war-related items that require heavy
inputs of steel and other industrial metals. Indeed, all economic and financial signals are pointing to the very nearness of some type
of concerted military action, either at home, abroad, or both. It is now time to take every precaution against this very real threat, and
that includes stepping up accumulation of physical gold to your financial portfolio.
The steel industry is healthy

Marsh and Weitzman 6/30 (Peter and Hal, journalists at the Financial Times, Outlook for US steel appears untarnished,
2008, Proquest) //am
The industry remains buoyant despite the looming spectre of recession, write Peter Marsh and Hal Weitzman On the outskirts
of Chicago, at the biggest steel complex in the US, a mood of optimism is in the air. Discussing the 5.5m tonnes of steel the
site in Gary made last year, Fred Jauss, general manager at the plant, says he is going to do his best to beat the figure this year. "We
don't see any problem in finding buyers for the steel we are producing," says Mr Jauss, whose plant is owned by US Steel, the
biggest steel company in the US. "We feel we are selling into a pretty receptive market place." Such optimism might be
considered peculiar, given that the US is meant to be on the cusp of an economic recession, with demand in many
businesses extremely weak, linked to the severe problems in sectors such as housing and banking.
Steel Industry is rebounding – multiple warrants

Krantz 8 (Matt, USA today, Steel once again a hot commodity, 5/12,
http://www.usatoday.com/money/industries/manufacturing/2008-05-12-steel-stocks_N.htm) //am
The struggling economy hasn't prevented one part of the Rust Belt from looking like somebody gave it a good shining with a steel
wool pad. Once a landscape littered with job losses and plant closures, the steel industry is back in a big way. Prices for
hot rolled band steel, a widely followed benchmark, have nearly doubled from the beginning of last year to a record of more than
$1,100 a ton, Metalprices.com and SteelBenchmarker say. And rather than being the Who's Who of Chapter 11 companies that they
were a decade ago, steel companies are seeing their stocks soar. The Market Vectors Steel exchange traded fund, which mirrors
the industry's stocks, is up 62% over the past 12 months and 23% this year. That blows away the 7% drop in the benchmark Standard
& Poor's 500 index the past 12 months and 4% drop in 2008. "Steel was seen as a mature cyclical business not showing much
growth," says Mark Parr, analyst at KeyBanc Capital. But now, steel "has become a legitimate growth sector again." Or, as
Olympic Steel (ZEUS) CEO Michael Siegal puts it: "There's not a lot of rust anymore." Steel's recovery is certainly another
example of how global demand for commodities is breathing new life into raw materials ranging from potash to wheat and corn. Steel
is just one of the latest metals to get swept up in the worldwide metals boom, says David Behr of Metalprices.com. Globalization is
certainly a big reason why steel is enjoying some of its best days since Andrew Carnegie's era. Much of steel's success also speaks to
how a seemingly down-for-the-count industry reinvented itself after a painful restructuring process that took decades to unfold. The
key events that have polished steel in the minds of investors include: Booming global demand. Perhaps the best thing going for steel
is the world's insatiable appetite. In the USA, companies use about 130 million tons of steel a year. Of that, about 110
million tons are produced domestically, says Bob Richard at Longbow Research. That means the shortfall must be imported from
other countries. The trouble, though, is that the rest of the world needs steel, too. Governments and companies in China, India and
Russia are on a building spree putting up bridges, airports and skyscrapers. So mills in their nations are not exporting to the USA as
they once did. China, for instance, has a plan to build 97 airports by 2020, says Chip Hanlon, president of Delta Global Advisors.
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"Global growth is starting to overrun us," says Olympic Steel's Siegal. And the result is declining worldwide inventory, says Sam
Halpert, senior analyst at Van Eck. "We've had a big destocking," he says. Streamlined industry. A string of bankruptcy
reorganizations of the USA's most storied steelmakers leading up to 2000 allowed the industry to mend itself, Halpert says. Some of
the biggest changes occurred in 2002, when financier Wilbur Ross began forming International Steel Group. Amid a steel depression,
ISG gradually bought some of the nation's top steel mills, starting with LTV and then Bethlehem Steel, Weirton Steel and Georgetown
Steel. Labor contracts were amended. Costs were driven down. And mills were modernized. Now, across the nation's steel
industry, 160,000 employees produce 110 million tons of steel a year, says the American Iron and Steel Institute. In
1970, it took 500,000 workers to make 91 million tons. "The industry is better," Halpert says. Such efficiencies have made
producing steel more profitable, he says. Down-and-out dollar. The weakness of the U.S. dollar compared with other currencies
is causing titanic changes in the steel market, KeyBanc's Parr says. Steel exported from the USA, thanks to the dollar, is competitive
even in nations with lower-cost steel production, he says. Meanwhile, the weak dollar is making U.S. steel companies irresistible
buyout targets for foreign steel companies.
U.S. steel industry in good shape

Ackerman 6/30 (Ruthie, Forbes.com, U.S. Steel Stays Strong, 2008, http://www.forbes.com/markets/2008/06/30/steel-iron-ore-
markets-comm-cx_ra_0630markets34.html) //am
With the 2008 iron ore price negotiations between BHP Billiton and Chinese steel mills still up in the air as of Monday U.S. steel
producers see dollar signs in their future. All of the feet dragging on iron ore prices is very bullish for U.S. steel producers, says
Michelle Applebaum of Michelle Applebaum Research. Last week, Australian mining giant Rio Tinto clinched a deal with Baosteel for
an 85.0% price hike, which shows that demand from China is strong enough to sustain a massive price increase. (See “ Rio Changes
The Rules Of The Game”) and (See " Rio Sets Steel Prices Alight.") With U.S. steel prices already 20.0% less than offshore prices,
demand in the U.S. will only continue to grow. In the meantime U.S. steel producer’s stocks are rising. United States
Steel (nyse: X - news - people ) shares edged higher 0.2%, or 19 cents, to $187.13, while Steel Dynamics (nasdaq: STLD -
news - people ) shares hot up 2.6%, or $1.00, to $39.41. Nucor (nyse: NUE - news - people ) rose 0.4%, or $1.06, to $75.94 and
AK Steel gained 2.1%, or $1.44, to $69.65. The weak dollar, high shipping rates, and strong overseas demand has been
keeping steel imports from reaching American shores. The decline in imports limits supply, forcing U.S. steel
companies to use full production capacity and allowing them to raise prices. As a result spot steel prices, which are prices
for immediate delivery, have surged. Monday marks the informal industry deadline for talks between BHP and Chinese steel mills, led
by Baosteel, China’s largest steelmaker. But unidentified sources say the negotiations could drag on indefinitely, according to
Reuters. “It is unlikely that U.S. prices will stay below global levels,” Applebaum said. “There will be continued pressure to raise prices
through the end of the year.”
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Uniqueness – steel industry

recovering/good
The US Steel industry is doing well
Fletcher 5/28 (Michael, Washington Post Staff Writer, Steel, Forging a Comeback, 2008, http://www.washingtonpost.com/wp-
dyn/content/story/2008/05/28/ST2008052800220.html) //am
The U.S. steel industry is enjoying a new era of prosperity less than a decade after crippling production costs and
lower-priced imports helped trigger a huge wave of bankruptcies that some thought would leave it permanently
tarnished. Buoyed by sharply reduced employee costs, soaring global demand, dramatic consolidation that has
tamped down cutthroat competition and a weakened dollar that has made imports less attractive, steel prices have
tripled in the past five years. For the first time in decades, companies operating in the United States have added
capacity and workers.
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Link – Alt Energy Increases Steel Prices

The use of increasing alternative energy will foster higher infrastructure costs.
Enke 6/30 (David, David is a Ph.D., and an Associate Professor of Finance at The University of Tulsa, with research and teaching
interests in the areas of financial risk management, quantitative and computational finance, financial engineering, enterprise risk
management, investment and trading, and intelligent systems, Will Electric Power Cause The Next Price Shock?, 2008) //am
According to the Energy Information Administration (EIA), 49.0% of electricity is generated from coal, 20.0% from natural gas,
19.4% from nuclear, 7% from hydro, 1.6% from petroleum, with the remaining 3.1% from other sources, part of which
are alternative energy sources not listed (solar, wind, etc.). Approximately 9.5% of electricity generation is currently
from renewable sources. If Congress has its way, this number will increase as restrictions on carbon emissions get
enacted. While everyone would like to see lower carbon emissions and a cleaner environment, such legislation will
have consequences, many of which will be unintended (ethanol anyone?). Hopefully some of these consequences will
be considered as we move forward as a country toward developing some type of energy policy, because while we all
know about the high cost of gasoline, and the impact that burning this fuel has on our environment, we are also
beginning to feel the effects of ethanol mandates, which even with their good intentions are producing unintended
consequences of higher food and commodity costs. Unfortunately, electricity prices are the next form of energy that is
likely to feel the effects of high commodity prices, regulation, and legislation in a way that is similar to the current
impact of high crude oil prices. Edison Electric Institute expects U.S. consumption to grow by 30% by 2030. Currently,
the average U.S. household uses 21% more electricity than it did in 1978, and household consumption is expected to
grow by 11% more over the next 20 years as home computer and air conditioning usage continues to rise. To support
expected increased usage, infrastructure will also need to be improved, but it too is not keeping up.
Desire and action are not enough. Even if we begin today to upgrade the power system infrastructure, it will not
come cheap. Infrastructure costs are also going up as both copper and steel prices have been on the rise,
affecting towers, transmission lines, and transformer cost. Yet demand will not wait as we hope for lower
commodity costs in the future. The North American Electric Reliability Corporation expects peak demand to increase by
18% over the next 10 years, while committed resources are expected to only increase by 8.5%. Not only are services
in doubt, but reliability is in jeopardy.
An attempt to reduce emissions would lead us to increase taxes on steel

Steketee 6/3 (Mike, National Affairs Editor of the Australian, Follow Arnie's lead, 2008,
http://www.theaustralian.news.com.au/story/0,25197,23959566-7583,00.html) //am
Action by developed countries is a necessary first step if there is to be any hope of getting binding commitments from developing
countries, which argue that, since it was the industrialised nations that created the problem, they should take the lead in resolving it.
Besides, some developing countries have started acting. China has announced that it will reduce the energy intensity
of its output by 4 per cent a year, a significant step if it is delivered. It has imposed special taxes on industries such as
steel, aluminium and cement to reduce their high use of energy. China has by far the biggest nuclear energy building
program in the world and has set renewable energy targets.
This card is on fire – energy independence has the potential of destroying the entire steel
industry along with other industries.
Alhajji and Longmuir 07 (A F and Gavin, A F Alhajji is an energy economist and professor at Ohio Northern University; Gavin
Longmuir is a petroleum engineer affiliated with the International Petroleum Consultants Association, My Say: The paradox of energy
independence, The Edge Malaysia, March 5, Lexis Nexis) //am
In spite of these possibilities, let's assume that plans for energy independence succeed, and that several European
countries, the US, Japan, China and India become self-sufficient. Major oil exporters could then seek to use their now
less-valuable oil at home as cheap fuel for an expanded heavy industrial sector. Instead of exporting oil directly, they
could export their energy embedded in metals, chemicals and manufactured products at prices that undercut anything
producers in the oil-consuming countries, especially Europe and the US, could match, given their dependence on
higher-cost alternative energy sources. Energy independence thus could destroy entire industries, especially
petrochemicals, aluminium and steel. In fact, cheap energy in oil-producing countries might make their new
industries competitive with those in China, India and Southeast Asia. The net result would be a loss of jobs and
weakened economies. Countries might end up energy-independent, only to become steel-dependent or petrochemical-
dependent.
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Companies investing heavily in renewable energy will have to pay much more for power
AP 7/2 (Expect power rates to rise Residential users could pay 30 percent more for utilities, 2008,
http://www.statesmanjournal.com/apps/pbcs.dll/article?AID=/20080702/NEWS/807020439/1001) //am
PORTLAND — Already faced with higher food and gas prices, consumers can expect to pay more for power
as regional utilities buy expensive wholesale electricity to meet rising customer demand while investing
heavily to meet renewable energy mandates. Ratepayer advocates contend the increases could rival
those from the 2000-01 energy crisis, when residential rates rose roughly 30 percent and industrial rates
increased about 50 percent. Northwest Natural Gas is getting set to reveal its annual rate adjustment,
and it doesn't look promising for customers. Natural gas prices are about 70 percent higher than the
level used to set rates last year. And so far, the company has locked in only 30 percent of next year's
supply. Meanwhile, Portland General Electric, Oregon's largest utility, filed a request with regulators in
February to increase rates 8.9 percent beginning in January. In two weeks, the company is set to update
the request to account for increasing fuel costs. Ratepayer advocates expect a significant increase in the
number. Jim Lobdell, the vice president in charge of PGE's energy portfolio, said he doesn't think rates will leap quite like they did
during the energy crisis. But he acknowledged there is going to be heavy pressure on rates. Since closing the Trojan
Nuclear Plant in 1993, PGE has bought about 25 percent of its electricity on the open market. With its current growth trajectory, the
utility's own supply of energy will be about 1,500 megawatts short of meeting its peak demand in 2014, Lobdell said. That represents
32 percent of PGE's peak demand.
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Higher energy prices drastically lower U.S. steel’s profits
Boselovic 5 (Len, Pittsburg Post-Gazette, Energy prices hit steel industry, October 26th, http://www.highbeam.com/doc/1G1-
137939615.html) //am
Oct. 26--Higher natural gas prices spurred a 70 percent decline in U.S. Steel's third-quarter profits and resulted in red
ink at another major U.S. producer. U.S. Steel yesterday reported net income of $107 million, or 82 cents per diluted
share, for the three months ended Sept. 31, vs. earnings of $354 million, or $2.72 per diluted share, in the year-ago
quarter. The latest results bested the consensus analyst estimate of 77 cents. U.S. Steel previously had warned that
the quarter would be harmed by rising costs for natural gas and scrap steel.
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Internal Link – high prices bad for

domestic industry
Low prices for the steel industry are key to keep strong manufacturing.
[insert cite]
Part B: Policy Recommendations The more ponderous subtitle in the Report reads: “Major Economic Policy Considerations Flowing
from the Criticality of Steel to U.S. National Security.” This section contains four segments that will be discussed (under their original
titles) in the sequence in which they were presented. Economic Policies that Encourage Continued Investment in the United States
As was noted above, the Report recommends policies to strengthen domestic manufacturing because large commercial
sales to that sector would sustain steel’s proficiency as a military supplier. New government policies should
encourage multinational corporations to channel their investments into domestic manufacturing rather than move
them abroad. Specifically, the policies should include initiatives that lower energy costs and ease the burdens
imposed on U.S. manufacturers by regulatory mandates, environmental rules in particular, and post-retirement
benefits [modified in the bullet point, without explanation, to “pre-and post-retirement “ benefits]. The suggested policies are so
broad, even global, in their scope that none have a chance of eliciting action or even arousing a serious interest in political circles.
They may resonate in some manufacturing circles but, following the steelmakers’ recent confrontation with the automotive sector,
not in others. ● “Significantly lower energy costs for domestic manufacturers” Would every person living in this country
not wish for lower energy costs. The question, though, is whether this is not a proposal for redistributing the burden of energy
costs by shifting some of it from the manufacturing sector to the general public (or taxpayers). In that case, the above statement is
really a plea for a subsidy!
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Impact – Steel Prices

Higher steel prices cause strikes, cancellation in infrastructure, economic dislocations, and
more rises at the speed of “ocean storms”
Kingsdale 5/15 (Jim, owner of energyinvestmentstrategies.com, High Steel Prices: a Preview of Peak Oil, 2008,
http://www.energyinvestmentstrategies.com/2008/05/15/high-steel-prices-a-preview-of-peak-oil/) //am
Such necessary products fall in two categories. First are those consumers can use to free themselves of oil: cars, trucks, and
trains that operate on electricity instead of gasoline or diesel. Second is the capital equipment needed to make both such
consumer items and to obtain more oil and other energy sources. Steel is one of the inputs to those products. A hint of
Crunch Time is in this report from Brazil and a sample is also described in today’s Wall Street Journal: The headline is, “Fast-Rising
Steel Prices Set Back Big Projects.” The article starts, “Relentless increases in the price of steel are halting or slowing major
construction projects world-wide and investments in shipbuilding and oil-and-gas exploration” Stripped of the human dimension the
essential formula is: global demand growth -> high oil, food and steel prices -> high costs to build rigs and ships -> higher energy
prices -> higher oil, food and steel prices This mechanical process of higher prices cycling up the line and shortages of things needed
to make other things compounding the dysfunction is only the start. Then, the human dimension supercharges the process. As the
Journal points out, higher steel prices are now causing strikes in Turkey, cancellation of infrastructure projects in India,
and government interventions in the private sector via price controls, nationalizations, and export controls - all of
which cause other economic dislocations. Not the least of today’s dysfunctional outcomes is a slowdown now
occurring in the production of equipment needed to find and produce oil. As production slows, companies lay off
workers. While layoffs tend to reduce ultimate consumer demand for products, in the short term shortages of
manufacturing inputs just increase demand for those inputs further. Thus society’s initial efforts to increase
manufacturing capacity turns into an effort to simply maintain capacity - or stop if from freezing up. As the process
of rising costs and slowing production reinforces itself it gains speed like an ocean storm. As the Journal
reports, “Last year, it took six months for steel prices to rise $100 a ton. Now, prices are moving that much in a
month.” The vicious cycle we are seeing today was initially caused by rapid growth and improved living standards in
China, India and other poor countries as brought on by globalization. The process was initially demand driven. It can -
and eventually it will - be corrected by a significant economic slowdown.
Increasing cost of steel will cause massive inflation around the world
King 5/19 (Byron, a frequent contributor to the free e-letter Whiskey & Gunpowder, High Steel Prices and “Peak Everything”,
Energy and Oil, http://www.energyandoil.com/high-steel-prices-and-peak-everything) //am
The rising cost of steel is at the heart of much capital cost inflation around the world. It affects all energy projects, plus
all other capital-creation efforts. It’s a long-term theme in my view of things. It means that capital creation will become much more
difficult, in an era when it is of utmost importance. Central Planning, anyone? Maybe we all ought to re-read Vladimir Putin’s PhD
Thesis — much of which he plagiarized — on the subject of central planning. The vertically integrated steel companies will survive,
and likely prosper. Heck, a good steel millll will become a national asset, like Yellowstone Park or Gracieland. The “tier” metals-
players, who bought into the niche theory, will struggle to find suppliers — let alone just-in-time suppliers (Ha!!!) — and to pass
through costs to the customers hemorrhaging from sticker shock.
Increased cost of steel results in massive layoffs

Metal Center News 3 (CITAC: high steel prices cost U.S. jobs. (Association News), March,
http://findarticles.com/p/articles/mi_go1556/is_200303/ai_n7610246) //am
The Consuming Industries Trade Action Coalition Steel Task Force has released a study claiming that higher steel prices, caused in
large part by the Section 201 steel tariffs imposed in March 2002, have resulted in the loss of nearly 200,000 American
jobs.
Increased steel prices result in inflation

Jagannathan 4 (K. T., writer from The Hindu Group, High steel prices fuelling inflation,
http://www.hinduonnet.com/2004/03/06/stories/2004030602321400.htm) //am
Question: What does the steel price increase mean to the economy at large?
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Vellayan: I see this increase in steel prices as contributing to an increased rate of inflation. The construction,
automotive and transportation sectors are large consumers of steel and this increase would result in a significant rise
in costs in these three sectors.
Increases in steel prices hurt the construction industry, manufacturing industries, and the
mining industry.
Shakil-ur-Rahman 8 (Mir, Editor and Chief of the International News, High steel prices hit engineering industry,
http://www.thenews.com.pk/daily_detail.asp?id=111222) //am
KARACHI: The local engineering industry is feeling the heat in the wake of soaring steel prices, driving up its cost of
production and lowering profit margins. The industries, which use steel as a basic raw material, are now fast becoming
unable to compete with international competitors, especially India, due to high input cost. However, India is still getting raw
material on lower rates. Korangi Association of Trade and Industry (KATI) Chairman Shaikh Fazl-e-Jalil told The News over phone
due to high steel and cement prices, the construction industry was facing difficulties, which in turn put many industries
producing construction-related steel products in trouble and some were on the verge of closing their operations. China
and Taiwan are selling their products in Pakistan at competitive rates while the local industry is not in a position to control the rising
cost of production. Spare-parts’ manufacturing industries are facing problems with rising steel prices in the country.
“Pakistan needs to strengthen its engineering industry which is far behind and is not able to compete with neighbours, particularly
India. At present, there is 18.5 per cent sales tax on the import of all types of steel products which should be reduced,” he urged.
Accepting that international steel prices were soaring, Fazl-e-Jalil, who is also associated with the engineering industry, said the
Pakistan Steel Mills (PS) being a public sector organisation should facilitate the local engineering industry. Pakistan totally
neglected its mining industry in the past and “we always rely on imported raw material for steel production which is
why our mining industry is still very backward.” The steel industry is now moving towards utilising local raw material
as international raw material prices are rising, making it difficult to produce steel. With this development, industry officials
hope that Pakistan will gradually lessen its dependence on imported raw material. “Prices of metals are surging all over the world and
not only in Pakistan. We need to move with the world and at the same time control our cost of production which is rising these days.
What we can do is to improve the quality and train the labour to minimise raw material wastage and create brands and discourage
imitation,” Muhammad Idrees Gigi, Chairman of Federal B Area Association of Trade and Industry told The News.
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Impact – Steel Prices

Higher steel prices hurt the auto industry
Shunk 6/2 (Chris, writer at autoblog, Surging steel prices cost automakers $500 more per vehicle,
http://www.autoblog.com/2008/06/02/surging-steel-prices-cost-automakers-500-more-per-vehicle/) //am
A few years ago, high(ish) gas prices and fierce competition had Detroit automakers talking about the "perfect storm" that the
domestic industry was facing. Fast forward to 2008 and the entire auto industry, not just U.S. automakers, is in a full-blown tsunami.
Gas is $4 per gallon, the U.S. is muddling its way through some seriously wobbly financial times, and now the price of steel has
nearly doubled in five months to $1,035 per ton. Since just this January, the cost of steel in your automobile has risen
$500 per car. The reasons for the sharp incline in prices includes both the increased cost of energy for steel makers
and higher demand for the strong stuff coming from rapid growth in countries like China and India. With everybody
feeling the pinch of high materials, which also includes sharp increases in platinum and aluminum, suppliers are passing these costs
on to OEMs, who in turn will be passing them on to us. That means we may soon be paying a lot more for our next vehicle.
With rising gas prices, inflation, and a weak U.S. economy, car customers appear to be experiencing their own little
thunder storm, too.
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Impact – Military
Domestic steel companies are key to readiness
AISI 5 (American Iron and Steel Institute, STEEL INDUSTRY REMAINS INTEGRAL TO NATION’S SECURITY, November 9th,
http://www.steel.org/AM/Template.cfm?Section=2005&CONTENTID=13484&TEMPLATE=/CM/ContentDisplay.cfm) //am
WASHINGTON, D.C. – The American Iron and Steel Institute (AISI) honors U.S. veterans this November 11 for their service – both past
and present – in preserving America’s national security. American steel and specialty metals also play a role in securing our
nation as they are found in virtually every military platform. “The domestic steel industry has transformed itself into
an innovative industry that produces more versatile steels, which serve our military,” said Andrew G. Sharkey, III, president
and CEO of AISI. “This Veterans Day, AISI and its member companies want to acknowledge the pride both U.S. veterans
and the steel industry take in ensuring national security.” A solid force in U.S. national security, steel helps arm military
Humvees, helicopters, ships, as well as the soldiers themselves. For example, some might be unaware that the hull of
the USS New York contains 20 tons of steel that were salvaged from the remnants of the World Trade Center. As Senator
Hillary Clinton (D-NY) has stated, “…a vital, healthy domestic steel industry is important not only for the economic health
of our nation, but for our national security, as well.” Abrams tanks consume 187,000 tons of steel plate in the
production of 8,500 tanks, which result in 22 tons of plate in each tank. Each aircraft carrier contains 50,000 tons of
steel plate and steel makes up about 20 percent of the materials used in the F-18 and F-22 military aircraft. The up-
armored Humvee in use by the U.S. Army includes steel plating around the cab of the vehicle, offering improved
protection against small arms fire and shrapnel. Steel plating underneath is designed to survive up to eight pounds of
explosives beneath the engine to four pounds in the cargo area. Senator Lindsey Graham (R-SC) recently noted the
importance of maintaining a healthy domestic steel industry as it relates to our nation’s military preparedness.
Historically, specialty and high-strength steels have been procured strictly from American mills, which is a fact the
domestic steel industry hopes remains in tact as the threat of state-subsidized foreign steel flooding our market
remains. The Department of Defense’s (DOD) primary use of steel in weapons systems is for shipbuilding, but steel is
also an important component in ammunition, aircraft parts, and aircraft engines. DOD’s steel requirements are
satisfied by both integrated steel mills (consumers of iron ore) and mini-mills (consumers of scrap). With the desire
never to be dependent on foreign nations for the steel for military applications, AISI urges defense of U.S. trade laws
so that examples such as the USS New York are sustained and American steel continues to play a vital role in national
security.
Domestic Steel Industry is key to military readiness

AISI 7/1 (American Iron and Steel Institute, U.S. STEEL INDUSTRY CRITICAL TO KEEPING US FREE, 2008,
http://www.steel.org/AM/Template.cfm?Section=2008&TEMPLATE=/CM/HTMLDisplay.cfm&CONTENTID=24325) //am
WASHINGTON, D.C. -- As we reflect on our country’s independence this Fourth of July, we should pause to recognize those who fought
for our freedom more than 230 years ago. But we should also recognize those who continue to keep our country free today: the men
and women in uniform who offer their noble service in order to preserve America’s national security. “Members of the United States
Navy, Marine Corps, Army, Air Force and Coast Guard, both at home and overseas, risk their lives everyday to ensure that Americans
continue to have the freedoms that our country is founded upon. It is their commitment to our country that has made America what
it is today – a beacon for freedom and democracy, “Andrew G. Sharkey, III, president and CEO, American Iron and Steel Institute (AISI),
said. “Our veterans represent the very best of America and the U.S. steel industry is continuously working to serve the
military in their efforts to defend our nation.” Sharkey said domestically-produced steel is important to “improve our
military platforms, strengthen the nation’s industrial base and harden our vital homeland security infrastructure.”
Congressman Peter J. Visclosky (D-IN), Chairman of the Congressional Steel Caucus, has noted that “to ensure that our national
defense needs will be met, it is crucial that we have a robust and vibrant domestic steel industry. It is poor policy to
rely on foreign steel for our national security – instead, we need a long-term investment in domestically-produced,
high-quality and reliable steel that will serve and strengthen our national security interests.” Protecting the nation’s
vast infrastructure is essential to our homeland security. This became an issue in recent times when it was discovered that
substandard steel imported from China was being used by the U.S. Department of Homeland Security to construct the border fence
between the United States and Mexico. Members of the Congressional Steel Caucus, including Congressman Visclosky (D-
IN), have worked to introduce legislation that will help strengthen the domestic steel industry in order to address
issues of substandard steel imports. “AISI and its members greatly appreciate the Congressional Steel Caucus’ support for the
steel industry and their vigilance on behalf of America’s national security,” Sharkey said. In addition, thousands of skilled men
and women of the U.S. steel industry work to produce high quality, cost-competitive products that are used by the
military in various applications ranging from aircraft carriers and nuclear submarines to Patriot and Stinger missiles,
Sharkey said. Land based vehicles, such as the Bradley Fighting Vehicle, Abrams Tank and the family of Light Armored
Vehicles, also utilize significant tonnage of steel plate per vehicle. The up-armored Humvee, in use by the U.S. Army,
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includes steel plating around the cab of the vehicle, offering improved protection against small arms fire and shrapnel.
In fact, the steel plating underneath the cab is designed to survive up to eight pounds of explosives beneath the
engine to four pounds in the cargo area. These critical applications require consistent, high quality domestic sources of
supply. “We as a country need to make sure that our national defense needs will be met, making it critical for the
United States to have a robust and vibrant domestic steel industry that will serve to strengthen our national security
interests,” Sharkey noted. Historically, American-made steel and specialty metals have been integral components of U.S.
military strength and they continue in this role today. The Department of Defense’s (DOD’s) primary use of steel in
weapons systems is for shipbuilding, but steel is also an important component in ammunition, aircraft parts, and
aircraft engines. DOD’s steel requirements are satisfied by both integrated steel mills and EAF producer mills. “With the
desire never to be dependent on foreign nations for the steel used in military applications, it is critical that U.S. trade laws be
defended, strengthened and enforced so that American-made steel can continue to play a vital role in our nation’s
security,” Sharkey said. “On this Independence Day, let’s pledge to work to uphold that ideal.” AISI serves as the voice of the North
American steel industry in the public policy arena and advances the case for steel in the marketplace as the preferred material of
choice. AISI also plays a lead role in the development and application of new steels and steelmaking technology. AISI is comprised of
29 member companies, including integrated and electric furnace steelmakers, and 138 associate and affiliate members who are
suppliers to or customers of the steel industry. AISI's member companies represent approximately 75 percent of both U.S.
and North American steel capacity. For more information on safety tips for consumers, visit AISI’s Web site at www.steel.org.
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Impact – Military
Keeping the domestic steel industry strong is the best way to maintain military readiness
Bradford 1 (Charles, Steel Analyst, President of Bradford Research, What's Wrong with the Steel Industry--Again?, February 20th,
http://www.freetrade.org/node/355) //am
Military use, that's another big one. I mean, we've had senators get up before Congress, especially on the Don Evans
hearings, on his appointment, and talk about how steel is so important for the military defense of the United States.
According to the American Iron and Steel Institute, the segment called ordnance and military accounted for 0.0 percent of the market
last year -- 0.0 -- all of 28,355 tons, against an industry that shipped 109.6 million tons domestically. And that's not counting imports.
If you added imports, it would be less than 0.0 percent -- if that's possible. The last fallacy that I'd like to hit upon is that imports are
the cause of the problem. I think they're a symptom; they are not the cause. A lot of situations that the mills caused themselves
encouraged imports last year. They ran up spot prices very rapidly, beginning in late 1999. Their customers, a lot of whom are
service centers or warehouses, hedged to beat the price increases. They double-ordered steel from domestic mills. Domestic mills
aren't stupid. They saw some double-ordering and they cut back on sales to certain of their customers or new customers. What did
those people do? They bought foreign steel. The problem is it takes five to six months for the foreign steel to come. So,
what happens? The market turns weaker in the U.S. because of the excess inventories in place; at the same time, the foreign steel
keeps coming. No matter what the administration does today, or Congress does today, we're going to see lower imports. It's already
preordained, because orders fell beginning in May. Add five months, six months, later to that and you see lower imports. This is a
natural event. It is not the catastrophe people make it out to be. Let's talk about what the industry really is, because there really are
three steel industries. Mr. Danjczek's industry, the mini-mills, melt scrap. They melt scrap. More than half their cost at times is the
cost of scrap. The beauty of scrap is that the price goes down in an economic downturn. So their costs are variable. In a downturn
like we have had -- and the steel industry has had quite a downturn since last May -- the cost of scrap has fallen. Therefore, mini-mill
costs go down.
Domestic steel companies are integral to national defense and security

[insert cite]
Consistent supplies of steel are essential to achieve both national defense objectives and homeland economic security
. This is the message of the U.S. steel industry’s latest publicity release (hereafter referred to as the Report). Steel is a pivotal
element of U.S. military preparedness, readers are told, and examples are given of steel applications in land, air and
naval weaponry. Moreover, steel is also required to build and maintain the infrastructure supporting the military,
including railroad tracks and cars. But only “high quality on-shore supply sources” can reliably shoulder these tasks. Why is this
so, one may ask. The anonymous authors of the Report give several reasons but make no effort to support them analytically or
factually. Instead, they use repetitious assertions regarding their industry’s efficiency and darkly hint at potential import disruptions,
conveying the idea that excessive U.S. involvement in the global economy will put national security at risk and should be
reined in. Specifically, the authors express concern about the volume of imported steel and an ongoing shift of American
manufacturing activities to offshore locations, China in particular. With respect to steel imports, they warn the U.S.
government of perceived longer-term perils to the nation’s military strength if further advances of foreign steel into the
U.S. markets were condoned. In the words of the Report, “by becoming even more dangerously dependent upon offshore
sources of steel, the United States would experience sharply reduced security preparedness .” This dire prediction is
supplemented by the following brief bullet points, each describing alleged shortcomings of offshore steel for national security
applications. ● “Highly variable, and certainly higher, costs” ● “Uncertain supply, impacted by unsettled foreign economies and
politics” ● “Quality, design and performance problems” ● “Inventory problems, long lead times and extended construction
schedules” The validity of these points will be examined later in this review.
The Military is heavily dependent on the domestic steel industry

[insert cite]
The first of six paragraphs contains the declaration: “Virtually every military platform is dependent on U.S.-produced steels
and specialty metals.” Of course, it is dependent on “domestically-melted specialty metals,” because Congress
directed the Department of Defense to use no other kind, which makes the logic of this declaration a bit circular.
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A domestic source of steel is important in times of war
Arabe 1 (Katrina, journalist at ThomasNet Industrial Newsroom, Debating the Roles of Steel & Nuclear Recycling in the Military,
September 7th, http://news.thomasnet.com/IMT/archives/2001/09/debating_the_ro.html) //am
As the Trade Commission moves to protect the U.S. steel industry from imports, a debate heats up over steel's importance in
Defense. And, the debate continues over what to do about nuclear recycling. On August 17 the U.S. International Trade Commission
decided it would place anti-dumping duties on imported hot-rolled steel products from South Africa and place countervailing duties on
similar imports from Argentina in hopes of protecting the domestic steel industry. A frequently cited incentive for the decision
has been that in the event of a war, the U.S. should maintain a domestic source of steel. The theory being that the U.S.
would be better able to replenish its defenses if it did not have to rely on outside nations for its raw materials. In the
wake of the ITC's decision a debate has sprung up over whether or not domestic steel is truly a necessity in
maintaining the nation's defense system. Russell Sutton, president and CEO of Ferguson Steel Co., Indianapolis, IN,
believes the issue is a matter of national security. He extends coverage, in theory, to petroleum as well. "We need
petroleum and we need steel to be able to conduct an ongoing defense should our supplies [from] offshore be cut," he
says.
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Impact – Military
The domestic steel industry is critical for the DoD
Hawkins 7 (William R., Senior Fellow for National Security Studies at the U.S. Business and Industry Council, Combat Lessons of
Iraq, Not Rumsfeld's Theories, Will Shape Future U.S. Military Procurement, June 6th,
http://www.americaneconomicalert.org/view_art.asp?Prod_ID=2795) //am
HASC also expressed concern for particular industries. It noted “domestic steel production capability is an important element
in the defense industrial base, and that the Department of Defense relies upon the domestic steel industry for many
critical capabilities, including jet aircraft, submarines and Humvees. The committee is also aware that the industry is
under intense competitive pressure with increasing consolidation of domestic steel producers. As a result of this
consolidation, foreign-owned companies now control more than a quarter of the annual North American industry
output.....The committee urges the Department and the Board to consider the critical contributions to national security
made by the domestic steel industry, and to examine whether past and future consolidation of the domestic industry
has led the United States’ domestic steel production capacity to atrophy.” This same advice should be applied to all
manufacturing sectors involved in military and high-tech fields.
The domestic steel industry is necessary for national defense – multiple warrants
US Steel Industry 7 (STEEL AND THE NATIONAL DEFENSE, January, http://legacy.usw.org/usw/program/content/3684.php) //am
The critical interdependence of domestically-produced steel and America's national security is detailed in a new
industry analysis released today, which urges public policies that promote further investment in domestic
manufacturing rather than increasing reliance on foreign sources of steel and steel-related products. Issued by the
American Iron and Steel Institute (AISI), Steel Manufacturers Association (SMA), Specialty Steel Industry of North
America (SSINA) and United Steelworkers (USW), the analysis explains that the U.S. steel industry's ability to supply
the defense establishment will depend on its ability to compete in its commercial markets and maintain an onshore
manufacturing presence. With much of America's steel-related manufacturing base being moved offshore due to
market distorting, and often illegal, foreign government incentives and unsound economic policies at home, the U.S.
military could lose its principal source of strategic metals. If this were to occur, the United States would become
dangerously dependent upon unreliable foreign sources of supply. The report details the importance of domestically-
produced steel to our national defense. In so doing, it highlights the increased need for steel to improve our major
military platforms, strengthen the nation's industrial base and harden our vital homeland security infrastructure. It
notes further that all segments of the domestic steel industry contribute directly or indirectly to the defense industrial
base. From missiles, jet aircraft, submarines and Humvees, domestic and specialty metals play an important direct role
in the strength of the U.S. military. If the U.S. is to maintain its capability to produce the steel and other strategic
metals that are critical to the nation's defense infrastructure, the following must occur: 1. Economic policies that
encourage continued investment in the United States in both manufacturing and technology must be pursued. In
addition, we need to: ¨ Lower significantly energy costs for domestic manufacturers; ¨ Demand that
environmental control systems in foreign countries increase to levels comparable to those used by U.S. manufacturers; ¨ Remedy the
competitive disadvantages suffered by domestic manufacturers that provide pre- and post-retirement employee benefits; ¨ Change
tax policies so that they no longer disadvantage U.S. manufacturers. 2.The United States also needs to have a healthy and viable
R&D effort at home. 3. And most importantly, enforcement of free trading principles must be pursued vigorously. The analysis also
singles out the government of China's massive support of its steel industry as "an artificial advantage in international competition"
that, if left unchallenged, will result in the continued transfer of significant defense-related manufacturing capability to this growing
military power in Asia.
A strong domestic steel industry is key to national security

Visclosky 99 (Peter J., 1st Congressional District of Indiana, Testimony on the Current American Steel Crisis Before the House
Committee on Ways and Means Subcommittee on Trade, February 25th, http://www.house.gov/visclosky/stltest.htm) //am
A strong domestic steel industry is also a key to the national security of the United States. The steel industry's present
and future competitiveness has long been a priority of the Department of Defense because of the importance of a
sufficient wartime steel supply. During the Cold War, steel, like aircraft and ship manufacturing, was essential to our
ability to defend ourselves if the need arose. We could not then count on imports from the Soviet Union, Brazil or
Japan, nor could our allies. As recently as the Gulf War, the U.S. Army relied on steel in 5,000 tanks, Bradleys, and
other Armored Personnel Carriers. At the peak of the conflict, the U.S. Navy deployed 120 ships made almost
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exclusively from American steel, including the aircraft carrier U.S.S. Nimitz and the battleship U.S.S. Missouri, to the
Persian Gulf. As the crew of the Nimitz likes to say, she represents 95,000 tons of diplomacy that carries 4.5 acres of
sovereign U.S. territory anywhere in the world -- that diplomacy stands on 95,000 tons of American steel. Corporate
leaders from the aerospace, vehicle, and shipbuilding industries successfully argue that production lines for
equipment, such as submarines and F-16s, must remain open, if for no other reason than to ensure that the means
and skills to produce those ships, tanks, and planes remains ready. The line of reasoning goes that our defense
industrial base must maintain the capacity to increase production within a reasonable amount of time. Obviously, a
domestic steel industry that cannot provide the millions of tons of steel necessary to make ships and tanks would have
a devastating impact on America's ability to respond to a threat to our national security. Steel stands strong among
America's industries in boasting of the significant role it played in winning and securing our freedom.
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Impact – Military
The domestic steel industry is key to security – studies and facts prove
Shilling 5 (Jack, executive vice president of SSINA, SPECIALTY STEEL INDUSTRY OF NORTH AMERICA, December 6,
www.ssina.com/news/releases/pdf_releases/12_06_05.pdf) //am
Regarding defense applications, the survey of U.S. specialty metals companies conducted by their industry trade group, the
Specialty Steel Industry of North America (SSINA), proves unequivocally that specialty metals are vitally important to
virtually every U.S. military platform. “U.S. military capabilities are directly dependent upon the availability of crucial
specialty metals,” explained SSINA Chairman Jack W. Shilling, who spearheaded the study. “Without them, the U.S. military and
homeland security forces would not have the ability to fight a war, defend our borders, and protect our citizens from
terrorism.” Acting Deputy Under Secretary of Defense Gary A. Powell reinforced Shilling’s comments by explaining, “There is no
question that specialty metals are critical to national defense, and the U.S. specialty metals industry is a very
important supplier of these materials to various defense contractors. And myriad defense programs would be
negatively impacted by specialty metal supply disruptions.” Many examples of leading edge specialty metals
applications currently used in missiles, jet aircraft, submarines, helicopters, Humvees and munitions are identified in
the study, which will be delivered to Capitol Hill and the Pentagon. “Compiling this information was very time- consuming and
I want to thank the SSINA member companies for their cooperation and support of this project,” said Shilling. The industry report
cites Department of Defense studies as additional evidence of the critical importance of specialty metals to national
defense. A series of reports entitled the Defense Industrial Base Capabilities Studies clearly show that applications
which contain specialty metals are essential to meeting current national defense requirements and are critical
components of technologies that focus on 21 st century warfare. Shilling also noted that for the past three decades the
U.S. Congress has understood the dependent relationship between a healthy U.S. specialty metals industry and a
strong national defense. “Over 30 years ago, Congress enacted the Specialty Metals Amendment to the Berry
Amendment to recognize the importance of the industry to national defense and help ensure its long-term survival,”
he said. “Since then, the ongoing importance of this statute to national defense has been confirmed virtually every
year during debate in Congress. Most recently, the Department of Defense published notice in the Federal Register of
the department’s intent to strictly follow this provision of the law.”
Domestic steel industries are integral during war – empirically proven

Francis 7 (David R., Columnist of the Christian Science Monitor, New insights on the Soviet Union's collapse, July 23rd, Lexis/Nexis)
//am
Goldman figures that Gorbachev's dismantling of the Soviet military-industrial complex was the main cause of the
collapse. The aluminum industry, for example, supplied raw material for military aircraft, the steel industry for the
60,000 tanks facing the West. Afterwards, "there was no longer anything there," he says. At its peak, the military absorbed
30 percent of total Soviet output. Today, Russia spends about 5 percent on its military.
A competitive steel industry is key to national security

Guzzo 5 (Maria, journalist of the American Metal Market, Trade laws, taxes said key to specialty steel strength, Dec. 7th, Gale
Group) //am
SSINA said in its report that it understands it would be wrong to attempt to build a wall around the United States. "This is not
necessary or desirable, in our opinion," the report said. "Many SSINA member companies are multinational companies. We are not
suggesting that this needs to change." David Phelps, president of the American Institute for International Steel, Washington, said
there's no question that the specialty metals industry is crucial to national defense. "However, the way to safeguard
the health of the specialty metals industry is to have a competitive industry," he said. Phelps said that after decades of
trade protection in the United States, he knows that such protection doesn't create a competitive industry. "If ever there
was an example of that fact, look at the carbon steel industry five years ago," he said. "Restructuring made them competitive, not
trade protection." Thomas A. Danjczek, president of the Steel Manufacturers Association, Washington, said he didn't think the SSINA
proposal was too protectionist. "They're responding to the fact that the U.S. government is not paying a lot of attention to critical U.S.
industries," he said. "It's not self serving; it's necessary. If we would be getting any response out of the government, I'd have a
different attitude." Gary A. Powell, acting deputy undersecretary of defense for industrial policy, said there's no question
that specialty metals are critical to national defense and the U.S. specialty metals industry is a very important supplier
of these materials to various defense contractors. "Myriad defense programs would be negatively impacted by
specialty metal supply disruptions," he said.
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Relying on a variety of vendors is ineffective – recent examples prove

McKenna 5 (Ted, journalist of the journal of Electronic Defense, Support your local armsmaker: the defense industry is as global
as, if not more than, any other industry. Does this hurt or help a nation's military effectiveness?, August, Gale Group Databases) //am
Wartime Production Ultimately, what matters is whether the military can get what it wants in time of need. General Richard
Cody, US Army vice chief of staff, noted the increased number of deployments by the US around the world. Compared with the years
between 1950 and 1989, when the US had some 10 deployments, including Vietnam and Korea, there have been 43 deployments and
counting since 1989--this despite a 44% drop in forces since the fall of the Berlin Wall. Right now, 630,000 soldiers are on active duty.
"What's the right number? I don't know," Gen Cody said. "But it's taken this many service members to fight the global war on
terrorism, and it's a stress and a strain on the Army." One example of the strain was the inability of the military industry to
initially provide the amount of individual body armor (IBA) that the Army needed for its operations in Afghanistan and
Iraq. As Operation Iraqi Freedom was just getting underway, only one vendor was building IBA, and even though the
Army invested a lot of money up front for the armor, it simply couldn't get it fast enough. "There are now eight
vendors, but it took a while," Gen. Cody said. "We can build tanks and helicopters faster than we can equip our
soldiers, because of the way that the industrial base is set up." They are not all US companies, though. The US military
today acquires its technologies basically wherever it can get them, and this often means overseas. While national
borders may be real in the sense that wars are fought over them, they are essentially arbitrary, and certainly
businesses don't stop on the border of a country if they think a profit can be made by crossing to the other side. Thus,
trade and transmission of ideas continues to spread across the world, particularly given the state of modern
telecommunications. For any individual nation's military, this means acquiring and holding onto a technological
advantage is increasingly difficult. Borders are fleeting. In the final scene of "Grand Illusion," the Jean Renoir film about soldiers
held captive in World War I German camps, an officer taking aim at escapees running across a field of snow suddenly lifts his rifle,
stopping. Why didn't you shoot? he is asked. Because they have crossed the border into neutral territory, he replies. To the viewer,
there is nothing but white snow; this border between territories is invisible and in fact--so the film implies--an artifice manufactured
by man.
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Impact – Military
Domestic industries are necessary to maintain readiness
Waller 1 (Michael, journalist for insight on the news, U.S. in Steel Trap.(United States, military
infrastructure)(Statistical Data Included)., Sept 17th, Gale Group Databases) //am
The domestic steel industry and other industries vital to U.S. national defense are being killed off by policymakers in
Washington who are caught up in a `free-trade' fervor.
When the U.S. Army decided it needed new berets for every soldier, it had to go to Communist China to have them
made. No U.S. company could produce them to the required quality and specifications, Army officials said. An outraged Congress
intervened to break the contract with the Chinese supplier and issue it to a small American company. The Army's Chinese-made
berets became the butt of jokes around the world. But the underlying questions, industry and defense analysts say, are no
joke. The black-beret fiasco illustrates a looming crisis in the nation's defense-industry base and its overall readiness
infrastructure. The United States is losing its industrial capacity in keg areas and soon will become totally dependent
on foreign sources for some of the basic raw materials for its military machine. Defense planners now are worrying about
where the Pentagon will go a decade from now for strategic materials as essential as steel. If present trends continue, the United
States soon will be unable to build tanks, armored vehicles, guns, bombs and warships without depending on foreign
steel. The trends are so troubling that the Department of Commerce and the Department of Defense (DOD) are
studying the effect on national security of increasing U.S. dependence on semifinished steel imports and on the
country's diminishing capability to produce its own steel from domestic iron ore. Even in the high-tech sectors where it is
the world leader, the United States is abandoning its independent approach and teaming up with foreign companies and governments
to build some of its most advanced systems. The Clinton/Gore administration decided as a matter of policy to make the U.S.-led
International Space Station dependent on key Russian components, allowing the Kremlin veto power over how the manned satellite is
operated. Even among allies, the United States is placing key components of high-tech weapons systems in the hands
of foreign governments. President George W. Bush has offered to let fence-sitting allies from Germany to Japan profit from
development of the proposed missile-defense system. The new Joint Strike Fighter (JSF) is to be produced in cooperation with the
United Kingdom. With free-market approaches taking on almost religious fervor in Washington, many policymakers are
content to let domestic industries die, regardless of any strategic national-security importance they serve, if foreign
suppliers can meet current needs. Libertarians and many conservatives argue that strategic industries shouldn't be protected at
all. Others argue there is a huge difference between subsidizing milk production to keep consumer prices artificially high and
supporting an industrial or service sector vital to national defense. Within the latter camp is a division about whether to try to
preserve domestic capabilities or to make the best of world changes and try to partner with other countries.
"You used to have the idea that we wanted to maintain complete capability in this country, to provide all necessary
capabilities in case of war," Steve Bryen, a deputy undersecretary of defense for former president Ronald Reagan, tells Insight.
"That idea has changed quite a lot. For the most part, a lot of the stuff we're using in the defense world is commercial. It's not purely
military -- computers, communications technology, etc. That stuff is global. In that regard, the concept of trying to maintain a North
American defense industrial base has changed quite a lot and I'm not sure you can do it any more." Reagan recognized the
importance of protecting certain strategic industries. In the mid-1980s, when U.S. manufacturers opted for cheaper Asian-
made machine tools, Reagan imposed import restrictions at the risk of shutting down the domestic machine-tool
industry. At the same time his administration, with Bryen's active involvement, supported research and innovation to
help the U.S. machine-tool industry become more competitive and profitable and to remain a core of the nation's
defense-manufacturing base. Steel producers now are arguing for similar action from President Bush and are praising him for
already moving toward protecting the steel industry from foreign dumping. Some say Bush is doing it to get union votes, while others
hope that he frames the issue on national-security grounds. "The president must decide that the national- and economic-
security interests of the United States require a limitation of [imports of] semifinished steel in order to maintain
integrated melting capacity in the United States to serve the defense, vehicle and can-making industries," says Roger B.
Schagrin, a representative of Cleveland-Cliffs Inc., the largest producer of iron ore in North America.
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Impact – government spending

A weaker steel industry could leave huge debts in the hands of governments
Brough 2 (Wayne T, PhD and chief economist of Freedom works, Steel Never Sleeps, March 5th,
http://www.freedomworks.org/informed/issues_template.php?issue_id=882) //am
From virtually every perspective, tariffs on steel will do little more than raise prices for consumers to subsidize an industry that is not
viable in its current configuration. Nonetheless, the steel industry continues its search for federal assistance. Steve Miller, the new
CEO of the now bankrupt Bethlehem Steel, is no stranger to Washington. A key executive at Chrysler when it received its bailout in
1979, Mr. Miller is banking on Washington one more time to bail out his new industry. And if he has his way, tariffs are just the
beginning of Washington’s payoffs to the industry. Many in steel industry have their eyes on a taxpayer bailout of their “legacy” costs.
Legacy costs are the costs of paying for the health care and pensions of steelworkers and retirees. In earlier years,
many steel companies agreed to very lucrative retirement and health care packages for their workers. With a slow
market and increased competition, some of these firms are predicting difficulties in covering these costs. Many of the
old integrated steel companies are now turning to Washington to cover these liabilities, which can range up to $10
billion. Legacy costs are indeed a problem that makes restructuring the existing industry more difficult. Mergers or
acquisitions are unlikely, as few would be willing to take on the legacy costs of the integrated firms. Yet that does not warrant a
federal bailout. The dot-com crash and Enron’s nosedive wreaked just as much havoc on pensions without any talk of a federal
bailout. Even within the steel industry, the more efficient firms question the push for federal funds. Dan DiMicco, CEO of Nucor stated,
“I want to make it clear that we are very opposed to having the American taxpayer and the federal government bail out the industry
on these premium benefit packages that are not available to the average American taxpayer who would be asked to foot the bill.”
(http://www.ita.doc.gov/media/InTheNews/nytsteel_grant012002.htm) Free trade is an integral component of a market society and a
important part of American history. As Benjamin Franklin noted, no nation was ever ruined by free trade. Protectionism, on the other
hand, is a guise of industrial planning, with the federal government choosing winners and losers through price controls. Inevitably,
this props up weak industries and delays necessary changes to enhance innovation and competition. Consumers suffer through
higher prices and restricted choices in the marketplace. The steel industry is no exception. New tariffs will do little more than raise
prices and shield the industry from necessary change.
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Domestic Steel Industry Good –

Laundry List
A domestic steel industry is necessary for infrastructure, military preparedness, energy,
transportation, and public safety – turns the case
Kelly 1 (Nancy, journalist from the American metal market, Producers, consumers hit D.C. with dueling lobbies: Steelmakers press
US security button.(Brief Article)(Statistical Data Included), Dec. 24th, Gale Group Databases) //am
WASHINGTON -- A viable domestic steel industry is absolutely critical to build and maintain a solid national infrastructure
ranging from bridges and highways to military hardware and is the best argument why President Bush should impose
the strongest tariffs possible on steel imports, Washington steel interests said. Major Washington steel associations and the
United Steelworkers union collaborated in compiling a report it will use in a campaign of "informational" lobbying among influential
White House advisors, think tanks and lawmakers as President Bush considers what if any trade remedy to impose against low-priced
imported steel. The message authors say they hope to hammer home is that it is critical to have immediate access to
domestic steel and "not to be dangerously dependent on excess foreign steel supply." Among the highlights of the
report: * Direct and indirect steel purchases for national defense purposes are about 5.5 million tons, annually, for
military hardware, construction, maintenance and other support applications. * An estimated 1.4 million tons of steel
will be used for military construction and housing in 2002. * If the United States were to become dependent on
offshore steel supplies the country would experience reduced security preparedness in the face of higher costs,
uncertain supply, quality, design and performance problems, and inventory problems. * The American Society of Civil
Engineers reports that $1.3 trillion would be needed over the next five years for major infrastructure improvements in
the United States. The balance of the report details how steel is critical in the supply of energy, transportation, health
and public safety, and commercial and industrial and institutional buildings. It also details the critical applications of
steel wire rope, which is used in control cables on most aircraft, aircraft carriers and tanks, as well as construction
cranes and in energy uses. In addition, the report outlines the use of steel plate and specialty metals in defense
applications. Contributors to the report included the American Iron and Steel Institute, the Steel Manufacturers
Association and the Specialty Steel Industry of North America.
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Impact Scenario – collapse of the auto

industry
The steel industry has a big impact on the auto industry
Litterick 7 (David, writer at the Daily Telegraph, High steel prices 'putting squeeze on car industry' With companies facing a
further increase in the cost of commodities, profits are in jeopardy, warns Nissan chief, January 9th, Lexis/Nexis) //am
Nissan's chief executive, painted a bleak picture of the future of the global car industry, claiming that rising steel prices would
dent makers' profits further in 2007 and spur consolidation. As the big names in the auto sector gathered in Detroit for the
industry's biggest annual trade show, Mr Ghosn said the high cost of commodities would increase the pressure on struggling
manufacturers. "Steelmakers are asking for another price increase in 2007,'' Mr Ghosn said. "That will cause a
deterioration of the profitability of the industry as a whole.'' Nissan's first-half operating profit fell for the first time in eight
years as Japan's second-biggest carmaker paid more for steel and other commodities. The company said yesterday it would miss
sales targets this fiscal year in its two biggest markets, America and Japan, because of a lack of new models. "I have announced a
double-digit increase in our sales in the US but it obviously didn't happen,'' Mr Ghosn told Bloomberg. "It was a surprise for us. We are
going to be very prudent in making forecasts from now on because of the uncertainties and headwinds facing the industry. The
automotive industry has lost its pricing power. If this is going to continue, it's going to precipitate consolidation in the
industry.''Reducing purchasing costs was given as one of the main catalysts for the putative three-way tie-up between Nissan,
Renault and General Motors last year, although GM rejected any partnership. "An increase in commodity prices will continue to
be a burden on the automakers in 2007 and would hurt cost reduction efforts,'' said Atsushi Osa of Sumitomo Mitsui Asset
Management. "There will be a limit to what level automakers can absorb the cost gains.'' Brazil's CVRD, the world's largest iron ore
exporter, which usually sets the benchmark price, won a 19pc price increase last year.
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A2: Non-Unique
Although prices will go up they will eventually level off
Muzzi 4 (Doreen, Farm Press Editorial Staff, High steel prices from suppliers impact farming, April 17th,
http://westernfarmpress.com/mag/farming_high_steel_prices/) //am
“The steel suppliers we talk to say they expect prices to increase a while more and then level off, but nobody is
projecting steel prices to drop anytime soon,” Jennings says. “We're trying to keep costs down for farmers, but the fact
is that it's costing everybody more.” For example, he says, a 7-inch by 7-inch square tool bar used frequently on farm
implements and planters sold for $17 per foot eight weeks ago, and now it's $24.80 per foot. Because Jennings doesn't move enough
inventory to be able to afford to stockpile a lot of steel products, he says he's ordering what he needs as he needs it. “If somebody
needs something I don't have, they just have to wait the few days it takes for me to get it from my suppliers.”
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A2: People will cut demand for steel

Demand for steel is skyrocketing
Courtenay 6/24 (Marc, Marc Courtenay holds an MS in Psychology from California Polytechnic State University, and is a former
Senior Vice-President of Investments for two major brokerage firms. Currently, he's an investment publisher and analyst, as well as a
financial editor, specializing in value stocks and emerging growth companies as well as the psychology of investing, Global
Infrastructure, Alternative Energy and the Cost of Commodities, 2008, http://seekingalpha.com/article/82486-global-infrastructure-
alternative-energy-and-the-cost-of-commodities) //am
U.S. Global Investors asserts that "infrastructure has become a topic of choice for politicians around the world because they
can generally count on the support of the electorate. In the case of emerging markets, it is very encouraging that
many political leaders openly acknowledge that future economic growth in their countries depends directly on
infrastructure improvements. Infrastructure expansionist fever is even catching on in the United States, Canada and
other industrialized nations of the world with a mind-boggling global $41 trillion spending program between 2005 and 2030. And, it
all necessitates the unprecedented global consumption of record amounts iron ore, cement, copper, and other physical
metals, no matter how bleak the U.S. economy. In a keynote address to the Denver Gold Group Asian Pacific Forum in San
Francisco Tuesday, U.S. Global Investors CEO and CIO Frank Holmes preached the gospel of global infrastructure expansion to a very
attentive audience of fund managers, institutional investors, analysts, and mining executives, all attuned to its benefits to
international mining. Holmes stressed the importance of broader cycles, such as the influence of Kuznets Emerging Market Cycle,
which drives commodity demands-in trying to analyze current business cycles. Kuznets, an economist who specialized in developing
economies, in particular emphasized and tracked the lengthy cycles of infrastructure development. Holmes suggested a global
megatrend of globalization, urbanization and wealth creation is now generating "a global infrastructure boom on a massive,
intractable scale." And, he added, "Megatrends increase the use of commodities, especially infrastructure, which creates sustainable
jobs and massive use of commodities." A general public, which previously could not have cared less about iron ore or
copper, may suddenly relate to the need for iron ore mines to build bridges, or the need for iron ore and zinc to
manufacture steel for buildings.
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A2: China low prices

Lower prices from competition have empirically not made a significant difference for the US
steel industry
[insert cite]
In the fifth paragraph, the authors graft one allegation upon another and come up with a grand hypothesis. What they seem to
driving at is that low steel prices in China, blamed on government support of steelmakers there, “will result in the
transfer of significant U.S. manufacturing capacity to China. If steel prices were such an important determinant of
manufacturing production costs, then abnormally high U.S. steel prices in mid-2006--relative to other major steel
markets--should also have caused the transfer of U.S. manufacturing to China. But in what applications is steel really
the principal determinant of manufacturing costs? Have U.S. steelmakers themselves not argued that in the case of
more complex goods like tools and machinery the impact of high steel prices on total costs is negligible or
insignificant? Some documentation with actual numbers would help clarify this issue. In its present form, the
argument made in the Report is not useful.
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A2: alternatives to steel

Steel scrap and other alternatives will also increase dramatically in price if we switch to them
Nelson 4 (Barbara, writer at Real Estate Weekly, Rising steel prices cause contract woes - construction industry, March 10,
http://findarticles.com/p/articles/mi_m3601/is_30_50/ai_114631118) //am
The move comes as China's demand for scrap metal to feed its burgeoning automobile manufacturing industry has
driven the price from $120 a ton to $255 a ton within months. In 2001, the United States exported 7.44 million metric
tons of scrap. Last year it exported 12 million metric tons, with China buying 3.3 million metric tons. China's demand
for scrap increased 22 percent last year and is expected to increase 13 percent this year. Since last fall, steel prices have
drastically increased, due in part to China's booming industrial economy. "With the automobile industry in China heating up, prices
have risen," said Gary Higbee, director of development of the Steel Institute of New York. The price increase is creating a ripple effect.
"It is chaotic at the moment. We have letters going out to clients, interoffice memos ... It's a soap opera," said Ken Hiller, senior vice
president and chief engineer of Bovis Lend Lease, referring to the spiralling prices created by the supply and demand environment.
"We are trying to get reimbursed from our clients. The prices we are getting from our subcontractors have all sorts of disclaimers."
"It's a real mess," said Barry Fries, CEO of B.R. Fries & Associates. "Our suppliers can sell it at a higher price overseas then they can in
the states. As long as China is going to remain a big consumer of metal it will continue. It is causing an inflationary trend." But steel
executives say because of technological advances in steel production, prices in the past have not kept up with inflation. "Because of
the use of scrap metal, they have been able to keep prices at 1970s levels," Higbee said. "The deal was, they used recycled metal."
Last summer, steel scrap was selling in the $120/ton range. By the fall, it had gone up by one-third, to more than
$160/ton, and by mid-February it had exceeded $255/ton, according to the American Institute of Steel Construction,
Inc. It will continue its upward climb, said Scott Melnick, AISC vice president of communications last week. "We are
looking at price increases through mid-summer," Melnick said. "Keep in mind this affects all steel, nails, siding and
rebar, anything made out of steel. Even if concrete is the alternative, rebar will also cost more."
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A2: Weak Dollar

Despite the weak dollar international steel industries will be competitive
Gillette 5 (Becky, Taylor Machine Works Inc, Weak dollar, better exports factors in Taylor's banner year: dollar is vital part of
Taylor's competitiveness.(Taylor Machine Works Inc.), Jan. 17th, http://goliath.ecnext.com/coms2/gi_0199-3645402/Weak-dollar-better-
exports-factors.html) //am
The outlook in the future is that there is expected to be some improvement in availability of steel. That should lead to moderation in
prices. Taylor predicts prices will be relatively high compared to the past three years, but there should be some movement downward
in prices by the middle of the year. "Despite the weak dollar that makes foreign steel manufacturers less competitive,
there is going to be a great increase in importing foreign steel simply because the weak dollar is not having any impact
on the price of steel," Taylor said. "Imported steel is just as competitive as domestic steel despite the weak dollar. We
will see supplies coming in from foreign steel greater than we have seen in recent years. The weaker dollar should
make foreign steel more expensive, but it hasn't because of the limited supply and demand in the U.S. That should
moderate prices some."
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Auto Industry
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Links
High gas prices have driven down auto sales
CBS News 08 (July 1 2008, Business, “Declining Sales Rock Auto Industry,”
http://www.cbsnews.com/stories/2008/07/01/business/main4224296.shtml)
General Motors Corp. soundly beat Toyota Motor Corp. in June to retain its traditional U.S. sales lead, but GM sales still dropped
18.2 percent during a dismal month for most large automakers. Toyota's U.S. sales fell 21.4 percent, while Ford Motor
Co. said it sales tumbled nearly 28 percent. Annual auto sales, which hit 17 million in 2005, slowed to 16.1 million last
year, and are expected to skid another 10% this year, reports CBS News Business Correspondent Anthony Mason "We haven't
seen a double digit decline in the automotive industry in decades," said auto industry analyst Rebecca Lindland with Global Insight.
Officially, U.S. auto sales are on pace for their worst year since 1993, with an estimated 14.5 million units in 2008
expected to be sold, down from an average of 16.8, reports CBS News correspondent Jeff Glor. Ford was the first
automaker to report sales data Tuesday. Analysts had predicted June auto sales could drop by double-digits to their lowest
monthly rate in 16 years. Ford shares sank to a new 52-week low, while rival General Motors Corp. shares are trading near their
lowest level in more than a half century. GM's shares bounced nearly 6 percent higher in afternoon trading Tuesday after sinking to
their lowest level in more than a half century during Monday's session. The nation's biggest automaker on Tuesday reported selling
262,329 vehicles for the month, compared with Toyota's 193,234. Some industry analysts had expected Toyota to beat GM in the U.S.
for the first time, but both companies were hurt by a sluggish economy and poor sales of trucks and sport utility vehicles.
Toyota car sales fell 9.4 percent in June while its truck sales were off 38.8 percent. GM's car sales sank 21 percent in June, while its
incentive-boosted truck sales were off 16 percent. For the first half of the year, GM sales fell 16.3 percent compared with the year-ago
period. Toyota sales were down 6.8 percent for the first six months of the year. Toyota took the global sales lead from General Motors
in the first quarter, capitalizing on growth in China and Europe as GM saw its North American sales drag down gains in other markets.
GM barely won the global sales race with Toyota last year, but Toyota overtook it as the world's top automaker as measured by global
vehicle production in 2007. Honda Motor Co., with its car-heavy lineup, reported a 1.1 percent sales increase for June, with a 19.3
percent rise in car sales offsetting an 24 percent drop in trucks. But Ford, still reliant on trucks and sport utility vehicles, saw its sales
drop 27.9 percent. Industry analysts had predicted June auto sales could drop by double-digits to their lowest monthly rate in 16
years. Dearborn-based Ford blamed the latest sales decline on high gas prices and low consumer confidence, which sent buyers to
the sidelines. It reported steep drops in June sales of pickup trucks and sport utility vehicles, including a 41 percent year-over-year
decline for the F-Series pickup, a perennial best-seller, and a 52 percent drop for the Ford Explorer SUV. George Pipas, Ford's top sales
analyst, said SUV sales are probably down for good. "Our view is that gas prices aren't likely to go down, and more
importantly, many consumers have moved on," he said. "We believe that the segment has merit for certain consumers but is
not likely to rebound at any point." For the first half of the year, Ford's sales were down 14 percent compared with the year-ago
period. U.S. auto sales had already fallen for seven straight months as of May, the longest period of consecutive monthly drops in
eight years, according to the auto information Web site Edmunds.com. When customers do buy, they're picking smaller cars,
crossovers and hybrids. With gas prices soaring, drivers are looking for more fuel-efficient models. But there aren't
many options on the lot, Mason reports.
High gas prices are collapsing the auto industry – minivan market proves
AP 08 (Dee-Ann Durbin, AP writer, June 10 2008, “High Gas Prices ‘Collapsing’ US Minivan Market,”
http://www.manufacturing.net/News-High-Gas-Prices-Collapsing-US-Minivan-Market.aspx)
Asked recently how the U.S. minivan market has been faring, Nissan's Dominique Thormann had a concise answer. ''It
collapsed,'' said Thormann, a senior vice president of Nissan North America. While the rapid decline in pickup and sport utility
sales has been grabbing the headlines, minivan sales have also taken a tumble, falling 20 percent in the first five
months of this year. And unlike trucks, which could rebound once the construction industry picks up, it's unclear if minivans
have a future in the U.S. market or if they're being killed off by crossovers and the stodgy taint of the soccer mom image. ''The
future of the segment is up in the air,'' said Tom Libby, senior director of industry analysis for the Power Information Network, a
division of J.D. Power and Associates. Libby said the advantages of minivans -- the sliding doors and height -- has been eroded by the
negative image of minivans and consumer preference for SUV-like styling. The slump reflects what's going on in the wider U.S.
market. Overall auto sales were down 8 percent through May, and big vehicles like minivans took the brunt of it
because of high gas prices. Large pickup truck sales fell 21 percent, while large SUVs were down 32 percent. It doesn't
help that families -- minivans' target audience -- have been particularly impacted by rising gas and food prices, falling home
values and more difficulty in borrowing money, said Rebecca Lindland, an auto analyst for the Waltham, Massachusetts-based
consulting company Global Insight. ''Everything that a family needs is more expensive right now, and so the last thing
they're looking at is do they need to replace their Honda Odyssey,'' she said.
The recent auto industry crisis was caused by high oil prices
LA Times 08 (Ken Bensinger, staff writer, July 2 2008, “US auto sales in the ditch in June,”
http://www.latimes.com/news/printedition/front/la-fi-carsales2-2008jul02,0,616472.story)
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If these were normal times for the auto industry, Galpin Motors, the nation's top-volume Ford dealership, would have
perhaps 400 F-Series trucks on its lot in North Hills. On Tuesday, it had 746. "We're selling small cars as fast as we can," said
Bert Boeckmann, president of the dealership, noting that gas savers such as the Ford Focus and the Mazda 3 on his Mazda lot were
selling like hot cakes. "But one thing I've got plenty of is trucks." Boeckmann's problem is emblematic of what's troubling the
entire auto industry in a time of $4-a-gallon gasoline. On Tuesday, carmakers reported that sales in June fell to 1.19
million vehicles, an 18.3% drop from the same month last year, according to Autodata Corp. It was the worst slide
yet in a string of monthly declines dating to November. The automotive sector represents about 4% of the U.S. gross
domestic product, but its continuing tribulations threaten to diminish that role, and paint an ugly picture of the
economy as a whole, experts said. "You basically have consumers saying they're going to pay their mortgages and put food on the
table and they're not going to do much more," said Ken Goldstein, economist at the Conference Board. "They're not going to be
buying lots of vehicles. They're not going to be buying much of anything now." Through the first six months of 2008, sales were down
10.1% compared with last year. Total vehicle sales nationwide in 2007 were 16.1 million. At the current rate of sales, 2008 totals
could be well below 15 million. June's total was dragged down by an 18% decline for General Motors Corp., a 28% drop
for Ford Motor Co., and a 36% slide for Chrysler, the worst of any carmaker. The weak results for the Detroit
automakers, with lineups rife with gas-guzzling trucks and sport utility vehicles, were not unexpected. But the Big
Three had some surprising company at the bottom of the sales board: Toyota Motor Corp.'s sales fell 21%, while Nissan
Motor Co. saw an 18% drop. The chief problem, observers uniformly agree, is the skyrocketing price of oil. As
gasoline rose above $2 a gallon and then $3, consumer appetite for the high-margin trucks and SUVs that fueled profits in Detroit in
the early part of the decade waned. With the average price of a gallon of unleaded topping $4 nationwide for more than
three weeks now, small cars are just about the only vehicles selling. Sales for every category of car and truck were
down in June except compact and economy cars, which increased 6.8%.
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Brink
The US Auto Industry is on the brink of collapse – has broad implications for the US Economy
WSJ 08 (NEAL E. BOUDETTE & NORIHIKO SHIROUZU, Wall Street Journal, May 20 2008, “Car Makers’ Boom Years Now
Look Like a Bubble,” http://www.mindfully.org/Industry/2008/Car-Maker-Bubble20may08.htm)
This decade has already seen burst bubbles in tech stocks, homes and credit. Now, it seems, another segment has fallen victim
to irrational exuberance: the U.S. auto market. Like investors who sent dot-com stocks or house prices to
unsustainable levels, auto manufacturers in the U.S. have pushed their sales volumes to new peaks over the past
decade. They invited customers to buy cars at employee prices, extended no-interest loans for up to six years and sold
unprecedented numbers of vehicles to rental fleets — all strategies that some analysts say drove U.S. auto sales to
artificial highs. Through most of the 1990s, auto makers sold a little over 15 million cars and light trucks a year in the U.S. market.
That changed in the late 1990s: With gasoline prices low and many U.S. consumers feeling flush from the tech-stock
boom, auto sales surged. Sales peaked at 17.4 million in 2000 and remained near 17 million for another five years. Heads of
General Motors Corp. and Toyota said the U.S. was entering a golden age of the automobile. In 2003, Toyota's head of North
American sales predicted the industry would soon be selling 20 million vehicles a year. They were wrong. Sales started
falling in 2006 and this year are expected to be right back where they were in the 1990s, at just over 15 million. Last
week, market researcher Global Insight Inc. lowered its 2008 forecast for U.S. vehicle sales to below 15 million. Global Insight now
believes sales won't reach previous highs again until 2012, a year later than it had previously thought. "Going forward, 16 million is a
good year," says Ron Harbour, whose firm, Harbour Consulting, tracks auto production. The industry's miscalculations hold
broader consequences for the U.S. economy. The auto industry is the nation's largest manufacturing
sector, accounting for almost 4% of U.S. gross domestic product. It employs about 2.5 million people directly or
indirectly, and spends tens of billions of dollars a year in research and development. Because auto makers have to project
their model lineups and manufacturing requirements about three years in advance, a company that misjudges future demand can
rack up big losses. The slump in auto sales is already complicating the turnaround efforts of the Big Three — GM, Ford
Motor Co. and Chrysler LLC — and pinching the earnings of foreign auto makers including Toyota Motor Corp. and Nissan Motor Co.
A bubble occurs when market participants push prices of assets — stocks, homes, tulips — higher than their intrinsic
values would appear to merit. While the auto-industry doesn't fit the classic formula of an asset bubble, a similar degree of mania
was apparently at work: Makers believed they could sell vehicles in much greater numbers than the market would
ultimately bear. GM spokesman Tony Cervone said the company didn't overestimate demand and blamed the current
sales slump on the U.S. economy's slowdown. Earlier in the decade, he said, trends in household income and spending power all
pointed toward steady growth. A Chrysler spokesman says the company sees long-term growth in the U.S., driven by its growing
population and income levels. The seeds for the boom were planted in 1999, when the stock market was roaring and
Americans headed to showrooms to splurge on new wheels, often trucks. Gas at the time was cheap, about $1.15 a
gallon.
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Internal Link – Industry Collapse

High Prices will collapse the Auto Industry and endanger US global competitiveness
Moynihan 08 (Michael Moynihan, Director of NDN's Green Project and currently a William Bowen Merit Fellow at
The Woodrow Wilson School of Public and International Affairs at Princeton University, he holds degrees from
Columbia and Harvard and is currently a PhD candidate at Princeton, NDN Think Tank “Big Three on Credit Watch,”
http://ndnblog.org/taxonomy/term/286)
While news about high fuel prices this past week centered on disingenous calls by President Bush and others to drill
our way out of the crisis, perhaps the most significant--and ominous event--was the barely publicized action by
Standard and Poors yesterday to place the Big Three US automakers on a credit watch. In taking the action, S&P cited
"renewed concerns about the three carmakers future cash flows". Given Ford's pre-existing troubles--accentuated by its
announcement last week as well that it is postponing relaunch of its star vehicle, the F150 truck, Chrysler's undertain future under
private equity management and GM's plummeting market share the announcement raises real questions about the survival of the US
auto industry. Domestic car sales were already down about 2 million vecicles this year from their high in 2006 before
the current fuel crisis. Plummeting sales and oceans of red ink--as customers struggling under the weight of sky high
consumer debt payments and declining wages, eschew the gas guzzling stars of only two years ago--threaten its very existence.
The potential collapse of the once great US auto industry--still the second largest employer in the country after
the government--calls into question--as I have written on this blog before--the very essence of the American way of life.
What can be done? One proposal raised by Jack Hidary at a recent conference on plug-in hybrids--is to offer incentives to retire old
gas guzzling cars. Brazil and Japan, among others, have done this with succsss, incidentally strenthening their domestic car markets
which benefits local carmakers. Another measure that would prove greatly helpful to the industry is health care reform since
America's disproportionately high healthcare costs create a major cost disadvantage relative to countries with public health care.
Finally, Congress needs to address the crisis in consumer debt where the steady erosion of consumer protections over the last
decade, boosted bank profits but left consumers struggling under an unsustainable load of debt. However, this is only the beginning.
Carmakers must understand the enormity of the shift underway--possibly from an oil based car industry to one that will
run on electricity--and the government must be ready to help in this massive transition. If the auto industry and
government get it wrong, the cost could be devastating in terms of lost equity, jobs and ultimately US
industrial strength. Cars are just too important to the US economy to allow them to go the way of steel, ships,
electronics and so many once great US industries.
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Internal Link – Fuel Standards

Higher Fuel Economy Standards would destroy the US auto industry
Taylor 08 (Alex Taylor III, senior editor for CNN Money, Fortune Magazine, May 14 2008, “Automotive Armageddon:
The next U.S. president could obliterate the auto industry as we know it,”
http://money.cnn.com/2008/05/13/news/companies/taylor_epa.fortune/index.htm)
NEW YORK (Fortune) -- As the presidential primary season draws to a close, it is worthwhile to contemplate this: It is
unusual for a single individual to hold the fate of an entire industry in his hand - but that will be the case for the next
president of the United States. He or she will have the power to enact unbearably strict fuel economy standards on the
cars and trucks sold in half the country. By so doing, he could render vast swaths of the current car and truck lineup
obsolete and doom their manufacturers to the scrapyard. Here's the story: Because of its history of intensive car use and dirty
air, California for years has been setting its own regulations for tailpipe emissions that are far stricter than the federal
standard. Twelve other states, including New York, New Jersey, Massachusetts, and Pennsylvania have enacted similarly strict
regulations. Last year, California decided to extend its rules out to 2020 with new and much tougher standards. The
reductions in emissions that it mandates would require that the average new vehicle be able to propel itself on less
than one gallon of gas for every 44 miles traveled. That may sound attractive to those who paying $4 per gallon at the pump
but - since it is 60% stiffer than the current regulations - it would restrict drivers to tiny vehicles that today they have only
passing familiarity with. Say goodbye to your SUVs, big pickup trucks, and V-8 powered muscle cars. Say hello to the Mini
Cooper, Honda (HMC) Fit and anything that is primarily driven by a battery. If anybody in the auto industry - either in Detroit or abroad
- told you they know how to meet that kind of a standard today with their whole vehicle lineup, they'd be lying. Automakers are
already hard pressed trying to meet the federal mileage standard for 2020 that only calls for an average of 35 miles per gallon. The
Toyota (TM) Prius and couple of other gas electric hybrids can get that kind of mileage in city driving but nothing else you'd want to
drive really comes close. To enact the tough standards that it wanted, California needed a waiver from the Environmental Protection
Agency, which sets auto emission rules on a national basis. The EPA has granted such waivers in the past; indeed, California had
never been denied one. This time, however, the EPA said no: California would have to follow along with the rest of the country. The
EPA ruled that, unlike smog and diesel fumes, climate change is a global problem, not a state one, and therefore needs a national
solution. Like everything else in politics, the EPA ruling isn't final. Lawsuits are flying from various interested parties in an effort to get
it overturned. What frightens the auto industry is the question of whether the administration that takes office in January, 2009 will get
the EPA to reverse course. All three presidential candidates have said that they side with California and would order the EPA to extend
a waiver. What happens after the inauguration is anybody's guess. But the betting in Detroit is that Democrats Obama and Clinton are
the most likely to stick to their guns if elected. Skirmishing continues on other fronts as well. Automakers have asked the federal
courts to declare the action by California and other states to set their own rules is illegal, unrealistic and could create chaos. As for
the states, they are suing to overturn the EPA decision to deny the waiver. "What you have is a bunch of scofflaws in the White
House," California attorney general Jerry Brown was quoted as saying in the Los Angeles Times. "[EPA Administrator Robert] Johnson
is becoming a stooge in a really pathetic drama that hopefully will not play out much longer." The drama may be just beginning.
Based on California's current vehicle sales mix, cars and the smallest light trucks will need to achieve more than 50
miles per gallon on 2020 to met the proposed new fleet standard; larger light trucks will have to achieve 35.2 miles
per gallon. They won't be much like today's. They could be made of aluminum, have plastic windows instead of glass,
be propelled by a variety of powertrains, and cost perhaps $10,000 more than current models. Worse, the cost of
developing and building them could bankrupt the companies that are supposed to supply them.
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Impact – Economy
Higher oil prices will collapse the auto industry and the US economy – weakens the dollar and
kills competitiveness
Klare 08 (Michael T Klare, author of Resource Wars and Blood and Oil, is a professor of peace and world security
studies at Hampshire College, January 31 2008, “Something Had to Give: How Oil Burst the American Bubble”
http://www.tomdispatch.com/post/174888)
The economic bubble that lifted the stock market to dizzying heights was sustained as much by cheap oil as by cheap
(often fraudulent) mortgages. Likewise, the collapse of the bubble was caused as much by costly (often imported) oil
as by record defaults on those improvident mortgages. Oil, in fact, has played a critical, if little commented upon, role in
America's current economic enfeeblement -- and it will continue to drain the economy of wealth and vigor for years to
come. The great economic mega-bubble arose in the late 1990s, when oil was cheap, times were good, and millions of
middle-class families aspired to realize the "American dream" by buying a three (or more) bedroom house on a decent piece of
property in a nice, safe suburb with good schools and various other amenities. The hitch: Few such affordable homes were available
for sale -- or being built -- within easy commuting range of major metropolitan areas or near public transportation. In the Los Angeles
metropolitan area, for example, the median sale price of existing homes rose from $290,000 in 2002 to $446,400 in 2004; similar
increases were posted in other major cities and in their older, more desirable suburbs. This left home buyers with two unappealing
choices: Take out larger mortgages than they could readily afford, often borrowing from unscrupulous lenders who overlooked their
overstretched finances (that is, their "subprime" qualifications); or buy cheaper homes far from their places of work, which ensured
long commutes, while hoping that the price of gasoline remained relatively low. Many first-time home buyers wound up doing both --
signing up for crushing mortgages on homes far from their places of work. The result was metastasizing exurban home
developments along the beltways that surround major American cities and along the new feeder roads that now stretched into the
distant countryside beyond. In some cases, those new homeowners found themselves 30, 40, even 50 miles or more from the urban
centers in which their only hope of employment lay. Data released by the U.S. Census Bureau in 2004 showed that virtually all of the
fastest growing counties in the country -- those with growth rates of 10% or more -- were located in exurban areas like Loudoun
County, Virginia (35 miles west of Washington, D.C.) or Henry County, Georgia (30 miles south of Atlanta). At the same time, cheap
oil and changing consumer tastes -- pushed along by relentless advertising campaigns -- led many of the same
Americans to trade in their smaller, lighter cars for heavy SUVs or pickup trucks, which, of course, meant only one thing --
a significant increase in oil consumption. According to the Department of Energy, total petroleum use rose from an average of 17
million barrels per day in 1990 to 21 million barrels in 2004, an increase of 24% -- most of it being burned up on American roads. Let
the Good Times Roll (into the Exurbs) In 1998, when the bubble was taking shape, crude oil cost about $11 a barrel and
the United States produced half of the petroleum it consumed; but that was the last year in which the fundamentals
were so positive. American reliance on imported petroleum crossed the 50% threshold that very year and has been
rising ever since, while the cost of imported oil hit the $100 per barrel mark this January 2 for the first time, an all-time
record (though the price was once briefly higher, as measured in older, less inflated dollars). When that steady price climb,
combined with growing dependence on imported petroleum, was translated into the new exurban landscape the
economic bubble began to shudder. As a start, there was that ever-increasing outflow of dollars needed just to pay for
all those barrels of crude and the resulting surge in America's foreign-trade deficit. Consider this: In 1998, the United
States paid approximately $45 billion for its imported oil; in 2007, that bill is likely to have reached $400 billion or
more. That constitutes the single largest contribution to America's balance-of-payments deficit and a substantial
transfer of wealth from the U.S. economy to those of oil-producing nations. This, in turn, helped weaken the
value of the dollar in relation to key foreign currencies, especially the euro and the Japanese yen, boosting the cost
of other imported foreign goods and so threatening to fuel inflation at home. Meanwhile, two critical developments
kept the cost of oil rising: a dramatic increase in global demand, largely driven by the emergence of China and India as
major consuming nations; and a pronounced slowdown in the expansion of global supply, due mainly to a dearth of new
discoveries and recurring political disorder in key oil fields already in production. This meant that American energy consumers --
including all those long-distance commuters with crippling mortgages and gas-guzzling SUVs -- had to compete with newly-
affluent Chinese and Indian consumers for access to ever more costly supplies of imported petroleum. Something had to
give. As the oil import bill kept rising, the value of the dollar kept falling, and inflationary pressures kept building, the country's
central bankers responded in classic fashion by raising interest rates. This naturally resulted in substantially higher monthly payments
for homeowners with variable-rate mortgages. For many families already stretched to the limit, this would prove the final blow. Forced
to default on their mortgages, they then precipitated the subprime crisis by, in effect, puncturing the bubble. Even then, the
economy might have had a chance had that crisis not come in tandem with the $100 barrel of oil. By December, consumers were
cutting back on nonessential purchases, producing the most disappointing holiday retail season since 2001. When questioned, many
indicated that the high cost of gasoline and home-heating fuel had forced them to economize on Christmas gifts, winter vacations,
and other indulgences. "If gasoline prices go up, that means there's less to spend on everything else," said David Greenlaw,
chief U.S. fixed-income analyst at Morgan Stanley. The high price of gasoline was bad news for another pillar of the
economy as well: the auto industry. While Japanese companies were busy rolling out hybrid vehicles and small,
fuel-efficient conventional cars, Detroit stuck doggedly to its now-obsolete business model of producing large SUVs
and light trucks, which had, in recent years, been the source of most of its profits. Once the price of oil went stratospheric,
of course, Americans predictably stopped buying the gas guzzlers, signing what looked like an instant death certificate
for an improvident industry. In 1999, for example, Ford sold more than 428,000 mid-sized Explorer SUVs; in the first 11 months of
2007, the equivalent number was 126,930 Explorers (and even that puts a gloss on the corpse, as November was one of the worst
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months in recent automotive history). An auto industry in decline naturally means that many ancillary industries
will be facing contraction, if not disaster.
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Impact – Economy
The Auto Industry is the largest sector of the US manufacturing industry and is tied in to many
other sectors of the economy
Center for Automotive Research 03 (Center for Automotive Research, Alliance of Automobile Manufacturers, September
24 2003, “Automakers Drive U.S. Economy on Many Different Levels, New Study Shows”)
The automobile industry continues to be America's largest manufacturing industry, although the majority of those jobs are
in supplier and related industries, with total auto industry and related employment numbering 13.3 million jobs, a new Center for
Automotive Research study shows. "When you look under the hood of today's automobile, you'll see goods from America's greatest
industries," said Senator George Voinovich (R-Ohio), co-chair of the Senate Auto Caucus. "These include goods not only from Ohio and
other Midwestern auto manufacturing states, but also from suppliers in every region across the country. It's a national industry
with a huge, job creating impact on our economy." "No other single industry is more linked to U.S.
manufacturing or generates more retail business and employment. New vehicle production, sales and other
jobs related to the use of automobiles are responsible for 1 out of every 10 jobs in the U.S. economy," said Sen. Carl
Levin (D-Mich.), co-chair of the Senate Auto Caucus. Key findings of the study include: The auto industry is responsible for more
than 100,000 jobs in each of several industries, including dealerships, fabricated metals, auto parts, auto repair and
maintenance, road construction, tire dealerships, fueling stations, and car washes. The auto industry is responsible for
more than 50,000 jobs in each of several other related industries, including plastics and rubber, trucking, computers
and electronics, petroleum and machinery and equipment. The auto industry is responsible for more than 25,000 jobs
in each of several more related industries, including advertising, textiles, aluminum and recycling. The auto industry
also provides thousands more jobs each in the rail industry, the steel industry, the painting and coating industry, the
glass industry, the copper and brass industry and the iron industry. The auto industry generates $243 billion annually
in private sector compensation. The automobile industry provides among the highest levels of wages and benefits in the private
sector, averaging $69,500 in 2001. The auto industry boasts a value added of $292,000 per worker, 143 percent higher than the
overall value-added ratio for U.S. manufacturing ($120,000). The automobile industry invests more in research and
development than any other industry -- $18.4 billion in 2000. The automobile industry directly employs 1.3 million
Americans in all 50 states. 2.2 million U.S. workers are employed indirectly by auto industry suppliers and other
industry-related companies. Expenditures of auto industry employees create an additional 3.5 million jobs nationwide.
Auto Industry is critical to North American economy

Crawford 06 (Grace Crawford February 2006, Business Facilities, The Location Advisor “The Automotive Industry:
North America’s Economic Engine” http://www.businessfacilities.com/bf_06_02_news1.php)
The automobile industry is a vital component of the North American economy. The two-way flow of trade between
Canada and the United States represents the largest bilateral trading relations in the world. Over $1.6 billion a day in
goods crossed the U.S.-Canadian border in 2002, totalling over $600 billion for the year. Thirty-three percent of U.S. assembly
plants and 25% of Canadian assembly plants are within 100 miles of the Windsor, ON-Detroit, MI border, and 23% of the U.S. Tier 1
supplier plants and 19% of the Canadian Tier 1 supplier plants are within 100 miles of this border. Since the signing of the Canada-
U.S. Free Trade Agreement in 1989, trade between the U.S. and Canada has grown over 210% from USD $166 billion to almost USD
$514 billion in 2000, according to Statistics Canada. New vehicle production, sales, and other jobs related to the use of
autos are responsible for one out of every 10 jobs in the U.S., according to a 2003 report on the “Contribution of the
Automotive Industry to the U.S. Economy” prepared by the University of Michigan and the Center for Automotive
Research (CAR). America’s automakers are among the largest purchasers of aluminum, copper, iron, lead, plastics, rubber, textiles,
vinyl, steel, and computer chips. The automotive industry has a tremendous impact on the U.S. economy in
terms of employment, Gross Domestic Product (GDP), economic output, research and development, and
exports. Canada is the eighth largest vehicle producer in the world, according to the Canadian Vehicle Manufacturers’ Association.
The auto sector is Canada’s biggest contributor to manufacturing GDP and its largest manufacturing employer. Supporting jobs all
across the country in 13 assembly plants, over 540 parts manufacturers, 3,900 dealerships, and many other related industries, it is
estimated that the auto sector employs one out of every seven Canadians. This explains why the following communities
across the U.S. and Canada are so keen to attract automotive relocation and expansion projects, and the valuable jobs they bring with
them.
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Impact - Competitiveness
Weak sales in the Auto Industry kill US competitiveness – Asian markets are eclipsing US
markets
Isidore 08 (Chris Isidore, CNNmoney.com writer, July 1 2008, “Auto Sales Plunge: Buyers flee SUVs and pickups but
can't find the cars they want, resulting in steep declines at most automakers,”
http://money.cnn.com/2008/07/01/news/companies/auto_sales/?postversion=2008070116)
June auto sales plunged, according to reports from the nation's major automakers, as Americans shunned pickups and
SUVs in the face of record gas prices and growing concerns about the weak economy. Despite high gas prices, sales of
many fuel efficient car models also fell sharply in the month as automakers were caught without the supply of vehicles
that people suddenly wanted to buy. The initial reading of industrywide auto sales from Autodata showed sales tumbled to a
seasonally adjusted annual rate of 13.6 million vehicles in the month, down from the 14.3 million pace in May, which
was also considered a weak month for sales, and 2 million cars and light trucks below the year-ago pace. It was also the
weakest sales pace in 15 years. The unadjusted sales fell 18%, which is the sharpest drop since October 2002, when the
decline was due to comparisons with a record sales month, not historically weak demand. It was far worse than the 12% decline
forecast by sales tracker Edmunds.com, although somewhat better than estimates of a private forecast from auto industry consultant
JD Power & Associates, which had seen sales falling as low as a 12.5 million annual rate. While the shortage of fuel efficient cars on
dealer lots hit even the sales of Asian automakers, they were in far better position than the traditional Big Three U.S. automakers to
deal with the shift in American's buying preferences. In fact, the Asian brands captured 46.2% of overall sales,
edging out the 45.8% of sales that went to the U.S. brands, according to Autodata. The same thing happened
in May, marking the only two times that the U.S. brands have fallen behind the Asian brands in U.S. marketshare.
European brands made up the rest of sales, placing the Big Three in their weakest competitive position ever compared
to their overseas rival. Until last year, there had never been a month that American car buyers preferred the combined offerings of
Asian and European automakers to those of the Big Three. At least General Motors (GM, Fortune 500) held onto the title as the
nation's No. 1 automaker in terms of sales. GM only narrowly edged Toyota in the May sales report, but even though its sales fell 18%
in June, it opened up some distance with its Japanese rival in U.S. sales. General Motors reported that its U.S. sales fell 18% in June
versus a year ago. Sales of GM's light trucks, which includes pickups, SUVs and so-called crossovers, tumbled 16%. But that was
better than GM's car sales, which dropped 21% in the month.
US competitiveness is in danger - GM was eclipsed by Toyota

Financial Times 07 (China Post, Financial Times, May 1 2007, “No Longer ‘Number 1,’” Lexis/Nexis)
The important business news of the week, perhaps of the month if not the year, is that the world's auto industry has a
new No. 1: Toyota Motor Corp. beat General Motors Corp. in quarterly worldwide sales for the first time. The score was
2.35 vs 2.26 million vehicles. Is it such a big deal? Certainly. The news is significant considering that GM has been No. 1
for more than seven decades and that the company is a symbol of American industrial superiority. Remember
the saying what is good for General Motors is good for America? And vice versa, perhaps. The United States, it must be
pointed out, is an automotive empire that represented unmatched excellence in car making. Now the empire is in
danger of crumbling, as America's Big Three GM, Ford and Chrysler are losing money and market share to Japanese
and other foreign competitors including even the Koreans. What's wrong with GM? Some blamed the company's problem
on marketing strategy, focusing on gas guzzling SUVs at a time when oil prices were skyrocketing. But that is only a
part of the problem. The real one is the loss of competitiveness. Why? They no longer make cars people like to drive.
Another factor that plagues America's auto industry are labor unions which have forced the management to accept contracts that are
not sustainable. Fat retirement and medical benefits for employees are beyond management's ability to provide. True, nobody can
stay on top forever, as one of GM's employees commented on the news of Toyota's crowning as the new king. But it is
time for the United States to reflect on how and why it has lost ground to the Japanese and other rivals who are able to
beat it at its own game. As some consolation, GM is still No. 1 in the U.S. market. But there is no guarantee it can stay on top
forever. One wonders what happened to that Yankee ingenuity and the American ego. "We are No. 1" is what that has made
Americans proud and strong. GM's chief executive Rick Wagoner said in January that he likes being No. 1 and he would be
disappointed if his company lost the honor. Could GM regain top dog status in the second quarter or sometime this year? Few are
optimistic, but GM is making great efforts to offset the impact by expanding its production capability in developing countries, chiefly
mainland China, now the world's second largest auto market. In 2010, the mainland is expected to replace America as the world's
largest No. 1 car market. And GM has already secured a foothold in China, selling more than 800,000 vehicles in 2006 with a market
share of 12 per cent. Thus, the bad news this week for GM could have a silver lining, hopefully.
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Competitiveness – China
China poses a threat to the global competitiveness of the US Auto Industry
Cooney 06 (Stephen Cooney, Industry Specialist, Resources, Science, and Industry Divison, April 4 2006, CRS Report
for Congress, “China’s Impact on the Automotive Industry,” http://www.fas.org/sgp/crs/misc/RL33317.pdf)
China is both the fastest growing motor vehicle market and the fastest growing vehicle producer. Output and sales
have grown from less than two million vehicles annually before 2000 to nearly six million vehicles in 2005. In the
number of vehicles that it manufactures China has passed Korea and France, is on pace to overtake Germany, and would then
trail only the United States and Japan. A disproportionate share of China’s output has always been heavy vehicles, but
since 2000, China’s growth has been led by the increase in passenger cars. They now account for about half of China’s production.
China exports or imports few motor vehicles: less than 200,000 of each. Exports are growing much more rapidly than imports and are
mostly light trucks shipped to developing country markets in Asia, Africa and the Middle East. China’s industry has developed
extensively with the aid of foreign direct investment, unlike those of Korea and Japan. This investment has been from major
international automobile manufacturers, led by General Motors (GM), that are unlikely to promote Chinese exports in competition with
their own products in other markets. As a consequence, the Chinese companies that have expressed an interest in exporting
cars are those who are less dependent on such cooperation and may struggle to meet safety and emission standards
in industrial countries. Most experts do not see a high volume of exports from China into these markets in the near future. By
contrast, Chinese auto parts exports are already making inroads into the United States. While U.S. motor vehicle trade
with China was insignificant in 2005, the United States imported $5.4 billion in parts from China, while it exported
about one-tenth of that amount. China accounted for about 6% of U.S. auto parts imports in 2005, but the amount has
quadrupled since 2000. Many of these imports are aimed at the aftermarket, as most of what China now exports to the U.S. market
are standard products such as wheels, brake parts and electronics. But with high rates of investment in China by the leading U.S.
manufacturers of both cars and parts, major companies such as GM look to increase sourcing from China. The Bush Administration
has noted that the new Chinese auto policy announced in 2004 eliminated practices not compatible with China’s
commitments as a member of the World Trade Organization (WTO). However, this policy maintains a limit of no more than
50% ownership by any foreign investor in a motor vehicle manufacturing joint venture in China. Moreover, the Administration has
filed a WTO case alleging discriminatory Chinese application of tariffs on automotive parts. Congress has been concerned with
broad policies giving Chinese exporters unfair trade advantages. The Senate approved a bill, added as an amendment to
other legislation, that would place a high tariff on Chinese imports unless China revalues its pegged exchange rate (S. 295). Further
action has been postponed on this measure. Legislation to allow U.S. producers to bring countervailing duty cases against Chinese
firms subsidized by their government has been approved in the House (H.R. 3283), and a new law has tightened rules against trade in
counterfeited goods (P.L. 109-181). This report will not be updated.
China is gaining market share – poses a threat to the US auto industry

Moore 06 (Jason Moore, marketing analyst for an auto parts store, Sept. 23 2006, “Chinese Auto Makers Grow
Strong in Industry,” http://www.buzzle.com/articles/109618.html)
According to the mentioned study, Chinese auto makers are now getting greater and greater shares in the
United States auto market. The study further reveals that Chinese auto makers are now enjoying an estimated
US$18.3 billion in revenue last year. That is only for their light passenger vehicles. This study was conducted by
Technomic Asia which is actually an international market consultancy organization. Technomic Asia also specializes in
strategies done by Chinese which could be very much applicable to companies in the United States. And perhaps if
China is able to take their fair share of the US auto market, then perhaps ailing US companies like the Ford Motor
Company could sure learn a lot about their techniques. Steve Ganster is the managing director of the organization. He also is
the author of the mentioned report. Ganster even assesses the situation by stating, "The aging and expanding parc, coupled with
private ownership of new vehicles at more than 70 per cent today, supports strong growth in the parts and service market." He even
further adds, "The top ten auto groups in China have sold more than ten million units combined through 2005, making
up about 70 per cent of the light vehicle parc. But we are seeing some interesting shifts in this area now. For example,
the leader, Shanghai VW, is seeing its market share of vehicles on the road decrease rapidly as other leading international players like
General Motors, Honda, and Hyundai become more established." The report was actually given the title "A Strategic Assessment of
China’s Light Passenger Vehicle Aftermarket, Third Edition."
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China Stable
China’s Auto Industry will not be affected by an increase in oil prices
Asia Pulse 08 (June 23 2008, Futures and Commodity Market News, “Oil Price Hikes Won’t Kill China’s Auto
Industry: Qilu Sec” http://news.tradingcharts.com/futures/6/5/110305656. html)
BEIJING, Jun 23, 2008 (AsiaPulse via COMTEX) -- The price hike of oil products will not change the basic trend of China's
automotive industry, but may affect the industry's short-term profits, said a report issued by Qilu Securities. The National
Development and Reform Commission (NDRC) hiked benchmark gasoline and diesel oil retail prices by 1,000 yuan
(US$145.35) per ton effective on Friday, with the price of jet fuel up 1,500 yuan per ton. The new average price of retail
gasoline is set at 6,980 yuan/ton, while the diesel price is 6,520 yuan/ton. The NDRC said that it would take a series of measures to
reduce impact of the price hikes on people's lives and control conduction from the price rise. Qilu Securities said, in the short-
term, the price hikes will have an impact on the consumption structure of motor vehicles, but will not change the
general development trend of the automotive industry. It noted that price hike of oil products will follow a trend and the
fundamental factor affecting auto consumption is the sustainable growth of the national economy and resident's rising consumption
capacity. As China is now low in the base figure of vehicles in use, the automotive industry still has big
development potential and the industry is expected to achieve growth of more than 15 per cent growth
in the next three years. The price hike is expected to benefit long-distance transport vehicles and small cars, making some
potential buyers of 1.6-2.0L cars change to economy cars. Sales of luxury cars will not drop, it pointed out.
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Aluminum
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Internal Link – high energy prices hurt

aluminum
The international aluminum market is among the hardest hit from high energy prices
iStock Analyst 08. “Chinese Inflation.” iStock Analyst. 23 June 2008. 7 July 2008
<http://www/istockanalyst.com/article/viewarticle+articleid_2306142~zoneid_Home.html>
It's the aluminum producers that we're guessing are among the hardest hit. As we cover in our article on base metals, a
huge portion of the cost of aluminum is energy-related (up to 40%), so any increase leads to shrinking margins or price
increases. On Friday, China's largest aluminum producer, Aluminum Corp. of China Ltd (Chalco), announced production
costs would be rising up to $43 per metric ton. In fact, rising costs combined with severe storms in the first part of the year
are blamed for the huge drop in Chalco's profits for the first half of the year. The price of aluminum on the London
Metal Exchange has been rising in the past week.
High energy prices hurt the aluminum industry – analysts agree

Barron’s 08. Sears, Steven M. “Keep a Tab on Alcoa with an Option’s Play.” Barron’s. 26 June 2008. 7 July 2008.
<http://online.barrons.com/article/SB121442884160704675.html?mod=googlenews_barrons>
Smelting aluminum is energy intensive, and everyone knows energy prices are way up. Energy accounts for 45% of
aluminum-production costs. Prices are also up for caustic soda, which represents 12% of alumina-production costs. All of this
means Alcoa's stock may decline when the company reports second-quarter earnings on July 8. Already Goldman
Sachs' options strategists are advising clients to buy defensive Alcoa puts. They think Alcoa's stock may decline
because of the impact of high energy prices, a negative earnings-per-share impact caused by an explosion at a supplier's
facility, and fading takeover speculation.
High energy costs cripple the aluminum industry

Energy Choices 08. Drage, Dan. "Premium Electricity to Affect Aluminium Industry." Energy Choices. 2008. 8 July 2008
<http://www.energychoices.co.uk/premium-electricity-to-affect-aluminium-industry-01072008.html>.
Aluminium suppliers are struggling to keep pace with rising energy costs, with the vast quantities of electricity
required to engineer the metal crippling the industry Aluminium prices, in line with crude oil prices, are anticipated to
rise by a third in the next 18 months A typical aluminium smelter consumes as much electricity as a city, and single
furnaces need the power of 1000 homes to fire them up. The return on this 1000 home power input is only three tonnes of
metal; therefore sites such as Anglesey Aluminium in Wales are Britain's biggest single consumers of electricity. Higher energy
costs could lead to smelter closures in China, which has some of the least efficient and most expensive producers in
the world. Similar power crunches have hit production in South Africa, Brazil and New Zealand, and aluminium producers
are increasingly looking to areas with large energy supplies. Algeria and Libya have been suggested as prime, as yet untapped sites.
Tom Albanese, chief executive of global miners Rio Tinto, believes access to secure and cheap power is now “more
important than ever for aluminium producers”, but environmental campaigners have vocalised their opposition to aluminium
production spreading its wings all the way to North Africa.
A warming bill would cost the US $269 billion, 1.8 million jobs, and place a heavy burden on
the aluminum industry
Capitol News June 4. Lovley, Erika, and Lerer Lisa. "Warming Bill: Super Bowl for Lobbyists." Capitol News Company 4 June
2008. Lexis. 8 July 2008.
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We believe the first global warming bill passed in the U.S. will set the foundation for all carbon reduction efforts in the future; there
is no time for half-measures, said Friends of the Earth Action President Brent Blackwelder. But the Natural Resources Defense Council
and a slew of others believe that some action is better than no action. Environmental Defense Fund recently launched a pro-
legislation television ad campaign. Some individual financial services companies are lobbying to make sure any carbon market that's
created is open to all traders, even if they are not actual polluters. But the Financial Services Forum and the Financial Services
Roundtable have yet to take an official stand on the legislation. Monday's vote was a blow to business groups - particularly the
behemoths, the U.S. Chamber of Commerce and the National Association of Manufacturers - that argue the proposal could take
another swing at an already struggling economy and cut into American's ability to compete globally. A March study by the NAM
predicted that the United States would take a $269 billion hit to the economy by 2014 and lose 1.8 million jobs by
2020 if the proposal becomes law. The legislation is particularly burdensome for energy-intensive industries such as
cement, steel and aluminum and airlines. Jet fuel prices would skyrocket even more, trampling an already damaged airline industry
and raising fares still higher, the Air Transport Association warns.
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Internal Link – Aluminum industry key

to auto industry
Aluminum key to the auto industry but competing heavily overseas
Business Wire 07, "Gain Insight in to Nonferrous Metal Foundries in the US." Business Wire 20 Dec. 2007. LexisNexis
Academic.
Motor vehicle manufacturers are an increasingly significant customer market for this industry, as light weight aluminum becomes
the material of choice from a growing emphasis placed on fuel economy and reducing greenhouse gas emissions.
However, ongoing globalization of the motor vehicle industry will create strong competition as manufacturers
increasingly turn to global vehicle platforms.
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Impact – Competitiveness
Aluminum is key to US competitiveness, significant for crucial US markets
Newswire 06. "Aluminum Industry Standing Strong in United States." Newswire 29 Sept. 2006. 6 July 2008
<http://www.newswiretoday.com/news/9024/>.
Aluminum, being a lightweight, corrosion resistant, high-strength and easily recyclable material, is a vital ingredient for
manufacturing, maintaining and amending products, required by modern society and demanded by developing
nations. Aluminum industry is an important part of the US element industry. It will have a key role in deciding the US'
competitiveness in global arena. As the industry is developing technically and financially, it will contribute substantially
in the evolvement of socially befitting, ecologically sustainable and financially feasible products and manufacturing
methods worldwide. Aluminum is significant for the markets crucial to the US economy. Construction, transportation,
defense, aerospace, food and beverage packaging, electricity transmission, consumer durables, equipment and
machinery, all depend on a constant supply of technically rich, low priced aluminum products. These industries are
enabled in consistently upgrading the performance, energy efficiency, cost, recyclables and product safety due to
aluminum processes. "US Aluminum Market (2006)", RNCOS' recent market research report, puts forth that US, with over 400
aluminum plants, is a major hub of primary aluminum production. Automotive and light-truck manufacturing accounts
for the largest market share. US Aluminum industry showed the value of $ 4,603.2 million in 2005, a rise of 6.3% over 2004. The
compound annual growth rate (CAGR) for 2001-2005 is 4.9%. Following factors are also highlighted by the report:
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Semi Conductors
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HIGH ENERGY PRICES HURTS

SEMICONDUCTER
EMPIRICALLY HIGH ENERGY PRICES LEAD TO AN INCREASE IN SEMI COUNDUCTORS.
Tom’s Hardware (an online publication focused on technology that was founded in 1996 by Dr. Thomas Pabst)
“Semiconductor growth to slow substantially in 2005, analysts say” 9/9/2005
http://www.tomshardware.com/news/semiconductor-growth-slow-substantially-2005,1370.html
El Segundo (CA) - A new report released by iSuppli dampens the hope for another golden year for the global semiconductor industry.
Analysts believe that high energy prices, excess manufacturing capacity as well as damages caused by Hurricane Katrina will
have a negative impact on 2005 chip sales. While the semiconductor industry itself still believes in solid growth for this year,
iSuppli is one of the first market research firms to cut its revenue forecast for this year. Compared to chip sales of $227.2 billion in
2004, iSuppli now expects global revenues to gain only 2.4 percent and end up at $232.7 billion. iSuppli analysts originally forecasted
5.9 percent growth, but now believe that the rapid rise in global energy prices, combined with a growing excess of
manufacturing capacity will have a negative impact on the industry. "In a troubling sign for the semiconductor
industry, chip suppliers are continuing to increase production-despite slowing growth and weakening prices," the firm
said in a statement. "Global semiconductor capacity is expected to rise by 3.1 percent in the third quarter compared to the second.
Meanwhile, worldwide semiconductor manufacturing capacity utilization will increase to 86 percent in the third quarter, up from 83
percent in the second." "With the significant amount of capacity that is available, if end demand does not significantly increase, the
fourth quarter will experience a slowdown in manufacturing run rates," said Len Jelinek, director and principal analyst,
semiconductor manufacturing, at iSuppli. "The severity and length of this slowdown will be determined by the amount of
semiconductor inventory built up in the third quarter."
HIGH ENERGY PRICES HURT SEMICONDUCTOR MARKET

U.S. News & World Report; 5/12/2003, Vol. 134 Issue 16, p38, 3p, 1c “CONFIDENT CONSUMER”
http://web.ebscohost.com/src/detail?vid=1&hid=113&sid=650468e4-8642-4082-a2bd-acafc32418be%40sessionmgr102
Among industries, energy companies showed a doubling of earnings thanks to Iraq-related higher oil prices, while
health and medical firms also posted earnings gains of 23 percent on 8 percent higher revenues. Despite slow sales growth (3
percent), technology companies managed to squeeze out profit gains of 16 percent. A sense of improving fortunes in the critical
sector has driven the Nasdaq composite index (comprised largely of tech stocks) 15 percent higher since mid-March. One way to
boost sales is to buy them. Women's clothier Liz Claiborne reported profits up 26 percent in the quarter to $64.1 million, largely
because of its purchase of Ellen Tracy and Mexx Canada. "This is probably the most favorable I have been about earnings since the
third quarter of 2000," says Chuck Hill, research director at Thomson First Call. "We're not going to the moon in a rocket, but this is
the best I have seen since then. Companies always beat estimates so you have to look at whether they are beating them
more or less than usual. This quarter, they are beating them by 6.6 percent versus an average of 2.7 percent during the past nine
years." Still, the New Skepticism continues to hold sway over Wall Street, which is deep in its own funk, brought on by
reduced commissions and head count, not to mention having to pony up $1.4 billion to settle charges its research was colored
by conflicts of interest. That dour perspective could be seen in the market's reaction to two closely watched reports, both
from overseas semiconductor firms that are foundations of the technology sector. Taiwan-based semiconductor
manufacturing firms United Microelectronics and Taiwan Semiconductor checked in with disappointing earnings and got whacked
by investors. But seemingly lost in the bout of selling were their forecasts of strong second quarters, a possible
harbinger of increased spending on information technology. Right now, there's nothing to make anyone feel overly
comfortable about keeping his job, much less sinking gobs of new money into the stock market. That explains the mostly
seesaw drift of the current market. And little is likely to be clear anytime soon given the kooky set of circumstances that got the
economy into trouble in the first place. As First Call's Hill explains it, the economic downturn was "unique in our lifetime. It was the
only one to have been brought on by a capital spending binge rather than the usual overheated consumer spending." So forecasting
what might happen next is tougher than usual--and it is usually nearly impossible. Until businesses start adding capacity in a
big way, it will fall to the consumer to continue supporting a recovery that will eventually bring the revenue growth
companies and investors are begging for. Despite repeated fears that consumers are pulling back, "consumer fundamentals . . .
are in better shape than commonly thought," says Morgan Stanley economist Richard Berner. He ticks off the positives: Falling energy
prices will boost after-tax real income growth, rising house prices have cushioned the effect of falling equity prices, and some form of
tax cut will aid pocketbooks. No doubt Bush is hoping it will all come together quickly enough for his reelection campaign, now
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seemingly underway. If not, expect a round of "quagmire" stories like those that some journalists penned just days before Baghdad
fell.
A WEAK ECONOMY SPURRED BY HIGH OIL PRICES HURT THE SEMICONDUCTER MARKET
Electronic News (10616624); 12/18/2006, Vol. 52 Issue 51, p19-19, 1p “Semi Equipment
Suppliers to Benefit from Weak Dollar.”
http://web.ebscohost.com/src/detail?vid=1&hid=113&sid=f828edf5-0807-473c-8f27-
40ced244e4e3%40sessionmgr102
A U.S. economic slowdown coupled with excess equipment purchases in 2006 should swing the semiconductor
equipment market into negative territory for 2007, according to The Information Network
http://www.theinformationnet.com, a New Tripoli, Pa.-based market research firm. Leading indicators are pointing to a
weakening performance for at least the next six months in the U.S. for a variety of reasons such as the sharp
weakening in the U.S. housing market, volatile energy prices, and weakness of the dollar and its impact on interest
rates, the company noted. Despite concerns about inflation in the U.S., a weakening U.S. economy could force the U.S. federal
government to lower interest rates in the spring, further weakening the dollar, which has dropped 8 to 10 percent this year -- half of it
in the past month.

SEMICONDUCTER
HIGH ENERGY PRICES HURT THE SEMICONDUCTOR INDUSTRY
IPC( IPC is a global trade association with 2,600 member companies) “Semi, PCB shipments hurt by energy prices, mortgage woes,
IPC reports” 2/11/2008 http://www.edn.com/index.asp?layout=article&articleid=CA6530733&ref=nbsa
In the US consumer spending declined dramatically in December brought on by high energy prices, mortgage woes and
slowing job growth. Semiconductor and PCB shipments saw a decline in December. In spite of signs of looming recession in
the US economy, US new orders rebounded in the month of December. Also the EMS shipments outlook remains positive with ever
increasing global demand for consumer electronics. Trends in computer and electronic products new orders vs sales indices of
selected supplier industries, January 2007 – December 2007 Note on the graph: All indices are based on the same baseline of the
average month in 2000=100, and reflect a 3-month rolling average. Sources: IPC statistical programs for the EMS and PCB
industries; SIA for semiconductor data; US Census Bureau for US new orders for computer and electronic products.
High energy prices hurt the global semiconductor industry

CNET NEWS “Report: High oil prices may mean lower chip sales” 9/8/2005 http://news.cnet.com/Report-High-oil-prices-may-
mean-lower-chip-sales/2100-1006_3-5855578.html?tag=nw.18
Research firm iSuppli trimmed its numbers for 2005 chip sales and modified its outlook for the industry's present growth
cycle, citing the effect of rising gas prices on people's ability to shell out for consumer electronics devices. iSuppli's report,
published Thursday, predicts that global semiconductor sales will still outpace last year, hitting $232.7 billion in 2005, up 2.4
percent from 2004's $227.2 billion. But that lags previous forecasts by 3 percent for an estimated 5.9 percent worldwide
semiconductor growth in 2005. "A weaker-than-expected first half, coupled with the likely impact of high oil prices in the
second half, have been instrumental in bringing down iSuppli's 2005 semiconductor forecast," said Gary Grandbois, an
analyst with the company. Similar concerns over high energy prices were expressed earlier this month by the
Semiconductor Industry Association. Analysts with the trade group estimate the current spike in fuel costs could add
up to a net loss of $1,475 in excess spending cash per household per year in the United States alone. Looking at an
average of 1.8 million homes, the SIA said that would add up to a $41 billion loss in U.S. consumer electronics sales
and a worldwide negative impact of $23.4 billion for chipmakers. "
RAISES IN ENERGY PRICES THREATEN TO KILL THE semiconductor MARKET

NYT “Malaysia exports slow on semiconductor glut” 9/6/2005 http://www.iht.com/articles/2005/09/05/bloomberg/sxringgit.php”
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KUALA LUMPUR: Malaysia's exports grew in July at the slowest pace in more than three years as electronics shipments
faltered amid a semiconductor glut and higher oil prices, the trade ministry said Monday. Exports rose 2.9 percent to 43.6
billion ringgit, or $11.6 billion, from a year earlier, the trade ministry said in Kuala Lumpur. That was the slowest growth since
February 2002. Exports rose 11.7 percent in June. The export growth "was a disappointment and mainly came from the
electrical and electronics side," said Leslie Tang, an economist at UOB-Kay Hian in Singapore. "There seems to be some pullback
in demand from China and whether this is a sustained pullback or just a temporary blip remains to be seen." Growth in Malaysia's
economy has slowed since the second quarter of 2004 as rising oil prices and a glut in the global semiconductor
industry hurt exports. Electronics account for about half of Malaysia's overseas sales. Malaysia's economy expanded 4.1 percent in
the three months that ended June 30 from a year earlier, the slowest pace since the first quarter of 2002, as factories cut production
of semiconductors and building materials. The Today in Marketplace by Bloomberg Bank of America moves quickly to cut jobs after
earnings disappoint Sony profit helped by camera sales, but game console still trailing rivals Microsoft profit soars 23 percent, beating
expectations growth prompted economists like Chua Hak Bin of DBS Group Holdings and Yip Yee Lan of BNP Paribas Peregrine
Securities to cut their growth forecasts for 2005. Malaysia's exports to the United States, its biggest market, gained 17 percent in July
from a year earlier, after growing 22 percent in June, the statement Monday said. The United States, which accounted for 22 percent
of Malaysia's exports in July, bought more electrical and electronics goods. Shipments to the European Union fell 10 percent on lower
exports to Britain and France, while exports to China declined 4.9 percent as Chinese bought fewer electronics and less palm oil and
chemicals. "The global environment will be less helpful in 2006" as "U.S. growth is set to slow sharply," said Julian Jessop,
chief international economist at Capital Economics in London. "The rest of Asia will also benefit less than before from the boom in
China as China gets better at producing goods at home that it previously had to import." Malaysia's exports of electrical and
electronic goods, which made up more than half of overseas sales in July, gained 2.6 percent, slowing from the 12 percent increase in
June.
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SEMICONDUCTER
AN INCREASE IN ENERGY PRICES HURT THE US MARKET AND BOOST COMPETITION OVERSEAS.
Taiwan Journal “Semiconductor sector poised for future development” Vol. XXV No. 26 July 4, 2008
http://taiwanjournal.nat.gov.tw/ct.asp?CtNode=122&xItem=44181
When discussing the global semiconductor industry, it is impossible to overlook the role of Taiwanese companies in
integrated circuit design, manufacturing, and packaging and testing. This international edge that the nation's semiconductor-
related firms enjoy was on display at an annual exhibition dubbed SemiTech Taipei 2008 held between June 11 and 13 at the Taipei
World Trade Center. Co-hosted by the Taiwan Semiconductor Industry Association and the Taipei Computer Association, the show
attracted 150 companies using 300 booths to exhibit the latest in IC technology. Founded in 1996 with over 140 corporate members,
the TSIA aims to assist Taiwan's semiconductor sector in maintaining its competitive edge in the global marketplace. International
semiconductor heavyweights, including Taiwan Semiconductor Manufacturing Co. Ltd.--the world's largest dedicated semiconductor
foundry--and Powerchip Semiconductor Corp.--the nation's largest memory chip producer--attended the show. Meanwhile, Advanced
Semiconductor Engineering Inc.--the world's largest chip packager--and Siliconware Precision Industries Co. Ltd.--Taiwan's second-
largest supplier of chip packaging and testing service--were also present. Frank Huang, chairman of TSIA as well as PSC, announced
at the show's opening ceremony that the entire production value of Taiwan's semiconductor industry last year totaled
US$44.1 billion, a number equating to a global market share of between 22 percent and 25 percent. "Taiwan has stood
side by side with the United States, Japan and South Korea as the world's leading four nations that dominate the global
semiconductor sector," Huang said. "The purpose of the show," he continued, "is to set up a platform for Taiwan's semiconductor
companies and to closely collaborate with each other while creating a link with other manufacturers abroad." President Ma Ying-
jeou, who delivered an address at the opening, said that Taiwan has taken the lead in the semiconductor industry
worldwide after years of all-out effort by domestic companies. The nation, moreover, is a specialist in the fields of IC
manufacturing, packaging and testing, he added. In response to the sector's future development, the president pointed out that
the new government would reconsider the needs of the high-tech industry, especially as the "Statute for Upgrading
Industries"--which has provided tax breaks and preferential treatment for domestic high-tech companies since 1991-- will expire next
December.
LARGEST SEMICONDUCTOR COMPANY HAS STARTED TO CUT JOBS because OF ENERGY CRISIS
Time Magazine "PROS AND CONS OF CAUTION." 152.19 (Nov 9, 1998): 122A(1). Opposing Viewpoints Resource Center. Gale.
# A53171351
Layoffs and firings seem to be the handiest solution for other companies too. "Companies no longer wait to ride out the tough spells,"
says John Challenger, CEO of Challenger, Gray & Christmas, a Chicago outplacement firm. "They practice just-in-time firings." At
chipmaker National Semiconductor, managers voice the optimism of those who feel they have reached the bottom. "We've taken
fairly severe actions," says chief financial officer Don Macleod, pointing out that the company cut 1,400 employees in April through
attrition and layoffs--10% of its work force --even before posting a loss for the quarter. "Our business has been impacted, but we're
moving forward. Our current view is that things are stable.
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HIGH ENERGY PRICES HELP

SEMICONDUCTORS
HIGH PRICES INCREASE SOLAR ENERGY MEANS INCREASED DEMAND FOR SEMI CONDUCTORS
Dow Corning “Demand in Solar Energy Industry Drives $400 Million Hemlock Semiconductor Expansion Dow Corning announces
expansion of world’s largest producer of polycrystalline silicon “2005.11.15
http://www.dowcorning.com/content/news/Demand_in_Solar_Energy_Industry_Drives_$400_Million_Hemlock_Semiconductor_Expansio
n.asp
Hemlock, Mich. — Hemlock Semiconductor Corporation, the world’s leading producer of polycrystalline silicon, will begin
construction of a $400-$500 million expansion at its Hemlock, Mich. headquarters in December. The expansion is
driven by increasing demand for polycrystalline silicon, the cornerstone material used in the production of solar cells
used to manufacture renewable energy from light rays and semiconductor device manufacturing. The Hemlock
Semiconductor expansion will increase site capacity by 50 percent, and is expected to generate more than 100-150
full-time direct jobs, and an equal number of contractor positions in the next three years. Additionally, there will be 400
temporary local contractor jobs created during construction of the expansion. Phase one of the two-phase expansion project is
expected to be completed in January 2008, with a potential second phase concluding a year later. "It’s exciting to announce this
expansion on a number of levels,” said Donald E. Pfuehler, president and CEO of Hemlock Semiconductor. “Not only will we expand
our ability to provide high quality products to solar and semiconductor industry customers, we’ll also be creating a significant number
of jobs and improve the economic activity in this region.” “This expansion will continue to strengthen Hemlock Semiconductor’s
presence in Michigan,” Michigan Governor Jennifer Granholm said, praising the company’s leaders. “The company's decision to grow
here is a testament to the state’s leadership in competitive-edge technologies and will create jobs in the high-tech field of alternative
energy investment and research.” Hemlock Semiconductor expects the solar energy industry to grow at a 20-25 percent pace over
the next 10 years. Today, solar energy accounts for approximately 10 percent of all renewable energy produced “Innovation in the
solar energy industry is providing excellent opportunities for businesses, people, and the environment,” said Marie N.
Eckstein, Dow Corning’s general manager of Advanced Technologies and Ventures. “Both Hemlock Semiconductor and Dow
Corning will continue to research and develop opportunities to enhance solar technology.” Upon completion of the
expansion, Hemlock Semiconductor will have approximately 500 direct employees and approximately 600 contractor positions.
Pfuehler also said that while Hemlock, Michigan was the preferred location for this expansion several issues needed to be addressed
to insure the Hemlock site remained globally competitive. “We received excellent support from Governor Granholm’s office, Michigan
Economic Development Corporation, Thomas Township, City of Saginaw, Saginaw Future, Inc., Department of Environmental Quality
and Consumers Energy. We appreciate the support of these groups which enabled our expansion to remain at this site.” Hemlock
Semiconductor Corporation is a joint venture of Dow Corning Corporation and two Japanese firms, Shin-Etsu Handotai Company, Ltd.
and Mitsubishi Materials Corporation.
In addition to serving the solar energy market, the company also provides
materials used in the production of semiconductor devices used in computers, cell phones and other electronic
applications.
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SEMI CONDUCTERS KEY

the SECRETERY OF ENERGY STATES THAT SEMICONDUCTERS ARE KEY TO NUCLEAR SECURITY
Federico Peña (United States Secretary of Transportation from 1993 to 1997 and United States Secretary of Energy from 1997 to
1998, during the presidency of Bill Clinton.) “US news and world report” Semiconductors.(Secretary of Energy corrects article
reporting his position on semiconductor industry)(Letter to the Editor)(Brief Article). Oct 20, 1997 Gale # A19860411
The nation needs much faster computers to continue to ensure the safety, security, and reliability of our nation's nuclear weapons
without nuclear testing. The technology our labs have developed can provide the chips to make these computers faster,
technology that will also benefit our overall scientific capabilities. The U.S. semiconductor companies in this consortium
want to invest $250 million in our laboratories to develop this next-generation technology and to ensure their continued leadership in
this market. U.S. semiconductor companies now dominate the world market, In my conversation with your reporter, I expressed my
view that it's important that we keep this lead in the next generation of microchips and beyond. This is a $150-billion-a-year market
that is expected to grow to $600 billion by 2010. I also expressed my strong support for the U.S. companies that supply
manufacturing equipment to semiconductor manufacturers--the so-called stepper industry and the industries that will provide the
components for such machines. Unfortunately, my views on this point were not included in your article. I want American companies to
benefit from this new technology, and that is why I invited the U.S. stepper companies to discuss proposals for their own consortium.
Two of the three major U.S. stepper companies came in several weeks ago', and we are continuing discussions with them about ways
to maximize the benefit they reap from this new technology.
SEMI CONDUCTERS ARE KEY TO SOLAR ENERGY

Chiatzun Goh (Stanford engineering) National Academy of Engineering “Orgainic semiconductors for low cost solar cells
http://www.nae.edu/NAE/bridgecom.nsf/weblinks/MKEZ-6LULZ6?OpenDocument Winter 2005
Currently the world consumes an average of 13 terawatts (TW) of power. By the year 2050, as the population
increases and the standard of living in developing countries improves, this amount is likely to increase to 30 TW. If this
power is provided by burning fossil fuels, the concentration of carbon dioxide in the atmosphere will more than double,
causing substantial global warming, along with many other undesirable consequences. Therefore, one of the most
important challenges facing engineers is finding a way to provide the world with 30 TW of power without releasing carbon into the
atmosphere. Although it is possible that this could be done by using carbon sequestration along with fossil fuels or by greatly
expanding nuclear power plants, it is clearly desirable that we develop renewable sources of energy. The sun deposits
120,000 TW of radiation on the surface of the earth, so there is clearly enough power available if an efficient means of
harvesting solar energy can be developed. Only a very small fraction of power today is generated by solar cells, which
convert solar energy into electricity, because they are too expensive (Lewis and Crabtree, 2005). More than 95 percent of
the solar cells in use today are made of crystalline silicon (c-Si). The efficiency of the most common panels is approximately 10
percent, and the cost is $350/m2. In other words, the cost of the panels is $3.50/W of electricity produced in peak sunlight. When you
add in the cost of installation, panel support, wiring, and DC to AC converters, the price rises to approximately $6/W. Over the lifetime
of a panel (approximately 30 years), the average cost of the electricity generated is $0.3/kW-hr. By comparison, in most parts of the
United States, electricity costs about $0.06/kW-hr. Thus, it costs approximately five times as much for electricity from solar
cells. If the cost of producing solar cells could be reduced by a factor of 10, solar energy would be not only
environmentally favorable, but also economically favorable. Although c-Si solar cells will naturally become cheaper as
economies of scale are realized, dicing and polishing wafers will always be somewhat expensive. Thus, it is desirable that we find
a cheaper way to make solar cells. The ideal method of manufacturing would be depositing patterned electrodes and
semiconductors on rolls of plastic or metal in roll-to-roll coating machines, similar to those used to make photographic
film or newspapers. Solar cells made this way would not only be cheaper, but could also be directly incorporated into roofing
materials, thus reducing installation costs. Organic semiconductors that can be dissolved in common solvents and sprayed
or printed onto substrates are very promising candidates for this application.
A THRIVING SEMI CONDUCTER MARKET IS KEY FOR THE FUTURE OF TECHNOLOGY
Discover Magazine "The future." 18.n7 (July 1997): 18(3). Opposing Viewpoints Resource Center. Gale #A19560104
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Semiconductor technologies based on the transistor have come a long way in half a century. But even while we pause to admire our
achievements, the future beckons. Looking ahead requires the vision to believe in "What you never thought possible." SHRUNK-TO-
FIT One of the most significant advances in semiconductors over the past five decades has been the dramatic miniaturization of
transistors, which has allowed engineers to squeeze more of them onto a single chip. Between 1970 and 1995, transistors shrank
200-fold. Once, the one-micron-sized transistor seemed an impossible goal. Today, Motorola manufacturers integrated circuits with
transistors one-third that size. While the laws of physics and manufacturing processes pose eventual limits to further significant size
reductions, designers will still manage to pack even more transistors onto the chips of the future by building more layers into chip
silicon and thereby stacking circuits, or by developing new kinds of silicon. packaging has already shrunk so that it's only 20 percent
larger than the chip itself, allowing for the same number of transistors in a smaller area. Many experts believe that in addition to
predictable improvements in size and cost. microchips will undergo at least one more major innovation during our lifetime. Areas of
near-term breakthrough include: integration; increases in performance speed; higher density: and increased functionality with
minimal power input--a necessity for portable products.
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SEMI CONDUCTERS KEY

SEMICONDUCTERS KEY TO US MILLITARY REDINESS AND EFFECTIVNESS
SIA (semiconductor industry of America) 2/2/2008 “Semiconductors the innovation that drives America” www.sia-
online.org/browser/pdf/American_Chip_Industry.pdf
Semiconductors are also essential to America’s national defense. From the ‘smart bombs’ that allow the U.S. military to minimize
civilian and allied casualties today to the ‘super suits’ that will protect and enhance the effectiveness of our soldiers in the field
tomorrow, the important role chips play in many weapon and communications systems makes maintaining a strong domestic industry
of strategic value. The importance of leading-edge microchips necessitates that we continue to have research and design centers
and manufacturing facilities in the U.S
SEMICONDUCTORS ARE KEY TO MAINTAINING MILLITARY SUPERIORITY

Andy Extance (editor compoundsemiconductor.net) “TriQuint Semiconductor to supply MMICs for new U.S. Army battlefield radar”
http://compoundsemiconductor.net/blog/2008/05/triquint_semiconductor_to_supp.html May 6th 2008
HILLSBORO, Ore. --(Business Wire)-- -- TriQuint Semiconductor (Nasdaq:TQNT), a leading RF front-end product manufacturer and
foundry services provider, today announced that it has begun shipping production gallium arsenide (GaAs) monolithic microwave
integrated circuits (MMICs) to Lockheed Martin Radar Systems for the manufacture of EQ-36 Counterfire Target Acquisition Radars
being developed for the U.S. Army. TriQuint devices are used as chipset components in the new phased array radar designed to
identify, track and help neutralize threats posed by mortars, artillery and missiles under rapidly changing battlefield conditions.
TriQuint's Director of Military Products Marketing, Dr. Gailon Brehm, said the new devices are the latest products to be developed for
Lockheed Martin Corporation in a relationship that has also included work on radar programs for ship borne and aircraft systems. The
die-level products in Lockheed's transmit/receive (T/R) modules will support the initial production of five mobile systems being
developed along an aggressive timetable. Lockheed Martin demonstrated a fully-operational prototype of the EQ-36 Counterfire
Target Acquisition Radar at the Association for the United States Army (AUSA)'s 2007 exposition in October. Following that
demonstration, Lockheed Martin Radar Systems Vice President Carl Bannar said(1) that the company was on the 'fast track' to design
and produce the system, having rolled-out a field-tested, operational prototype within nine months. The first of the completed radars
are expected to be delivered to the U.S. Army by mid-2009, the company added. The new phased array system, also known as the
U.S. Army's Enhanced AN/TPQ-36 radar, contains T/R modules that Lockheed Martin described as being at the 'heart' of the overall
system. These technologically highly-mature transmit/receive modules are "...ensuring the performance capability on which the Army
relies," the company said. "We've enjoyed the challenging work of optimizing TriQuint's advanced MMICs for Lockheed Martin's T/R
modules," said Dr. Brehm. "TriQuint has been a consistent technology leader in developing amplifiers and related devices for phased
array radar systems and it's gratifying to see us extend such leadership into battlefield radars." The new EQ-36 Counterfire Target
Acquisition Radar is quite advanced compared to battlefield radars now deployed that include TPQ-36 and TPQ-37 systems that date
to the Cold War era. A key difference in the new EQ-36 system is its ability to rotate, offering a 360-degree view. This enables
operators to more easily and rapidly identify hostile mortar, artillery and missile fire. With this capability defenders can detect threats
from any direction and neutralize the danger more quickly than ever before. TriQuint is now in its initial production phase for the EQ-
36 program that will deliver devices throughout a multi-year cycle. Lockheed Martin indicated in October its first five production units
were part of an approximately $120 million contract awarded by the U.S. Army.
BREAKTHRU’S IN MILLITARY SEMICONDUCTORS SPILL OVER TO THE CIVILIAN MARKET AND

WILL BE USED TO SAVE LIVES.
Bartel (Writer the UT newspaper) “U.S. Army funds NT semiconductor research” 8/30/2008
http://media.www.ntdaily.com/media/storage/paper877/news/2001/08/30/CampusNews/U.s-Army.Funds.Nt.Semiconductor.Research-
1882682.shtml
Two professors in the NT physics department are going for the gold this semester. Dr. Terry Golding and Dr. Christopher Littler of the
physics faculty received a $358,000 grant from the U.S. Army this semseter to design a better method of manufacturing heat-sensing
semiconductors. The military uses these semiconductors to create the infrared sensors found in night vision apparatus and missile
guidance systems. They are also used in satellites to identify vehicles and personnel on the combat ground. Golding’s new technique
for doping, or treating, adds the precise amount of impurities in the form of atomic golden glitter to the semiconductor material,
which gives the material the ability to conduct electricity. This technique, called transmutation, is an improvement, Littler said, to the
way doping has been done in the past. “The infrared detection industry has shown to be a matured industry, but lately it’s bumped
into new limitations,” Littler said. “We’re merely coming up with new answers to new questions.” Littler said the process of doping,
one he first became acquainted with when he worked at Dallas-based Texas Instruments, has been around since the 1950s.
Semiconductors are created by growing semiconductor crystals, he said. Though the method for growing crystals was understood, the
method for doping the material was inexact. “As the crystals were grown, the material would be uneven or homogenous in its
conductive properties, and it would have to be discarded,” Littler said. This haphazard process made the technology expensive, he
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said, exceeding an affordable price range for mainstream consumers. Littler said Golding’s new “transmutation” procedure will make
the process of creating heat-sensing semiconductors less expensive. Transmutation is accomplished by placing a material made from
a mercury-cadmium-telluride compound into a reactor where it is bombarded with a bath of neutron particles. Eventually, a mercury
atom captures one of the passing neutrons and turns into a gold atom. By doing this, they make the alchemist dream of turning
common material into gold a reality Golding said. “Essentially, its like the fantasy Isaac Newton had about turning lead into gold,” he
said. “With this technology, that’s what we’re accomplishing here.” The transmutation process yields one atom per one million
semiconductor atoms, so it is not enough gold to provide Golding and Littler with an early retirement. But by using this new method,
Littler said their research team aims to engineer a reproducible method for adding the exact number of gold impurities to the
material. Golding’s work with infrared sensors began at the U.S. Army Night Vision Laboratory at Fort Belvoir, Va., where he worked
while pursuing his Ph.D. at Cambridge University. He said his idea for transmutation evolved over several years but solidified a few
months ago in a phone conversation he had with one of his advisors at the Night Vision Lab. Golding’s association with Littler began
in 1992, when they met at a night vision conference at the University of South Hampton in England. “We had known each other for
eight years, and it took that long to get him to come down here,” Littler said. At the time of their first encounter, Littler was involved
in research at NT, observing characterizations in narrow-gapped semiconductors, the same type used by infrared sensors. “Since
narrow-gapped semiconductors require a smaller amount of energy to excite the electrons, they can detect infrared radiation, which
has a lower energy,” Littler said. “The material and processes is tailored to make visible what is invisible to the eye.” After doping the
compound with the precise amount of gold atoms, a flat wafer with a grid of several diodes, each containing the gold impurities, is
created. Each diode is connected to a computer CPU, and as they absorb intensities of infrared radiation from a heat source, they
create a “heat map” display of the source on the computer screen. Though the technology is now available for the military,
Golding said improvements on heat-sensing semiconductor manufacturing will make them more affordable for anyone. Soon, he
said, the same infrared devices used in heads-up displays in fighter planes will be used on car windshields to help drivers see
obstacle-heavy fog. “These infrared cameras will be used in whole range of safety and life-saving applications,” Golding said.
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SEMICONDUCTORS KEY TO ECONOMY

SEMI CONDUCTORS KEY TO ECONOMY
PR Week (US) "Campaigns: SIA secures many champions for its research initiative." (Feb 21, 2005): 27. Business and
Company ASAP. Gale. A128979648
Semiconductors today fuel the economy and our daily lives, and with the number of circuits that scientists are able to fit
on a chip still doubling every 18 months, new funding for research is always needed. Since 1998, the Semiconductor
Industry Association (SIA) has lobbied Congress for appropriations for its Focus Center Research Program (FCRP), which
supports five research-based centers made up of 30 leading universities. But last year, when the FCRP was left out of President
Bush's budget, the SIA turned to Golin Harris to help it secure dollars 20 million in Defense Department appropriations, which would
be matched by the industry up to dollars 20 million. 'In many ways this program sells itself because of the importance of
semiconductor technology to the economy and national security,' says Daryl Hatano, VP of public policy at SIA. 'But even
with the intellectual justification behind us, it (was) still very helpful to have Golin Harris' expertise to help us navigate our way
through the appropriations process.' Strategy Although funding from Congress had decreased for fiscal 2004, the lobbying effort had
a solid foundation from previous years.
SEMICONDUCTORS AND NANO TECH KEY TO US MARKET AND JOBS

Levine, Bernard. "Semiconductors will rise again: don't sell the industry short--growth will return." Electronic News
(1991) 48.38 (Sept 16, 2002): 1(2). Business and Company ASAP. Gale. # A92852247
LAKE GEORGE, N.Y. -- Business has been lousy since the dot-com bubble burst, but does that mean the heyday of
semiconductor growth is in the past? No way, according to a host of speakers here at last week's Albany Symposium on Global
Nanotechnology. The semiconductor and related industries have experienced the boom-and-bust cycle for the past few
years, but many believe a slow recovery is already underway and will pick up steam next year. The industry could see
a boom again when technology drivers such as nanoscale manufacturing, expanded broadband Internet connections,
biotechnology marvels and voice-recognition schemes take hold. The big question may really be how soon all these advances become
reality. "The promise of nanotechnology is a new world of products worth $1 trillion a year in 10 to 15 years," said
Mihail Roco, senior advisor for nanotechnology at the National Science Foundation. "There is strategic importance for
the country--creating jobs in the United States by creating new technology." The Bush administration intends to do its share
to make nanotechnology a reality, said Sharon Hays, deputy associate director for technology for the Office of Science and
Technology Policy (OSTP). The president's proposed fiscal year 2003 budget includes big increases in nanotechnology outlays for
energy and defense areas, she said. But 10 years is a long way off. Accelerated broadband penetration could bring booming IC
business back much sooner, many believe. "One of President Bush's major things on his agenda is to expand the role of broadband
"I'd like to rebuild some cause
and fully utilize these amazing and revolutionary technologies," Hays said. History provides hope.
for optimism," said Doug Andrey, the Semiconductor Industry Association's (SIA) director of information systems and finance. "IT
is the No. 1 driver of the U.S. economy.
INNOVATION IN THE SEMICONDUCTOR MARKET IS KEY TO THE ECONOMY

Rob Spiegel (longtime journalist He writes about environmental compliance, distribution, outsourced design and global issues
affecting design.) Electronic news Nov. 4th 2002 “Economy tied to innovation: AMD CEO Jerry Sanders says innovators are being
discouraged – Semiconductors” http://findarticles.com/p/articles/mi_m0EKF/is_45_48/ai_94123287
CHICAGO--"When true innovation suffers, so does the economy," said Jerry Sanders, chairman and CEO of Advanced Micro
Devices (AMD), during his keynote speech last week at the National Electronic Distributors Association (NEDA) Executive
Conference. "When innovation is occurring and consumers win, so will business." Sanders warned that the elements that
encourage innovation are lacking in the current market. One of the impediments, he said, is the current lack of a robust capital
"With the
market. "True innovation is in jeopardy today because easy access to capital is in short supply," Sanders said.
weakening of the capital market, business becomes about preservation, which creates a status quo that benefits the
entrenched." Sanders sees the dearth in capital as a worldwide economic problem. "The funding by a few for a few is threatening
innovation here and abroad." He noted that when governments step in to assist companies with capital, it compounds the problem.
"Companies are not very responsive when the government protects them. Japan is an example." He also noted the climate of
executive criminality has suppressed innovation by increasing aversion to the risk-taking that is necessary for innovation. "We're
ashamed of the criminals involved, but innocents should not be punished," Sanders said. "While I appreciate the idea of holding
executives responsible, limited liability is an incentive to innovate. Who's going to risk the corporation if they are personally
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responsible?" Sanders believes China has become an economic threat because it is more open than Japan and thus doesn't share
Japan's protectionism, which ultimately stifled Japan's growth. In China he sees a country with potential for innovation. "We have to
out-innovate them. If we do, they'll never catch up. We have to keep creating growth with new ideas." He also noted danger in the
trend of less investment in research and development, both at companies and at universities. "The number of labs is shrinking,"
Sanders said. "This industry needs to keep in mind that R&D is critical to its success." Looking at the reasons for the economic
success during the 1990s, Sanders pointed to the PC standardization provided by IBM and Microsoft. "Standardization attracts new
participants. Microsoft played a clear role in producing the computer industry." As for Microsoft's troubles with antitrust laws, Sanders
questioned whether the court was focused on protecting the consumer or other companies. "Microsoft was judged to use its system
to stifle competition, but who should the solution protect? Antitrust laws should protect consumers, not institutions," he said.
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SEMICONDUCTORS HURT MILLITARY

SEMICONDUCTURS ALLOW FOR BACK DOOR’S THAT CAN RENDER THE US TOP EQUIPMENT
USELESS
Sally Adee (professor John Hopkins) “the hunt for the kill switch” may 2008
http://www.spectrum.ieee.org/may08/6171
Last September, Israeli jets bombed a suspected nuclear installation in northeastern Syria. Among the many mysteries
still surrounding that strike was the failure of a Syrian radar—supposedly state-of-the-art—to warn the Syrian military of
the incoming assault. It wasn't long before military and technology bloggers concluded that this was an incident of electronic
warfare—and not just any kind. Post after post speculated that the commercial off-the-shelf microprocessors in the Syrian
radar might have been purposely fabricated with a hidden “backdoor” inside. By sending a preprogrammed code to
those chips, an unknown antagonist had disrupted the chips' function and temporarily blocked the radar. That same
basic scenario is cropping up more frequently lately, and not just in the Middle East, where conspiracy theories
abound. According to a U.S. defense contractor who spoke on condition of anonymity, a “European chip maker”
recently built into its microprocessors a kill switch that could be accessed remotely. French defense contractors have
used the chips in military equipment, the contractor told IEEE Spectrum. If in the future the equipment fell into hostile
hands, “the French wanted a way to disable that circuit,” he said. Spectrum could not confirm this account independently, but
spirited discussion about it among researchers and another defense contractor last summer at a military research conference reveals
a lot about the fever dreams plaguing the U.S. Department of Defense (DOD). Feeding those dreams is the Pentagon's
realization that it no longer controls who manufactures the components that go into its increasingly complex systems.
A single plane like the DOD's next generation F-35 Joint Strike Fighter, can contain an “insane number” of chips, says
one semiconductor expert familiar with that aircraft's design. Estimates from other sources put the total at several hundred to more
than a thousand. And tracing a part back to its source is not always straightforward. The dwindling of domestic chip and
electronics manufacturing in the United States, combined with the phenomenal growth of suppliers in countries like
China, has only deepened the U.S. military's concern.
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SEMICONDUCTORS HURT MILLITARY

THE CONTINUED USE OF SEMICONDUCTURS WILL ALLOW CHINA AND RUSSIA TO DISABLE THE
US WEAPONS DEFENSE SYSTEMS
Sally Adee (professor John Hopkins) “the hunt for the kill switch” may 2008 http://www.spectrum.ieee.org/may08/6171
Three years ago, the prestigious Defense Science Board, which advises the DOD on science and technology
developments, warned in a report that the continuing shift to overseas chip fabrication would expose the Pentagon's
most mission-critical integrated circuits to sabotage. The board was especially alarmed that no existing tests could detect such
compromised chips, which led to the formation of the DARPA Trust in IC program. Where might such an attack originate? U.S.
officials invariably mention China and Russia. Kenneth Flamm, a technology expert at the Pentagon during the Clinton
administration who is now a professor at the University of Texas at Austin, wouldn't get that specific but did offer some
clues. Each year, secure government computer networks weather thousands of attacks over the Internet. “Some of
that probing has come from places where a lot of our electronics are being manufactured,” Flamm says. “And if you're
a responsible defense person, you would be stupid not to look at some of the stuff they're assembling, to see how else
they might try to enter the network.” John Randall, a semiconductor expert at Zyvex Corp., in Richardson, Texas, elaborates that
any malefactor who can penetrate government security can find out what chips are being ordered by the Defense Department and
then target them for sabotage. “If they can access the chip designs and add the modifications,” Randall says, “then the
chips could be manufactured correctly anywhere and still contain the unwanted circuitry.” So what's the best way to kill
a chip? No one agrees on the most likely scenario, and in fact, there seem to be as many potential avenues of attack as there are
people working on the problem. But the threats most often mentioned fall into two categories: a kill switch or a backdoor. A kill
switch is any manipulation of the chip's software or hardware that would cause the chip to die outright—to shut off an F-35's missile-
launching electronics, for example. A backdoor, by contrast, lets outsiders gain access to the system through code or
hardware to disable or enable a specific function. Because this method works without shutting down the whole chip,
users remain unaware of the intrusion. An enemy could use it to bypass battlefield radio encryption, for instance.
Depending on the adversary's degree of sophistication, a kill switch might be controlled to go off at a set time, under certain
circumstances, or at random. As an example of the latter, Stanford electrical engineering professor Fabian Pease muses, “I'd nick the
[chip's] copper wiring.” The fault, almost impossible to detect, would make the chip fail early, due to electromigration: as current
flowed through the wire, eventually the metal atoms would migrate and form voids, and the wire would break. “If the chip goes into a
defense satellite, where it's supposed to work for 15 years but fails after six months, you have a very expensive, inoperative
satellite,” Pease says. But other experts counter that such ideas ignore economic realities. “First and foremost, [the foundries] want to
make sure their chips work,” says Coleman. “If a company develops a reputation for making chips that fail early, that company
suffers more than anyone else.” A kill switch built to be triggered at will, as was allegedly incorporated into the European
microprocessors, would be more difficult and expensive to pull off, but it's also the more likely threat, says David Adler, a consulting
professor of electrical engineering at Stanford, who was previously funded by DARPA to develop chip-testing hardware in an unrelated
project. To create a controlled kill switch, you'd need to add extra logic to a microprocessor, which you could do either during
manufacturing or during the chip's design phase. A saboteur could substitute one of the masks used to imprint the pattern of wires
and transistors onto the semiconductor wafer, Adler suggests, so that the pattern for just one microchip is different from the rest.
“You're printing pictures from a negative,” he says. “If you change the mask, you can add extra transistors.” Or the extra circuits
could be added to the design itself. Chip circuitry these days tends to be created in software modules, which can come from
anywhere, notes Dean Collins, deputy director of DARPA's Microsystems Technology Office and program manager for the Trust in IC
initiative. Programmers “browse many sources on the Internet for a component,” he says. “They'll find a good one made by
somebody in Romania, and they'll put that in their design.” Up to two dozen different software tools may be used to design the chip,
and the origin of that software is not always clear, he adds. “That creates two dozen entry points for malicious code.” Collins notes
that many defense contractors rely heavily on field-programmable gate arrays (FPGAs)—a kind of generic chip that can be
customized through software. While a ready-made FPGA can be bought for $500, an application-specific IC, or ASIC, can cost
anywhere from $4 million to $50 million. “If you make a mistake on an FPGA, hey, you just reprogram it,” says Collins. “That's the
good news. The bad news is that if you put the FPGA in a military system, someone else can reprogram it.” Almost all FPGAs are now
made at foundries outside the United States, about 80 percent of them in Taiwan. Defense contractors have no good way of
guaranteeing that these economical chips haven't been tampered with. Building a kill switch into an FPGA could mean embedding as
few as 1000 transistors within its many hundreds of millions. “You could do a lot of very interesting things with those extra
transistors,” Collins says. The rogue additions would be nearly impossible to spot. Say those 1000 transistors are programmed to
respond to a specific 512-bit sequence of numbers. To discover the code using software testing, you might have to cycle through
every possible numerical combination of 512-bit sequences. That's 13.4 × 10153 combinations. (For perspective, the universe has
existed for about 4 × 1017 seconds.) And that's just for the 512-bit number—the actual number of bits in the code would almost
certainly be unknown. So you'd have to apply the same calculations to all possible 1024-bit numbers, and maybe even 2048-bit
numbers, says Tim Holman, a research associate professor of electrical engineering at Vanderbilt University, in Nashville. “There just
isn't enough time in the universe.” Those extra transistors could create a kill switch or a backdoor in any chip, not just an FPGA.
Holman sketches a possible scenario: suppose those added transistors find their way into a networking chip used in the routers
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connecting the computers in your home, your workplace, banks, and military bases with the Internet. The chip functions perfectly
until it receives that 512-bit sequence, which could be transmitted from anywhere in the world. The sequence prompts the router to
hang up. Thinking it was the usual kind of bug, tech support would reset the router, but on restart the chip would again immediately
hang up, preventing the router from connecting to the outside world. Meanwhile, the same thing would be happening to similarly
configured routers the world over. The router scenario also illustrates that the nation's security and economic well-being depend on
shoring up not just military chips but also commercial chips. An adversary who succeeded in embedding a kill switch in every
commercial router could devastate national security without ever targeting the Defense Department directly. A kill switch or backdoor
built into an encryption chip could have even more disastrous consequences. Today encoding and decoding classified messages is
done completely by integrated circuit—no more Enigma machine with its levers and wheels. Most advanced encryption schemes rely
on the difficulty that computers have in factoring numbers containing hundreds of digits; discovering a 512-bit type of encryption
would take some machines up to 149 million years. Encryption that uses the same code or key to encrypt and decrypt information—
as is often true—could easily be compromised by a kill switch or a backdoor. No matter what precautions are taken at the
programming level to safeguard that key, one extra block of transistors could undo any amount of cryptography, says John East, CEO
of Actel Corp., in Mountain View, Calif., which supplies military FPGAs. “Let's say I can make changes to an insecure FPGA's
hardware,” says East. “I could easily put a little timer into the circuit. The timer could be programmed with a single command: ‘Three
weeks after you get your configuration, forget it.' If the FPGA were to forget its configuration information, the entire security
mechanism would be disabled.” Alternately, a kill switch might be programmed to simply shut down encryption chips in military
radios; instead of scrambling the signals they transmit, the radios would send their messages in the clear, for anybody to pick up.
“Just like we figured out how the Enigma machine worked in World War II,” says Stanford's Adler, “one of our adversaries could in
principle figure out how our electronic Enigma machines work and use that information to decode our classified
communications.”
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SEMICONDUCTOR INDUSTRY ON BRINK

THE NEXT FEW YEARS WILL DETERMINE THE SEMICONDUCTORS FUTURE IN THE NEXT FEW
YEARS
Asia Times “Quest on for next 'big thing' in semiconductor industry” 10/24 / 2007
http://www.eetasia.com/ART_8800485061_480200_NT_4a2c6ed0.HTM
The semiconductor industry may be on its last stretch, according to the consensus of researchers who are looking for the next "big
thing." "We have reached the opportune moment in the semiconductor-technology industry when we need to get to work now to stay
ahead of Moore's Law in the next ten years," said John Kelly, IBM senior VP and director of research, opening up a recent look-ahead
sponsored by the Semiconductor Industry Association (SIA). Kelly, who is on the board of the SIA, considers 2007 the year of
introduction of the nano era, at more than a billion transistors per chip. This compares to the litho era, from 1970 to 1990 (a thousand
transistors per chip) and the materials-science era, from early 1990s to today (a million transistors per chip). "We certainly can't do it
alone," said Kelly while pointing out that materials-technology breakthroughs have not been on the short list from IBM Research. "We
need a healthy industry atmosphere of cooperation and competition among industry, universities and government laboratories in
order to find a new computational element as the end of CMOS scaling approaches", said George Scalise, president of the SIA. "The
real nano era is here. Collaboration One key example of this tripartite scheme of cooperation/competition is a partnership by the
Semiconductor Research Corp. and the Commerce Department's National Institute of Standards and Technology (NIST). The
partnership supports research in nanoelectronics, and the aim is to find a replacement for CMOS. That chip technology has driven the
world's computers for more than 30 years, but may hit its technological limits in the next decade. The plan is to demonstrate the
feasibility of next-generation circuits over the next 5 to 10 years.
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HIGH ENERGY HELPS

SEMICONDUCTORS
AFF: RISING PRICES HELP SEMICONDUCTORS BECAUSE OF RENEWABLES
D. Friedman (professor of law Santa Clara) “Compound Semiconductor Solar Cells for Electric Power Generation” Feb 2001
http://compoundsemiconductor.net/cws/article/magazine/11382
Recent headlines reporting sky-high natural gas prices and the possibility of $3/gallon for gasoline in the U.S. in the not-so-distant
future have led many of us to add "energy prices" to our list of "things to watch." What might not be obvious is that the rising
cost of energy could result in a new and, potentially, large market for compound semiconductors: solar cells for terrestrial
applications. Compound Semiconductor magazine has already reported the success of GaInP/GaAs/Ge solar cells for satellites [1].
These solar cells have a higher efficiency than any other commercially available solar cell, and if they now enter the terrestrial solar
cell market, the potential sales growth is even greater.
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SEMICONDUCTOR MARKET IS STRONG

THE SEMICONDUCTOR MARKET IS GROWING NOW AND SHOWS NO SIGN OF SLOWING
Austin Business Journal “Semiconductor sales jump worldwide” July 1st 2008
http://www.bizjournals.com/austin/stories/2008/06/30/daily19.html
A slowing U.S. economy hasn't phased semiconductor sales as global demand jumped 7.5 percent in May compared with the same
time last year. The Semiconductor Industry Association reported Monday that sales hit $21.8 billion in May, compared with $20.3
billion last year. That follows April sales that rose 5.3 percent worldwide compared to the previous year. Information on sales for
Austin-area companies, was not available in the study. Tax rebate checks may have spurred some buying in the U.S. for consumer
electronics, pushing up sales, but growth in emerging markets like China, India and Latin America is making up for any slackening
U.S. demand, according to the SIA. The smaller U.S. market share isn't a bad thing for the industry, officials with SIA said. In the past,
a slowdown in the local market meant a slowdown in the semiconductor industry. With more global demand, the industry can ride out
U.S. downturns.
SEMICONDUCTOR MARKET STRONG NOW. GIVE AMERICAN COUNTRIES GLOBAL LEAD

Computer Graphics World "Leaders in the processor industry benefit from strong demand and
price-war lull.(NEWS: MICROPROCESSORS)." 31.1 (Jan 2008): 10(1). Business and Company
ASAP. Gale.
In the third quarter, Intel and AMD both managed to gain share in the global microprocessor market due to robust sales
of PCs and servers, and the cessation of the companies' brutal price war, according to iSuppli Corp. In Q3 2007, Intel accounted
for 78.7 percent of global microprocessor revenue, up 0.3 of a percentage point from 78.4 percent in the second quarter. AMD fared
even better, with its share rising by more than twice that of Intel to reach 13.9 percent, up 0.6 of a percentage point from 13.3
percent in the second quarter. The two microprocessor suppliers gained at the expense of their smaller rivals, whose collective share
of global revenue declined to 7.4 percent in the third quarter, down from 8.2 percent in the second quarter. iSuppli's final revenue
ranking of global general-purpose microprocessor suppliers in the third quarter accounts for sales of all types of general-purpose
microprocessors, including RISC chips as well as the PC-oriented x86 devices sold by Intel and AMD. Yet again in the third quarter,
the two microprocessor giants accounted for an increasing share of total market revenues. Combined, Intel and AMD claimed
almost 93 percent of global microprocessor revenue in the third quarter of 2007--an increase of 2 percentage points
compared to the third quarter of 2006. In fact, Intel and AMD benefited from strong sales of computers in the quarter.
Global PC shipments, including desktops, notebooks, and entry-level servers, amounted to 68.1 million units, up 13.8 percent from
59.9 million during the same period in 2006, and up 11.1 percent from 61.3 million in the second quarter of 2007. The companies in
their third-quarter financial calls stated they had seen a reduction in the aggressive pricing that has ruled throughout most of
2007. This signifies the beginning of the end for the x86 microprocessor price war, iSuppli believes. "The combination
of strong PC and server demand, combined with stable microprocessor prices, led to a prosperous quarter for both
Intel and AMD," says Matthew Wilkins, principal analyst at iSuppli. Several factors contributed to a reduction in microprocessor
market share in the third quarter. "Pricing trends were influenced by many variables, including the consistent strength in computing
markets, Intel's rapid migration to its new Core 2 architecture microprocessors, and the increasing penetration of multicore products
in the market," Wilkins says. While the pricing battle may be coming to an end, Wilkins believes that the competition will continue to
be extremely fierce. "AMD's launch of Barcelona and Barcelona-derived products gives the company a stronger portfolio with which
to compete, and with Intel shipping its products based on its new 45nm manufacturing process, neither company is resting on its
laurels," Wilkins notes.
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SEMICONDUCTOR INDUSTRY STRONG

NOW
SEMICONDUCTOR INDUSTRY STRONG NOW OUR EV IS CITING REPORTS FROM THIS MAY
The Star “global semiconductor sales recover” July 2nd 2008
http://biz.thestar.com.my/news/story.asp?file=/2008/7/2/business/20080702101728&sec=business
PETALING JAYA: Worldwide sales of semiconductors showed a recovery in May, with sales rising to US$21.8bil in May, up
7.5% from the US$20.3bil a year ago, the Semiconductor Industry Association (SIA) reported. When compared with sales of
US$21.2bil in April, the May figures also showed a 2.8% improvement, the SIA said in its report. It added May was historically a
relatively strong month for semiconductor sales. Year-to-date, chip sales totalled US$103.4bil, up 5.3% from US$98.2bil in the
previous corresponding period. Total semiconductor sales, excluding memory products, rose 12.3% year-on-year and by 2.5
percent sequentially. SIA president George Scalise said global sales of semiconductors grew at a healthy rate in May reflecting
continued strong sales of consumer electronic products. “Despite reports of declining consumer confidence in the United
States, both disposable income and consumer spending rose in May. It is likely that the distribution of tax rebate
cheques to millions of Americans was a factor in increased consumer spending,” he said. Scalise said growing sales of
consumer electronic products in emerging markets, including China, Latin America, and India, had underpinned driving semiconductor
sales.
INCREASE IN CELL PHONES GUARANTEE FUTURE MOMENTUM

IIR Group “ARM Holdings PLC (NASDAQ:ARMH) - Strong growth momentum expected in FY 2009. Free research report for 1Q 08
results.” 7/4/2008 http://blogs.iirgroup.com/?p=1729
ARM Holdings PLC’s (ARM) 1Q 08 results exceeded our expectations, with total revenues growing 5.5% q-o-q in 1Q 08.
Considering overall uncertainty and seasonality in Royalty revenues, Management expects total revenues in US dollar terms to
remain flat or lower sequentially in 2Q 08. We expect ARM to experience moderate total revenue growth in FY 2008 despite current
industry slowdown as a result of uncertain global macroeconomic conditions and reduced consumer spending. The Semiconductor
Industry Association (SIA) has forecast cell phone unit shipments to grow approximately 12% y-o-y in 2008, while
microprocessor shipments are expected to grow at approximately 10% over the same period. As a leader in the
smartphone market, ARM is expected to benefit from growth in these segments in the form of increased licensing activity and robust
royalty revenues, as its customers ship more products incorporating ARM technology. We anticipate FY 2009 to be a stronger
year for the semiconductor industry, and expect industry growth to benefit ARM through increasing licensing activity
and robust royalty revenues. Our margin estimates for FY 2008 and FY 2009 remain unchanged for the company. Although we are
optimistic about the long term growth prospects of the company in view of its strong leadership position in the market, and higher
revenue contribution from the Physical IP Division (PIPD) segment, we retain a cautious outlook in the near term.
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SEMICONDUCTOR MARKET STRONG

SEMICONDUCTOR MARKET STRONG NOW. GIVE AMERICAN COUNTRIES GLOBAL LEAD
Computer Graphics World "Leaders in the processor industry benefit from strong demand and price-war lull.(NEWS:
MICROPROCESSORS)." 31.1 (Jan 2008): 10(1). Business and Company ASAP. Gale.
In the third quarter, Intel and AMD both managed to gain share in the global microprocessor market due to robust sales
of PCs and servers, and the cessation of the companies' brutal price war, according to iSuppli Corp. In Q3 2007, Intel accounted for
78.7 percent of global microprocessor revenue, up 0.3 of a percentage point from 78.4 percent in the second quarter. AMD fared even
better, with its share rising by more than twice that of Intel to reach 13.9 percent, up 0.6 of a percentage point from 13.3 percent in
the second quarter. The two microprocessor suppliers gained at the expense of their smaller rivals, whose collective share of global
revenue declined to 7.4 percent in the third quarter, down from 8.2 percent in the second quarter. iSuppli's final revenue ranking of
global general-purpose microprocessor suppliers in the third quarter accounts for sales of all types of general-purpose
microprocessors, including RISC chips as well as the PC-oriented x86 devices sold by Intel and AMD. Yet again in the third quarter,
the two microprocessor giants accounted for an increasing share of total market revenues. Combined, Intel and AMD claimed
almost 93 percent of global microprocessor revenue in the third quarter of 2007--an increase of 2 percentage points
compared to the third quarter of 2006. In fact, Intel and AMD benefited from strong sales of computers in the quarter.
Global PC shipments, including desktops, notebooks, and entry-level servers, amounted to 68.1 million units, up 13.8 percent from
59.9 million during the same period in 2006, and up 11.1 percent from 61.3 million in the second quarter of 2007. The companies in
their third-quarter financial calls stated they had seen a reduction in the aggressive pricing that has ruled throughout most of
2007. This signifies the beginning of the end for the x86 microprocessor price war, iSuppli believes. "The combination
of strong PC and server demand, combined with stable microprocessor prices, led to a prosperous quarter for both
Intel and AMD," says Matthew Wilkins, principal analyst at iSuppli. Several factors contributed to a reduction in microprocessor
market share in the third quarter. "Pricing trends were influenced by many variables, including the consistent strength in computing
markets, Intel's rapid migration to its new Core 2 architecture microprocessors, and the increasing penetration of multicore products
in the market," Wilkins says. While the pricing battle may be coming to an end, Wilkins believes that the competition will continue to
be extremely fierce. "AMD's launch of Barcelona and Barcelona-derived products gives the company a stronger portfolio with which
to compete, and with Intel shipping its products based on its new 45nm manufacturing process, neither company is resting on its
laurels," Wilkins notes.
CHIP COMPANIES SHOWING INCREASE IN REVENUE NOW

ExtremeTech.com "Intel To Increase Chip Market Share." (Dec 14, 2007): NA. Business and Company ASAP. Gale.
<http://find.galegroup.com/ips/start.do?prodId=IPS>. A172467012
HELSINKI (Reuters) - Intel Corp., the world's top chipmaker, is set to increase its share of a growing global semiconductor
chip market this year to 12.2 percent, research firm Gartner said on Friday. The market is expected to grow 2.9 percent
from last year to $270.3 billion (133.22 billion pounds), Gartner said. Intel's revenue grew more than twice as fast as the
market average, boosted by strong gains in laptop chip sales. Last year Intel's global market share was 11.6 percent.
Among top vendors, Toshiba's revenue was expected to surge 28 percent in U.S. dollar terms, surpassing Texas Instruments,
STMicroelectronics and Infineon. Of those three, only STM was able to slightly raise its revenue, Gartner said. "Semiconductor
vendors need to watch the performance of their end customers even closer as a major part of the industry becomes
increasingly tied to consumer spending patterns," Andrew Norwood, research vice president at Gartner, said in statement.
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SEMICONDUCTORS MARKET WEAK

SEMICONDUCTORS ON A DOWNWARD SPIRAL THANKS TO MEMORY CHIPS
Hoovers (Hoover's, Inc. is a business research company that has provided information on U.S. and foreign companies and
industries) “Mid-year check on the semiconductor industry” 6/3/2008 http://www.bizmology.com/2008/07/03/mid-year-check-on-the-
semiconductor-industry-2/
The semiconductor industry — how’s it doing this year? Not bad, actually, if you’re not in the DRAM or flash memory device business.
In the Semiconductor Industry Association’s mid-year update, there was good news and bad news. You want the bad news
first? OK, the bad news is the US-based trade group lowered its growth forecast for 2008, from 7.7% to 4.3%. The good
news? Take out the memory products market, and the industry will grow 7.4% this year, according to the SIA. IC Insights, a market
research firm, also downgraded its forecast for 2008. It sees sales volume increasing by 7%, instead of an earlier estimate of 9%, and
unit volume growing by 8%, rather than 11%. It’s been a bummer of a year for chip makers that are heavily dependent on
the DRAM or flash memory business. There still is tremendous oversupply in those markets, depressing memory prices.
Qimonda (the memory products spinoff of Infineon Technologies) is suffering and cutting headcount, as is Spansion. Micron
Technology is seeing tough times, too. Samsung Electronics, the world’s biggest supplier of memory devices, is a more diversified
chip maker and not hurting as much. Most companies in the business are scrapping over market share. What’s selling?
Microprocessors, analog semiconductors, and logic devices, the SIA reported. Analog chips and MPUs each make up about 14% of the
worldwide semiconductor market, and the SIA forecasts healthy growth for both segments in the next couple of years. SIA president
George Scalise said in a statement, “Sales of personal computers, the largest single market for semiconductors, continue to be
strong, especially in emerging markets. Total unit sales of PCs are on pace to grow by 10% this year to around 300 million units. Cell
phone unit shipments are expected to grow by about 12% to more than 1.3 billion units, with the largest growth coming from China,
India, and other emerging markets.” The SIA’s rosy take on the PC market is echoed by two market research firms, Gartner and IDC
Research. Gartner recently bumped up its 2008 forecast for worldwide PC shipments, to 15.2% from an earlier forecast of 12.8%
growth over 2007. IDC Research was a little less optimistic but nonetheless similarly inclined to see the glass filling with more water;
it now calls for 12.5% growth in the PC market for 2008, up from a prior estimate of 10.9%. And the trend is toward smaller, more
portable computers. Laptop, notebook, and smaller portables will increase sales by about 34% this year, according to IDC, while sales
of desktop computers will grow only around 5%.The functionality of Smart phones, principally the BlackBerry and the
iPhone, will continue to increase to the point that there will be little difference in applications, price, and size between
them and the smallest computers.
THE MARKET HURT NOW. HAS BEEN DROPPING FOR YEARS

Test & Measurement World "Trying times in semiconductor ATE market." 28.5 (June 1, 2008): 19. Business and
Company ASAP. Gale. <http://find.galegroup.com/ips/start.do?prodId=IPS>. # A179774420
The semiconductor industry is subject to cyclical fluctuations that are driven by factors such as technical innovations,
consumer trends, and economic conditions. There is speculation in the $5 billion semiconductor automatic test equipment
(ATE) industry that the market is headed for a down cycle and poised for a slowdown. Yet, there are signs of optimism.
Admittedly, 2007 was not a great year for the semiconductor ATE market, as reflected in the annual earnings of some of the big
names in the industry. Teradyne's Semiconductor Test Division's revenues decreased nearly 20% over 2006 revenues, while
Advantest's overall revenues slipped by almost 7%, and Verigy's revenues declined by 2.2%. Research indicates that the low demand
for system-on-chip (SOC) test systems and severe pricing pressure in the flash memory market are the two major factors that led to
the market slowdown during 2007. Overall, the market is expected to continue to witness a slowdown with diminishing
demand for SOC testers. The memory ATE segment, however, is expected to witness growth, as the growing use of flash memory
in consumer-electronic products is expected to continue to drive the need for flash memory test systems. In fact, Verigy saw a jump in
demand for its memory testers in 2007, with revenues reaching $282 million, an increase of nearly 38.2% over 2006. While the
growth of flash memory remains almost certain, the severe pricing pressure in the flash memory market cannot be ignored. Prices
have historically declined approximately 40% per year, putting pressure on ATE vendors to lower prices in turn. This will lead to
increased ATE system shipments at the cost of profitability. A few participants believe that the declining flash prices will lead to
increased consumption of flash memory, thereby expanding the market revenues. One way some companies seem to be dealing with
the downward trend is through the acquisition of other test companies. Verigy recently acquired Inovys, a maker of design debug,
failure-analysis, and yield-acceleration equipment for semiconductor devices, and Teradyne has acquired Nextest Systems, a
manufacturer of flash memory and SOC testers. At Frost & Sullivan, we anticipate additional consolidation in the market, especially
during this downward cycle, which is forecast to continue until 2011. Yet, consolidation is not the only solution for dealing with the
difficult times ahead. Semiconductor manufacturing continues to concentrate in Asia, and many companies could keep an eye there
during the down cycle. Asia Pacific is calling.
SEMICONDUCTOR MARKET ON A PATH OF DECLINE NOW

Electronics News (Mutschler, Ann Steffora). "Semi equipment set for sales drop.(Industry overview)." 00.00 (May 1,
2008): 3. Business and Company ASAP. Gale. <http://find.galegroup.com/ips/start.do?prodId=IPS>. A179213780
All sectors of the semiconductor equipment market are expected to decline. Due to a weakening US economy and
collapsing DRAM market, market researchers at Gartner now expect spending for worldwide semiconductor capital
equipment to fall 19.8% from last year to US $47.5 billion. Gartner previously forecast a 10% drop for semiconductor
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manufacturing equipment spending this year. Klaus Rinnen, managing VP for Gartner's semiconductor manufacturing group
explained that the expected bursting of the DRAM capital spending bubble has finally happened, as rampant
overcapacity in that sector drove unit prices well below cash costs for most manufacturers. 'Since our last update in late
December, reported DRAM spending plans have declined to the point where we are now projecting a drop of almost 47% in DRAM
spending and 29% in total memory in 2008,' he said in a statement. 'The memory market peaked last year by spending over 57% of
total revenue for capital expansion, a level which cannot be supported by the anticipated lacklustre revenue growth. We expect this
to drop significantly to the low 40% range for this year and 2009,' Rinnen said. In the equipment market, all segments are
expected to decline in 2008 with selected technology buys to occur as logic manufacturers begin to install 45nm process
capability and foundries continue to ramp 65nm production, but these investments will occur at a measured rate. 'We do not expect
many integrated device manufacturers (IDMs) to increase investments, and in most cases their spending will actually decline. Overall
capital spending on logic will decline by 7.6%," he continued. In the wafer fab equipment segment, Gartner expects worldwide
spending to decline 17.4% this year despite a small increase in NAND flash, as the sharp decline in DRAM-related spending will hit
companies with high exposure to the memory market. Recovery should begin in the second half of the year as DRAM supply and
demand comes into balance. Worldwide spending on packaging and assembly equipment is expected to fall 18.1% in 2008, after
declining 3.7% in 2007. Recent data suggests the industry may have hit the bottom in Q1. Gartner said it is still unknown as to
whether the market will begin a recovery in Q2. The market for automated test equipment, which declined 14% in 2007, is expected
to experience a similar decline of approximately 13% this year, as test providers remain cautious with capital budgets, although
Gartner expects improved market conditions in Q2 and Q3, with increased orders for memory testers occurring by late Q2 or early
Q3, as test capacity requirements increase for newer DDR memory generations.
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THE SEMICONDUCTOR MARKET HAS FINALLY PEAKED. FROM NOW ON IT WILL BE DOWNHILL
Computer Reseller News "Chip makers face difficult year." (March 10, 2008): 33. Business and Company
ASAP. Gale. http://find.galegroup.com/ips/start.do?prodId=IPS A176428267
Growth in the semiconductor market could be slowing, tax and advisory firm KPMG warned last week. Moderate revenue
growth will slow in 2008, with volatile profitability likely to create casualties. KPMG expects competition in emerging
markets, manufacturing and product innovation to lead to increased merger and acquisition activity. Meanwhile, the suffocating
atmosphere of fear will cause capital expenditure and investment in research and development to be muted this year,
at a time when it is needed most. KPMG's views followed a survey conducted with the Semiconductor Industry Association of 94
C-level executives at the top 100 global semiconductor companies.
GLOBAL REBALENCING OF THE SEMICONDUCTOR MARKET. TIME IS CRITICAL FOR THE US TO

GET ON THE NEXT TECH ADVANCMENT
Miller, George. (Congressman George Miller is chairman of the House Education and Labor Committee) "Global
semiconductor market drives European fab upgrades: construction spending and cleanroom space growth are in line with
past several years, driven by migration to 300-mm technology.(semiconductor technology)(Industry overview)(Company
overview)." CleanRooms 22.3 (March 2008): S2(6). Business and Company ASAP. Gale. Gale # A178797264
Boasting 12 percent of the world's integrated-circuit fabrication capacity, and nearly one-third of the world production
of power devices, Europe accounted for some $6.6 billion in semiconductor equipment and materials spending in
2007, according to the trade group SEMI. For the traditional semiconductor IC fabs, construction spending in Europe was
expected to exceed $700 million last year, rising from $450 million in 2006. In terms of fabs purchasing equipment, companies are
expected to spend about $2.5 billion, a decline from the more than $3 billion of 2006. SEMI expects spending to increase by
about 9 percent in 2008. General trends in the semiconductor industry are mirrored in the contamination control market,
according to Risto Puhakka, president at market research company VLSI Research in Santa Clara, CA. "The number one [European
semiconductor equipment] supplier is ASML Holding NV (Veldhoven, Netherlands), and its outlook is very optimistic for 2008, based
on a strong backlog," says Puhakka. "The rest of European semiconductor makers will follow industry expectations more closely. We
expect them to be slightly down." Positive effect With ASML comprising such a large part of the European equipment market, "it may
pull all of Europe onto the positive side," Puhakka says. The state of the economy is the biggest concern. "So far we haven't seen
electronics demand slowing in a considerable way," he says. Yet, "[the economy is] the overarching problem." Market intelligence
concern iSuppli Corp. (El Segundo, CA) agrees, and in late December cut its 2008 revenue growth forecast for the global
semiconductor industry to 7.5 percent from 9.3 percent, based on rising energy costs and expectations of a U.S. economic slowdown.
Market and fab diversity Europe is home to more than 278 production and R&D fabs that manufacture various integrated circuits,
microelectromechanical systems (MEMS), power devices, compound semiconductors, and innovative packages, according to SEMI.
Included in this population are several 300-mm wafer fabs, and several fabs boasting sub-90-nm technology. Figure 1: Field of activity
- all European fabs Integrated circuits 104 MEMS 67 Packaging 50 Power devices 38 R&D 26
Compound 24 Note: Table made from bar graph. Europe is also home to three world-class semiconductor R&D centers of
excellence: Inter-university Micro Electronics Center (IMEC) in Belgium, Laboratory of Electronics and Information Technology (LETI) in
France, and Fraunhofer Institute in Germany. In light of changing markets and emerging opportunities, several European device
companies and equipment companies have increased their involvement in the area of MEMS and photovoltaics (PV) manufacturing.
Regarding cleanrooms in Europe, the outlook is for growth that is in line with that of the last few years. A major driver is the migration
to 300-mm processing technology. Recent migration Among the more recent of these migrations is dynamic RAM supplier Qimonda
AG, which announced in late December that it would increase to approximately 90 percent its share of 300-mm capacity and reduce
capacities at its 200-mm manufacturing facilities worldwide. JPEGF The company is discontinuing its contract manufacturing of 200-
mm Qimonda products by Infineon Dresden. The last wafers for Qimonda were expected to enter production in February 2008, the
company says. Qimonda's cornerstone activities in Dresden moving forward will be its 300-mm manufacturing and research and
development activities. 200-mm wind-down Similarly, at its Richmond, VA site in the U.S., the number of 200-mm wafer starts will be
reduced by about 15 percent, in the context of switching capacities from 110-nm to 80-nm technology. The remaining 200-mm
capacity will continue to be used for manufacturing legacy products. In Asia, contract manufacturing of 200-mm capacity by
Qimonda partners Winbond and SMIC were discontinued by the end of 2007. Space additions Market researcher McIlvaine Co.
expects Europe to see the addition of more than 3 million square feet of cleanroom space in 2008, bringing the total cleanroom space
in use to nearly 24 million square feet (see Table 1). Table 1: Cleanroom world markets--European forecast Subject 2003
2004 2005 2006 2007 2008 Employees 238.20 237.68 252.77 269.96 285.35 304.74 (thousands) Room revenues
516.73 506.41 542.31 584.92 620.98 669.44 (US$M) Space additions 2.43 2.42 2.58 2.82 2.98 3.17 (mil. sq. ft.)
Space in use 18.12 18.81 19.87 21.18 22.40 23.94 (mil. sq. ft.) Subject 2009 2010 Employees 321.02
342.25 (thousands) Room revenues 708.44 762.12 ($M) Space additions 3.38 3.56 (mil. sq. ft.) Space in use 25.31
26.93 (mil. sq. ft.) Source: McIlvaine Co. Figures account for both semiconductor/electronics and life sciences cleanrooms. Memory
glut From a global perspective, memory--especially dynamic RAM--is in a state of oversupply. According to Puhakka of VLSI Research,
"There's no profitability. Suppliers can't invest in more manufacturing capacity." "Most predictions say that in the second half of this
year, [the memory oversupply situation] should start to improve," he added. "We're more pessimistic. There needs to be [industry]
restructuring to limit supply more. It will probably take a full year to work its way through." As if on cue, Japanese chip maker Fujitsu
announced in late January that it too would join in the restructuring, though it had thus far avoided a recent flurry of process
development alliances reshaping the semiconductor industry. The company announced that it would put its LSI business divisions into
a new subsidiary and devote its semiconductor technology development center to other purposes. The company will move process
development and prototyping equipment from a 200-mm facility in Tokyo, some 300 km south, to a 300-mm production fab in Mie
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prefecture. It will continue 45-nm logic process development at the Mie fab, where application-specific ICs and other logic products
are made. Global rebalancing Beyond the semiconductor industry restructuring that's underway, a broader electronics
manufacturing global rebalancing is taking place as well, according to iSuppli. The rebalancing is the result of a shift in
executive thinking to total cost of fab ownership, rather than just the cost of labor. In the early 2000s, manufacturing
capacity abruptly shifted from the high-cost regions of North America and Western Europe, to the low-cost nation of
mainland China, according to Adam Pick, a principal analyst at iSuppli. However, the second half of this decade is revealing
the change in thinking. Total cost of ownership The regional diversification by electronics manufacturers can be attributed to
other China-centric factors, including a mobile workforce, inflation, taxes, and the rising costs of transportation due to soaring oil
prices. According to Pick, in an iSuppli announcement, "The emphasis has greatly shifted to total cost of ownership, which
considers managerial resources, organizational structuring, manufacturing competencies, intellectual property, and, of
course, logistics." He added that recent capacity expansions of electronic manufacturing service providers, original design
manufacturers, and OEMs reveal several trends impacting the global electronics manufacturing business.
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SEMICONDUCTOR MARKET IS WEAK NOW
Business Week Online Ihlwan, Moon. "What Chip Slump? Korea's Hynix is Soaring; The memory chipmaker came back from
near death by boosting output with minimal investment. Challenging Samsung may require a different strategy.(GLOBAL)(Hynix
Semiconductor Inc.)(Financial report (Nov 29, 2007): NA. Business and Company ASAP. Gale
This year has been brutal on memory-chip companies. The notoriously cyclical industry is plagued with a supply glut
and plunging prices for chips storing data, images, and videos on PCs and electronic devices. Taipei-based
DRAMeXchange, which tracks semiconductor trends, reckons spot market prices for chips largely used for computer memory have
dropped 84% so far this year. Yet visit the offices and factories at South Korea's Hynix Semiconductor (HXSCF), the world's second-
largest memory chipmaker, and there's a conspicuous lack of gloom. "I'm most proud of the upbeat morale and can-do spirit shared
by all the employees," says Hynix Chief Executive Kim Jong Kap. Hynix has not bucked the market trend. In the July-September
quarter the company posted a 44% year-over-year decline in operating profit, to $273 million, even as sales rose 24%, to $2.62
billion. The share price has dropped 37% so far this year, against a 28% gain by the benchmark Kospi index. So why the optimism?
From its near-death five years ago, Hynix has staged one of the most dramatic corporate turnarounds in recent high-tech history,
increasing output while minimizing investment in new facilities. "I'm going to visit Toyota (TM) soon to see if there's anything we could
learn from them but I'm not sure there will be, given our vastly improved efficiency," crows Kim. Only Major Supplier to Increase
Average Selling Price Hynix's achievements aren't small. In a weak DRAM market, Hynix has been "the star performer," beating
competitors and closing its market-share gap [BusinessWeek, 6/15/07] with market leader Samsung Electronics (SSNGY), according to
market research firm iSuppli. In the third quarter, Samsung led with 27.7% of the market, followed by Hynix with 22.8% and Qimonda
(QI) of Germany with 12.8%. By increasing shipments of more profitable graphic chips and non-PC DRAM [dynamic random access
memory] for consumer products, Hynix emerged as the only supplier that increased average selling price among major players. And
despite the fall in earnings, Hynix reported a respectable profit margin of 10% in the third quarter. Apart from cash-rich Samsung, no
other memory-chipmaker reported better results. Qimonda, Micron Technology (MU) of the U.S., Taiwan's Nanya Technology (NNYAY)
and Powerchip Semiconductor (PWSMY) all reported quarterly losses. "Hynix has emerged as a serious threat to Samsung," says Song
Myung Sup, semiconductor analyst at Seoul brokerage CJ Investment & Securities. Shifting from Survival into Growth Mode The
contrast is remarkable given the dire straits Hynix faced early this decade. It lost a combined $7.2 billion in 2001 and 2002 alone, and
its debt load of more than $16 billion almost sank the company. Hynix only survived after its creditors swapped $5 billion in debt for
an 81% stake in the company in a debt workout program in 2001 and 2002. Now, as weaker memory chip makers try to stay afloat,
Hynix is bracing for greater challenges. "Our mantra so far has been survival but we are shifting into the growth mode," declares CEO
Kim. He plans to add in the next three years three more production lines processing king-size wafers measuring 12 inches in
diameter. Hynix now has two such plants, one each in Korea and China, in addition to five handling 8-inch wafers. Kim wants these
new factories to boost sales to $18 billion in 2010, from $8.3 billion last year. The migration to the king-size wafer is essential to cut
production costs at a time when prices are plummeting, since the 12-inch wafer yields 2.25 times as much surface area as the 8-inch
disk, while costing only about 20% more to process. The rapid price fall, in turn, will help fuel growing consumer demand for
faster and more powerful memory chips at a time when a variety of handheld devices require large amounts of data to
deliver music, video, games, and other multimedia applications. Wants to Double Its Share in NAND Drives Hynix's goal is to
boost its market share, particularly in NAND flash chips, which store data even when power is switched off. NAND is the fastest-
growing chip segment and iSuppli figures the market will grow to some $20 billion in 2010 from $12 billion last year -- despite the fact
that prices halve every year. Hynix now accounts for just below 15% of the NAND market and wants to double its share in five years.
J.G. Nam, marketing vice-president at Hynix, says another big driver will be notebook PCs, which will be equipped with NAND-based
drives [BusinessWeek, 5/31/07], called solid-state drives. "I expect corporate executives will begin using SSD-equipped notebook PCs
next year," Nam says. The problem is the high investment cost. The price of each 12-inch wafer factory tops $4 billion.
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SEMICONDUCTOR MARKET IS GREEN

SEMICONDUCTOR MANUFACTURE IS POWERED BY RENEWABLES . INTEL PROVES
ExtremeTech.com "Intel Uses Most Green Power in U.S." (Jan 30, 2008): NA. Business and Company ASAP. Gale.
Monday marked Intel's comprehensive investment in 1.3 billion kilowatt hours a year of renewable energy certificates,
making the silicon giant the single largest corporate acquirer of green power in the U.S. The news came by way of the
Environmental Protection Agency (EPA), which credited Intel's voluntary measure by ranking the company number one
in both its Green Power Partners Top 25 list and the Fortune 500 Green Power Partners list. Aimed at reducing the
environmental impact of conventional electricity, renewable energy certificates (RECs) represent the "currency" of the clean energy
marketplace with a proven track record of measurable results. Intel's REC portfolio encompasses wind, solar, small hydro-electric and
biomass energy procurement. The transaction will be handled by Sterling Planet, a leading national supplier of renewable energy
solutions, and verified by the non-profit Center for Resource Solutions' Green-e program. "EPA applauds our Fortune 500 partners for
protecting our environment by purchasing green power," said EPA Administrator Stephen L. Johnson. "By voluntarily shifting to
renewable energy, Intel is proving you don't need to wait for a signal in order to go green."
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RENEWABLES KILL SEMICONDUCTOR

MARKET
A SHIFT TO SOLAR POWER WILL DESTROY THE SEMICONDUCTOR MARKET
Business Week; 2/6/2006 Issue 3970, p78-78, 1p, 1 graph, 1c “What's Raining On Solar's Parade.”
http://web.ebscohost.com/src/detail?vid=1&hid=101&sid=4e450d7b-002b-4658-b941-51f8e751ebf8%40sessionmgr104
Sometimes it's possible to be a little too successful. The solar power industry has been on a tear, growing at more than
30% per year for the last six years. It's poised to reach a surprising milestone within two years, when it will gobble up
more silicon for its electricity-generating panels than semiconductor makers use in all their chips and devices. The
onetime "'tree-hugger' industry is not a niche business anymore," says Lisa Frantzis, director of renewable energy at Navigant
Consulting Inc. So what's the problem? "Global demand is stronger than the existing supply," says Lee Edwards, president and
CEO of BP Solar. His company and others can't buy enough of the ultrapure polysilicon now used in 91% of solar panels. The raw
material shortage has slashed growth for the industry from more than 50% in 2004 to a projected 5% in 2006. The shortage has
caused prices for polysilicon to more than double over the last two years. As Economics 101 teaches, that should prompt
producers to expand capacity. But for suppliers such as Michigan-based Hemlock Semiconductor Corp., the world's largest
producer, the decision hasn't been easy. For one thing, the company was badly burned in 1998. It had just built a new facility in
response to pleas from semiconductor makers when Asia went into a slowdown. Demand for silicon plunged, and the factory had
to be shuttered
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SEMICONDUCTORS KEY TO ALL

RENEWABLES
SEMICONDUCTORS KEY TO ALL RENEWABLES
Clean TX (The CleanTX Forum provides the networking and educational environment for professionals interested in building the
Texas clean technology community) 7/8/2008 “The Role of Semiconductors in Clean Technologies” http://cleantx.org/?page_id=58
Semiconductors play a key role in our daily lives. They are used in everything from greeting cards to satellites, and
form the basis of all modern electronics. There are over 500 billion semiconductor devices sold each year. In much the same
way as energy enabled the industrial revolution, semiconductors enabled the technology revolution. In order to sustain
these advancements, however, we need to develop sources of clean renewable energy and learn how to use that
energy more efficiently. Semiconductors can and do play in important role in both of these areas. Semiconductors are
the basic material from which photovoltaic cells are made, and they are used to control PV systems and wind turbines
(as well as all conventional power plants). Integrated circuits are also used improve the efficiency of nearly all energy consuming
products, including automobiles, appliances, lights, and consumer electronics. Beyond enabling clean energy sources and
improving energy efficiency, semiconductors can help promote a sustainable future by enabling new more energy
efficient lifestyles such as telecommuting and on line commerce. While semiconductors play a key role in clean
energy, these devices are also becoming significant consumers of energy themselves. Data centers consume over 1% of all
electricity used in the US, and that amount is on the rise. Add to that the energy consumed by semiconductors in PCs,
telecommunications systems, and consumer electronics, and it becomes clear that energy efficiency within semiconductors
themselves is an important issue. This panel session will address the roll of semiconductors in enabling clean technologies.
Panelists will address questions on applications of semiconductors in clean technologies as well as the development of more energy
efficient semiconductor devices.
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SOLAR GOOD FOR SEMICONDUCTORS

AN EXPANDING SOLAR MARKET WILL BOOST SEMICONDUCTOR SALES
Sacramento Business Journal DINWOODIE, TOM. "Lend us your roofs and we'll power the state." 17.51 (March 2,
2001): 43. Business and Company ASAP. Gale <http://find.galegroup.com/ips/start.do?prodId=IPS A71836956
As California struggles to match supply with demand, skyrocketing prices for electricity from traditional fossil fuel power
plants are opening the door to solar power. Long considered a technology for the developing world and people living off the grid
in Mendocino County, solar is now an affordable energy choice for businesses. Solar photovoltaics (PV), which rely upon silicon
semiconductors to convert sunlight directly into electricity, are converting commercial rooftops into micropower
systems that offer California businesses one of the best solutions to today's crisis in electricity supply. Conventional
wisdom has said that power plants that burned natural gas would be the cheapest source of electricity. However, recent record
prices for natural gas, which is also the nation's primary heating fuel, have spurred wholesale prices for electricity that
average in the range of 30 cents per kilowatt-hour, and have spiked as high as $1.50 per kilowatt-hour. This represents a tenfold
increase in the cost of electricity on average, and even greater at peak. Approximately 90 percent of the nation's new power plants
are expected to burn natural gas, says the U.S. Department of Energy. Rising wholesale costs for electricity generated from a huge
fleet of natural-gas power plants have convinced a growing number of savvy investors that solar PV, which generates electricity
during peak periods at 15 to 30 cents per kilowatt-hour, is an affordable investment, given the nation's over-reliance upon natural
gas. Why solar works: Solar PV is an important, vital piece of the resolution to the California energy crisis. Here's why: * Solar PV
panels generate electricity when we most need it, during peaks in demand on late summer afternoons. * Solar PV insulates
customers from today's price volatility, providing a great hedge against the uncertainty of future natural gas prices. *
The benefits of solar PV go beyond the customer consuming the electricity. The panels also reduce demands upon the
entire grid, freeing power for other users during times when the state and regional system is most stressed. * Solar
panels provide power without air emissions, a growing concern as power shortages have prompted the dirtiest sources
on the system -- diesel generators -- to run more often
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THE MOVE TO SOLAR POWER BOOSTS THE SEMICONDUCTOR MARKET AND HELPS THE
AMERICAN ECONOMY
Detroit News Eric Morath (2007, May 2). Hemlock Semiconductor plans $1 billion growth in Michigan :Company will add 270
high-tech jobs in Saginaw Co. to help boost state's solar power industry.. ,p. C.2. Retrieved July 8, 2008, from US National
Newspapers database. (Document ID: 1264210691).
Hemlock Semiconductor is expected to announce today a $1 billion expansion that will bring 270 high-tech jobs to Saginaw
County. Company officials and Gov. Jennifer Granholm are to lay out plans this morning in Midland. The expansion means an
infusion of needed high-tech jobs to the state and is a boon to Michigan's growing solar power industry. Hemlock,
majority owned by Dow Corning Corp., is the world's largest producer of polycrystalline silicon, a component of
photovoltaic cells, which are used to produce solar power. They join Auburn Hills-based United Solar Ovonic as a leading world
supplier of solar-related materials. In late March, state officials approved a tax credit valued at $8.1 million over 15 years to
encourage Hemlock to expand in Michigan, over several competing sites. The company is based in Hemlock, just west of Saginaw.
"Hemlock Semiconductor is a great example of the types of high-tech, high-growth companies we are working to bring to Michigan to
invest and grow," Granholm said in a March release. "This company chose to expand in Michigan twice already, and we look forward
to continuing to work with them to transform our economy and create good-paying jobs for workers in Saginaw County." Tuesday,
state and company officials said that an announcement concerning future Hemlock operations would be made today. Sources close to
the deal say the expansion in Thomas Township is eminent. The company employs about 440. The investment comes just weeks after
speculation swirled that Dow Chemical, Michigan's third-largest company in terms of revenue, was for sale. Dow Chemical leaders
vehemently denied any sale talks, and soon after fired two executives for allegedly negotiating a buyout on their own. Dow Corning is
a more than 60-year-old joint venture between Dow Chemical and Corning Inc. They primarily focus on silicone applications. The
growth of a Dow-related business is a positive sign for Michigan and the Saginaw-Midland area, said Central Michigan University
economics professor Mike Shields. "It's natural for company that relates to chemical industry to expand in this area," he said, "as long
as Dow remains part of the area." In addition to state incentives, Consumers Energy agreed to extend discounts of Hemlock's power
bill to facilitate their expansion. Production of silicon takes a tremendous amount of energy. "Alternative energy is an
expanding field, and we certainly in this region have the business infrastructure in place with our chemical and
technical research base to launch into that," said Ryan Richards, marketing manager for Midland Tomorrow, an economic
development organization. "Hemlock Semiconductors' growth shows Michigan's ability to diversify."
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THE MOVE TO MASS PRODUCED SOLAR PANALS WILL DESTORY THE SEMI CONDUCTOR MARKET
AS THEY SHIFT TO CHEAP PLASTICS
Financial Times CLIVE COOKSON "Following the sun to a new world of energy For the first time since the energy crisis of the
1970s, solar power is back on the agenda. Improvements to technology mean it is becoming reliable, convenient and cheap enough
to make it a practicable option :[SURVEYS EDITION]." , October 28, 2005, http://www.proquest.com/ (accessed July 8, 2008).
Thirty years after the first burst of political enthusiasm for solar energy, the technology for deriving power directly
from sunshine seems to have reached the threshold for enabling large- scale adoption. Several factors have come together
to suggest that this amounts to more than the false dawns seen by advocates of solar power in the past. As concern about global
warming grows worldwide - and even the Bush administration worries about energy security and the cost of oil - governments are
committing unprecedented sums to supporting research, development and installation of renewable energy systems. But the most
important factor is that three decades of R&D are paying off by producing solar systems that are reliable, convenient and cheap
enough to challenge conventional power plants. Moreover, because costs have fallen by about 90 per cent since the 1970s, there is
less need for high public subsidies. Solar energy can be exploited in two main ways: using its heat directly; or converting its light to
electricity. The thermal approach can be as simple as designing buildings to collect and retain as much heat as possible or pumping
water through an array of thin pipes (painted black to absorb as much solar radiation as possible); or it may involve a sophisticated
thermal power station in which mirrors concentrate solar energy from a wide area on to a small space, where the intense heat
produces electricity in a steam generator. Although solar thermal plants may be the most efficient way of generating electricity in
places like the California desert where the sun shines (almost) every day, the second approach - converting sunlight directly into
electricity via a photovoltaic cell - is the main focus of solar development because it is more versatile and convenient. Indeed,
versatility and convenience give solar power an edge over other renewable energy sources. In many parts of the world, wind turbines
generate electricity more cheaply than solar panels but they are more obtrusive and, with their rapidly rotating blades, they require
more engineering expertise than static solar cells. Photovoltaic cells can power something as tiny as an electronic calculator or they
can cover the roof of a building. They can also be combined to produce power plants such as the 6.3 megawatt unit at Muehlhausen
in Germany, inaugurated this year as part of Bavaria Solarpark, the world's largest solar electric system, which has an innovative
tracking system that follows the sun across the sky. A typical medium-sized project is the 7.9m plan by Transport for London (TfL),
the body charged with managing and co-ordinating the city's transport system, to install 7,000 "solar bus stops" throughout London
over the next five years. Each will have a canopy with solar cells that charge a battery during the day; at night this will power an
array of light-emitting diodes (LED). TfL says the LEDs give a distinctive white light making it easier for bus drivers to see people
waiting at stops (which, at present, are not normally lit) and enabling passengers to read route numbers, timetables or maps. The
solar power business is growing worldwide by 30-40 per cent a year and installations in 2005 are likely to cost about Dollars 8bn. The
largest market is Japan, followed by Germany. The US, where conventional fuel prices are lower, lags well behind in third place,
although some analysts expect new tax incentives for homeowners to install solar energy to boost the American market from 2006.
The world's leading producer of photovoltaic cells and modules is Sharp of Japan. According to PV News, the industry newsletter, in
2004, Sharp produced 27 per cent of the global photovoltaic output of 1,200MW. Other leading manufacturers include the solar units
of oil giants Shell and BP. However, obstacles remain. Today's commercial photovoltaic cells are based on expensive silicon
semiconductors and, although prices are falling, experts say they need to become cheaper by at least a factor of 10 if
solar installations are to compete in the mainstream generating market without subsidy. Around the world, government-
supported research programmes are working to achieve the radical breakthroughs required. One promising approach is to
replace silicon with cheap polymers - ideally mass- produced plastics. The problem is that these types of semiconductors are
inefficient at converting solar energy to electricity, typically achieving 2 per cent while commercial silicon manages 16 per cent.
Another idea is to harness nanotechnology, whereby matter is manipulated at a molecular level to determine how it can be used, to
reduce the cost and/or improve the performance of inorganic semiconductors. Cells based on nanoparticles are potentially
cheaper to manufacture than the silicon crystals used today but, as with organic semiconductors, they are less efficient
converters of solar energy to electricity.
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SEMICONDUCTORS KEY FOR NUKE

POWER
SEMICONDUCTORS ARE KEY FOR NUCLEAR POWER
Voice of America News "Scientists Look Deep Underground for High-Tech Lab." / FIND January 31, 2007,
http://www.proquest.com/ (accessed July 8, 2008).
Nobel Prizes have been awarded for neutrino research, with more likely to follow. But as for practical applications, those are still in the
distant future. Bob Wilson counsels patience. He points out that when the electron was discovered a century ago, scientists had no
idea what they could do with it. Now, he notes, "The electron is the basis of all technology. The electrical current is just
electrons moving around. Semiconductors are essentially manipulating the electron and understanding atomic
properties." He says that understanding neutrinos may give us a better understanding of fundamental forces that
govern nuclear power operations and cause the sun to burn and stars to explode. Being deep underground makes neutrino
research easier, because all those meters of granite screen out cosmic rays. It's also easier to spot neutrino interactions when zillions
of particles can be monitored at once. Eric Zimmerman says one of the best ways to watch them is in a sort of water bucket; a very
large bucket, like an underground cavern filled with water. "It's one of the ironies in science," he says with a shrug. "The smaller the
object you want to look at, the bigger the equipment you need to look at it. So we're talking about a cavity that's over a mile under
the surface of a mountain that's the size of a modern basketball arena."
SEMICONDUCTORS KEY TO NUCLEAR POWER

eWeek Mayumi Negishi "Toshiba Revenue Up on Chips, Power Systems; Solid flash memory chip prices and power plant sales
boost revenue." , October 29, 2007 http://www.proquest.com/ (accessed July 8, 2008).
Toshiba has been trimming its operations to focus on semiconductors and also on its nuclear power business, where it
competes with General Electric. Toshiba expects prices in its bread-and-butter NAND chips, used for data storage in portable
gadgets, to fall 20 percent in October-March. The resulting 40 percent price decline for the year to end-March compares favourably
with the firm's previous estimate for a 50 percent decline, Muraoka said. Semiconductors earn half of Toshiba's operating profit.
Toshiba, which plans to build a new NAND plant by 2009 and also plans to buy microchip production lines from Sony Corp, is likely to
have its lines running at full capacity in January-March, up from 90 percent in the current quarter and 75 percent in July-September as
supply tightens, Muraoka said. Prior to the results announcement, Toshiba shares closed up 3.4 percent, while the benchmark Nikkei
average rose 1.2 percent. Shares of Toshiba have gained 29 percent since the start of the year, as NAND chip price falls eased and
unit Westinghouse won orders to build nuclear plants in China and the United States. The Nikkei shed 3 percent in the same period.
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SEMICONDUCTOR KEY TO WIND POWER

SEMICONDUCTORS ARE KEY IN THE PRODUCTION OF WIND TURBINES
Energy Resource “American Semiconductor Providing System for One of Australia's Largest Wind Farms” 2/ 6 / 2007
http://findarticles.com/p/articles/mi_m5CNK/is_2007_Feb_6/ai_n25000271
American Superconductor Corp. has received an order from Suzlon Energy Australia (SEA) for a Dynamic VAR system for
Australia's Hallett Wind Farm. When completed, Hallett will have 94.5 megawatts (MW) of capacity and will be one of
Australia's largest wind farms, providing zero-emission electricity for 54,000 Australian homes. SEA is a subsidiary of
Suzlon Energy of Denmark, the international business arm of Suzlon Energy Limited. SEA is designing, procuring, constructing and
commissioning the Hallett Wind Farm project for AGL Energy Limited, Australia's largest retailer of electricity and gas. Located on the
Brown Hill Range in South Australia, it will consist of 45 wind turbines rated at 2.1 MW each. The wind farm is scheduled to come on
line by early 2008. AMSC will deliver the D-VAR system rated at 20 megaVARs of reactive compensation to SEA in the second half of
calendar 2007. It will be installed at a utility substation connecting AGL Energy's Hallett Wind Farm to the national power grid. "SEA
looked at several reactive compensation solutions to comply with grid interconnection requirements and found AMSC's D-VAR system
to be an appropriate solution for our Hallett Wind Farm," said Serel Ogten, SEA's electrical engineering manager. "D-VAR is a proven
product that offers us steady-state voltage regulation, power factor correction, and high-voltage ride through capability
-- all required to comply with the local interconnection requirements for the wind farm."
SEMICONDUCTORS KEY TO EFFICIENT WIND ENERGY

Wade Roush (Wade is Chief Correspondent for Xconomy.) He is a veteran science and technology writer “American Superconductor
Scores Huge Contract with Chinese Wind Turbine Manufacturer” 6/10/2008 http://www.xconomy.com/boston/2008/06/10/american-
superconductor-scores-huge-contract-with-chinese-wind-turbine-manufacturer/
While New England boasts a home-grown cluster of cleantech and green energy startups, the region is also becoming a major
supplier of infrastructure and equipment for green energy projects around the world. In April, Merrimack, NH-based GT Solar won
a $91 million contract to supply Dutch photovoltaic manufacturer The Silicon Mine with reactors needed to make solar
panels. And today American Superconductor of Devens, MA, announced an even bigger win—a $450 million contract to
make power converters that Beijing-based Sinovel Wind Corporation will use to build wind farms that will almost double
China’s wind power capacity by 2011. American Superconductor (NASDAQ: AMSC) is mainly known for building high-temperature
superconductor cables, which conduct electricity with zero resistance and are being used in locations like New York City to
supplement overburdened copper wires and create more reliable interconnections between sections of the power grid. But the
company has also developed software-controlled power converters that can be used to regulate the voltage of power
from generating sources such as wind turbines so that they can be safely connected to the larger power grid. The
converters can also control the pitch of wind turbine blades to maximize efficiency in different wind conditions. Starting
in January, American Semiconductor will ship power converters to Sinovel for installation in hundreds of 1.5-megawatt wind turbines
that will be erected around China. “The core electrical components covered under this contract will be used to support
more than 10 gigawatts of wind power capacity, nearly double China’s total wind power installed base at the end of 2007,”
Greg Yurek, American Semiconductor’s founder and CEO, said in a statement about the contract. “It is invigorating to see Sinovel’s
success in bringing much needed electrical generation capacity to the Chinese power market at a crucial time in that country’s
expansion.” Greenpeace, the Global Wind Energy Council, and the Chinese Renewable Energy Industry Association issued a report
last year predicting that China will have an installed wind-power base exceeding 120 gigawatts by 2020. For comparison, the United
States has a total installed generating capacity—from all power sources—-of just over 1,000 gigawatts.
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AFF Answers
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Non Unique – Prices High
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Link Turn – Renewables Stabilize Prices

Renewables are comparatively better for electricity prices and generation than fossil fuels
AWEA 07 [American Wind Energy Association, AWEA is a national trade association representing wind power project
developers, equipment suppliers, services providers, parts manufacturers, utilities, researchers, and others involved
in the wind industry - one of the world's fastest growing energy industries; Protection Against Electricity Price
Instability, July 1, http://www.awea.org/greenpower/gp_why3.html]
Purchasing electricity generated by renewable energy resources can provide a financial hedge against unstable or
rising fossil fuel prices. We have seen several occasions in the past 20 years when wars or economic booms have
caused fuel prices to change sharply, making it difficult for businesses to predict or control operating costs. Wind,
geothermal, hydro and solar energy in particular are not subject to fuel costs at all. And none of these indigenous
resources are at risk of supply interruptions from external political turmoil.
Electricity generated by these renewable resources can offer a longer term fixed price, while regulated rates and
contracts for electricity generated by fossil fuels usually contain a fuel price adjustment clause, or are only short term
contracts. Electricity from fossil fuels may be able to offer fixed prices for longer terms only through financial hedges
purchased in electricity futures markets.
Turn- Renewables help stabilize electricity prices

UCS 07 [Union of Concerned Scientists, The Union of Concerned Scientists is the leading science-based nonprofit
working for a healthy environment and a safer world, Cashing In on Clean Energy, August,
http://www.ucsusa.org/clean_energy/clean_energy_policies/cashing-in.html]
America’s current energy system is dominated by fossil fuels, which pose serious threats to our health and
environment and leave us vulnerable to price spikes and supply shortages. With the threat of global warming becoming
increasingly urgent, we must make responsible energy choices today that ensure a safe, reliable power supply and a
healthy environment for future generations.
Fortunately, there are practical and affordable ways to achieve this goal. Homegrown renewable energy resources—such as
wind, solar, bioenergy, and geothermal—can help reduce our dependence on polluting fossil fuels. These clean energy
sources can also help stabilize energy prices, stimulate the development of innovative new technology, and create
high-quality jobs and other economic benefits.
The plan is imperative to overcome squo electricity fallouts

Penner 01 [Dr. Peter S. Fox-Penner, Principal of The Brattle Group, Inc., Before the Senate Committee on the Budget January 30,
2001; http://budget.senate.gov/democratic/testimony/2001/foxpenner_econsechrng013001.pdf]
A number of added policy responses are needed to address our energy problems, but from the fiscal standpoint it will
remain important to continue investing in energy efficiency programs and energy supply R&D, particularly renewable
and distributed generation and advanced vehicle research. With respect to these crucial federal investments, sound
budgeting becomes sound policy. In the long run, there is no reason why the United States cannot achieve a robust,
environmentally sustainable, low-cost energy industry. Indeed, the technological prospects have never been better. 5
For the next few years, however, high and volatile prices and supply uncertainties will cast a shadow over the economy,
heightening the need for energy assistance and clean technology investments.
Renewables help the economy and shield consumers from price spikes
Environment California 03 [government sponsored environment site in California, Energy Reports, Apr 16,
http://www.environmentcalifornia.org/reports/energy/energy-program-reports/generating-solutions-how-clean-
renewable-energy-is-boosting-local-economies-and-saving-consumers-money]
Renewable energy also is the best economic choice. Increasing investment in renewable energy and energy efficiency
programs will boost local economies and save consumers money, all while protecting the environment. Renewable
energy sources also are "homegrown" energy sources that keep money spent on energy in the local economy. Several
studies have shown that investment in renewable energy creates more jobs than business-as-usual and sparks
economic development in local—particularly rural—economies by generating new sources of revenue for landowners,
school districts and local government. In addition, diversifying the electricity mix to include renewable energy shields
consumers from price spikes in the volatile fossil fuels market.
Prices will inevitably decrease

EIA 02 [subset of DOE, Electricity Prices in a Competitive Environment , Oct 21,
http://www.eia.doe.gov/cneaf/electricity/eu_comprice/eu_comprice_sum.html]
As the need for new capacity increases, competitive prices will rise until capacity expansion becomes profitable.
Therefore, the prices projected in the Intense Competition Case are not considered to be sustainable over the long term.
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No Internal Link – Spikes Won’t Hurt

Econ
Markets will self-correct- no risk of any damage to the economy
Michaels and Ellig 98 [Robert J. Michaels is professor of economics at California State University, Fullerton, and adjunct
scholar at the Cato Institute. Jerry Ellig is senior research fellow at the Mercatus Center, George Mason University., Electricity: Price
Spikes by Design?, summer, http://www.cato.org/pubs/regulation/regv22n2/pricespikes.pdf]
We believe that the evidence suggests the wholesale electricity market operated with surprising efficiency under difficult
circumstances and that regulators should not take the price spikes as evidence of the need for price controls or other
guidance. Remarkably, both the Federal Energy Regulatory Commission (ferc) and commissions in the affected states largely
agree with us. Unlike their counterparts in the Northeast and West, self-sufficient midwestern utilities traditionally have relied
sparingly on market purchases of power. In the extreme conditions of last summer, the market flourished and helped
keep the lights on. The reliable supply of electricity depends on complex coordinated networks. The United States is
learning that markets can perform much of the necessary coordination.
Spikes don’t change anything and the markets behave normally regardless
Michaels and Ellig 98 [Robert J. Michaels is professor of economics at California State University, Fullerton, and adjunct
scholar at the Cato Institute. Jerry Ellig is senior research fellow at the Mercatus Center, George Mason University., Electricity: Price
Spikes by Design?, summer, http://www.cato.org/pubs/regulation/regv22n2/pricespikes.pdf]
Within the spike days, prices behaved competitively. Low demand and plentiful transmission in off-peak hours
produced prices below $15/MWh on the spike days, the same as before and after the spike days. Onpeak, a confidential
survey of power marketers by Tabors Caramanis and Associates (tca) showed a normal intraday pattern, rising with the sun
and cresting prior to the late afternoon peak for deliveries to be made in the following hours. In a given hour, the risks of shortfalls
(which can cause systemwide outages) and the uncertainty about transmission produced large differences between
reported high and low prices. Both high and low prices, however, showed the same pattern over the day.
Electricity price spikes are absorbed by the economy and have little chance of allowing the
prices of energy to soar
Poole 07 [William, President, Federal Reserve Bank of St. Louis, Energy and the U.S. Macro Economy, July 24,
http://www.stlouisfed.org/news/speeches/2007/07_24_07.html]
In contrast, the real price of coal fell steadily from 1976 to 2003 and has since risen only slightly. In 2006, the real price of coal was
less than half of its 1982-4 value. The real retail price of gasoline has increased continuously since 2003, but in 2006 exceeded the
average price of 1982-4 by only 12 percent. The relative price in 2006 is roughly 10 percent below its historical high reached in 1981.
The real price of electricity fell by about 35 percent from the early 1980s until 1999, leveled off, and has increased about
12 percent since 2003. Nevertheless electricity remains 23 percent cheaper in real terms than it was on average during
1982-4.
As painful as recent energy price increases have been, this historical perspective helps us to understand why the
economy has been able to absorb the price increases with little effect on the aggregate economy. Perhaps the most
direct way to understand the impact of energy prices on consumers is to examine the fraction of household budgets devoted to
energy.
After 1981, the share of consumer expenditures on energy out of nominal disposable personal income trended downward, from a high
of over 8 percent to about 4.1 percent in 1998 (see Figure 6). Disposable personal income, by the way, is essentially all household
income including transfers such as Social Security benefits less direct taxes, which are mostly income taxes. Real disposable personal
income is the nominal or dollar amount adjusted for changes in the general price level.
With the increase in energy prices documented in Figures 2 and 3, the energy share of disposable personal income rose
from 4.1 percent in 1998 to almost 5.8 percent in 2006. This increase simply returns the share to about its 1985 level. It is
important to recognize, however, that the increase in energy prices, though of limited impact in the aggregate, has
forced difficult choices on lower-income households for whom the burden has been much higher as a proportion of
income.
The recent price increases are having the expected negative impact on the quantity of energy consumed, relative to total goods and
services consumed, but the total amount spent on energy has nevertheless increased. The increase in the energy share of nominal
disposable personal income reflects the inelastic short-run demand for energy by consumers. Put another way, as energy prices
have surged, the quantity of energy consumed has grown more slowly than real disposable personal income but not
slowly enough, given the price increases, to prevent the amount spent on energy from rising significantly.
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Econ
Energy prices have little overall effect on the economy- consumers and businesses will adapt
and markets prevent major fluctuations
Poole 07 [William, President, Federal Reserve Bank of St. Louis, Energy and the U.S. Macro Economy, July 24,
http://www.stlouisfed.org/news/speeches/2007/07_24_07.html]
I’ve emphasized that energy price increases have not had serious adverse impacts on the U.S. economy. The effects on
consumers as a whole have not been all that large; the economy has grown nicely since 2002, and the labor market is
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currently very close to full employment. But economists do have concerns, in good part because of lingering bad memories of
previous periods of sharply rising energy prices.
The energy shocks of 1973 and 1979-80 were principally supply-side disturbances to energy markets: the OPEC oil embargo and the
Iranian hostage crisis, compounded by the presence of price controls in the United States. The impact of those shocks is certainly
burned into my memory, and likely into the memory of everyone who lived through experiences of long lines at gasoline stations that
sometimes actually ran out of fuel; mandatory reductions in thermostat settings at business and government offices; and year-round
daylight saving time. In addition, both of these shocks were followed by recession.
Over the past four years, we have seen none of the macroeconomic complications of the early energy price shocks. An important part
of the difference this time is that the recent trend in relative energy prices has been driven by rapidly increasing world demand for
energy. Figure 7 shows energy consumption in four major economic areas: the United States, Europe, Japan and China plus India.(1)
The latest data available are for 2004. Between 2002 and 2004, primary world energy consumption increased 9 percent. However,
energy consumption in the United States grew only 2.5 percent, in the EU-15 4.2 percent and in Japan 2.9 percent. In contrast, during
this period primary energy consumption in China and India is estimated to have grown 33.0 percent. The increase in primary energy
consumption in the latter two countries is estimated at 51 percent of the total world increase in energy consumption. Clearly, rapid
development of populous emerging market economies is the major source of large increases in world energy demand. This shift in the
world demand for energy is the underlying source of the price trends that are documented in Figures 2 to 5.
However, energy markets work! The real price increases have provoked a response in production sufficient to
accommodate the higher demand. World production of primary energy increased 9.1 percent from 2002 through 2004. The price
mechanism in world energy markets is alive and functioning well to increase total production and to allocate available
supply among the existing and emerging sources of demand.
Faced with these higher energy prices, consumers and businesses in the United States have reacted in the manner
predicted by basic economic analysis. As I discussed above, consumers have reduced their consumption of more
expensive energy relative to total consumption expenditures. Yet they have been able to maintain strong overall
demand for consumption goods. Real personal consumption expenditures in the United States grew at an average annual
rate of 3.5 percent from 2002 through 2006, and this strong growth in consumer demand has made a major contribution to the
continued growth of our economy five years into an economic expansion.
The business sector of the U.S. economy has also reacted to higher energy prices over time. Energy use per dollar of real
GDP is shown in Figure 8. Energy use shows a consistent negative trend reaching a value in 2006 of 8.75 or only 48.6 percent of the
1970 value of 17.99. This downward trend is the result of efficiency improvements and structural changes in the economy that have
shifted production toward less energy intensive industries. In Figure 9 it can be seen that in 2006 consumption of energy in the
industrial sector—the sector consuming the most energy in our economy—is at roughly the same absolute level as it
was in the early 1970s. Industrial firms have maintained this level of energy consumption even though industrial
production in manufacturing in 2006 is three times larger than it was in 1970.
The transportation sector is the second largest consumer of energy in the U.S. economy. Energy usage in this sector has trended
upward steadily. The increase is driven the growing number vehicle miles and the failure of improvements in the average fuel
efficiency of the fleet of domestic motor vehicles to offset increases in total vehicle miles. Figure 10 shows fuel efficiency of various
types of vehicles in the United States. Fuel efficiency of our truck fleet has been relatively constant since the late 1960s. Although
substantial increases in the fuel efficiency of passenger cars have been realized since the mid-1970s, the fuel efficiency of vans,
pickup trucks and SUVs basically flattened out or declined a bit after the early 1990s. Overall fuel efficiency has tended to decline as
consumers increased the share of light trucks and reduced the share of passenger cars.
Very recently, it appears that households are adjusting their preferences for types of vehicles in light of the increased real
price of gasoline. The percentage of light trucks, which includes vans and SUVs, in total light vehicle sales peaked in late 2004 at
57.5 percent and by mid-2007 had declined to 51 percent.
Spikes don’t cause inflation

Humpage and Pelz 03 [Owen F. Humpage is an economic advisor at the Federal Reserve Bank of Cleveland. Eduard Pelz was
recently a senior economic research analyst there., Do Energy Price Spikes Cause Inflation?, Apr 1,
http://www.clevelandfed.org/research/commentary/2003/0401.pdf]
Many people mistakenly believe that a sharp rise in the price of energy is necessarily inflationary. They fail to
understand that energy prices adjust to the demand and supply of energy, whereas inflation responds to the demand
and supply of money. This Economic Commentary explains that the Federal Reserve can do nothing about relative energy
prices, but it can determine how relative energy price shocks are reflected in the overall level of prices. Over the last
20 years, the inflationary consequences of energy price shocks, while significant, have been fairly subdued.
Socks don’t cause economic collapse- their ev assumes 20 years ago- recessions would at least
be mild
recently a senior economic research analyst there., Do Energy Price Spikes Cause Inflation?, Apr 1,
http://www.clevelandfed.org/research/commentary/2003/0401.pdf]
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Our model suggests that the impact of energy price shocks on the U.S. economy— both on prices and output—has not
been very dramatic over the past 20 years. Prior to the early 1980s, energy prices apparently had a profound effect on
business cycle activity. In 1983, for example, economist James Hamilton noted that energy price spikes preceded nearly every U.S.
recession since World War II, and he verified this relationship statistically. More recently, however, the connection between
energy price spikes and business cycle patterns has seemed less certain. By 1996, Mark Hooker could find little
evidence of a relationship. Although energy price spikes preceded the two recent recessions, the downturns were
conspicuously mild (see figure 1).
Increased energy efficiency may be the most obvious reason that energy price spikes have less of a macroeconomic
impact. According to Energy Department estimates, we now consume only half as many Btu of energy per unit of GDP as
we did in early 1970s (see figure 2). Conservation should dampen both the business cycle consequences and the
inflation impact of energy price hikes. (We did attempt to control for energy efficiency in our model.)

Econ
Negative energy prices wont last long and positive growth would just offset it anyway
recently a senior economic research analyst there., Do Energy-Price Shocks Affect Core-Price Measures?, Nov, downloaded from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1029612]
We also examined how each of the energy-price components—positive and negative—responds to its own orthogonal
shock and to that of the other energy-price component. (Because interactions between the positive and negative PCE energy
component were identical to those of the CPI energy component, we report only the impulse response functions, plus or minus two
standard deviations in the four panels of figure 2.) The results show that both the positive and negative shocks persist for
one month before dying out in the third month (panels 1 and 3). In addition, negative energy shocks show some
evidence of an echo equal to 5 percentage points after a lag of five to six months (panel 4), suggesting that negative
shocks followed negative shocks between 1980 and 2000.
We also find evidence of a negative offset to positive energy-price shocks. In panel 2 of figure 2, a 5.8 percentage point
negative energy price response follows a 20- percentage-point orthogonal positive energy-price shock after 14 months in our
sample. A similar positive offset does not follow a negative energy-price shock. In addition, each energy-price series
demonstrates a small, but marginally significant, response two to three months immediately after a shock to the other
series (panels 2 and 4). Since a shock to each series shows persistence for one month and because when one series takes 12 a
nonzero value the other is zero, we believe that any correlation in period two results because the associated zero value falls
below a series’ average. This would create the negative correlation in period two. The small significant response in the
negative energy price series in period three, however, may not reflect this phenomenon (panel 2).
Specialists are wrong- there is no correlation between electricity prices and growth
Leonardo Energy 07 [Leonardo ENERGY is the premier web site delivering a range of virtual libraries relating to
electrical energy, Electricity prices and economic growth - a weak link, Apr 13, http://www.leonardo-
energy.org/drupal/node/1888]
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Energy and environmental specialists alike often argue that electric energy is far too cheap. They are referring to the
'externalities' of electrical generation: in fact the true global cost to society is still much higher than the actual market price.
Pressure for higher rate is usually countered by statements from the other side of the argument that higher electricity
prices pose a peril for the economy. These individuals argue that higher energy costs would lead to higher prices for
goods, which in turn would reduce product demand and cause a negative economic spiral.
Recent data from the U.S. Energy Information Administration (EIA) show that electricity costs and the overall economy are
not as closely linked as they once were. The energy consumption used to create the Gross Domestic Product (GDP) in the
U.S. has been nearly halved since 1970. Nor do statistics for U.S. states show a correlation between electricity prices
on the one side and growth in State Gross Product or changes in unemployment rate on the other.
3 reasons why energy prices won’t hurt the economy

Slaper 06 [Timothy, Senior Economist @ Joint Economic Committee in United States Congress, Energy Prices and the Economy,
Jan, http://www.house.gov/jec/publications/109/energy01-26-06.pdf]
Will higher energy prices have much of an impact on industry? In the 1970s and early 1980s, several sectors of the economy
underwent tremendous pressure due to rising energy prices. Today, the fast rise in oil prices – the first energy shock – was one of the
reasons economic growth stalled in the 1970s. The same supply side response is unlikely because the production side of the
economy is less sensitive to higher oil prices than it was in the 1970s for at least three reasons.
One, the economy as a whole is less energy intensive. Figure 1 shows that for each unit of energy input, the economy
today produces more output than it did during the oil shock of the 1970s. In other words, there is a bigger economic
production bang for every energy input buck. (The energy “buck” on the graph is measured in energy units called British
Thermal Units or BTUs).
Two, a smaller percentage of total employment is devoted to energy intensive industries than thirty years ago and, as
a result, the economy is less vulnerable to high oil prices. The principle reason for this is that service industries – a less
energy intensive sector – contribute to a greater proportion of economic output and employment today than thirty years
ago. Another way to look at it is that energy intensive industries – manufacturing, for example – are a smaller portion of economic
output. Because energy is a far smaller component in the service industry input mix, higher energy prices will have a relatively
small effect on service industry prices, profitability and employment.
Three, heavy industries – construction, manufacturing, mining and utilities – have become more energy efficient. Industry
output per unit of energy input has increased since the oil shocks of the 1970s. In Figure 1, the lower line shows how the ratio of
industrial output per unit of energy input rose quickly in the late 1970s and early 1980s. As the price of energy quickly rose,
firms were motivated to become more energy efficient. Once the price of energy stabilized, however, the trend in industrial
energy efficiency leveled off.
For these reasons, the production side of the economy is much less sensitive to higher energy costs.
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Econ
Theres only a chance of as prices affecting the electricity grid and spikes won’t have many
effects on the economy
Foster Electric Report 05 [government report on electricity prices, WITH A FEW NOTABLE EXCEPTIONS, FERC'S
STAFF FORESEES NO ELECTRIC GRIDRELIABILITY PROBLEMS DURING UPCOMING SUMMER, BUT EXPECTS HIGHER
POWER PRICES, May 11, Lexis]
While wholesale electricity prices will probably be higher, FERC's staff analysts told the Commission that the upcoming
summer should be mostly free ofany electricity supply crunches or potential outages. Southern California and southwestern
Connecticut may be two very notable exceptions if those areas should experience extreme hot weather, however. Portions of the
Pacific Northwest may also see some supply shortages because the lack of snow and rainfall has left hydropower reservoirs and other
water sources lower than normal.
Discussing the upcoming electricity supply situation during the Commission's May 4 regular agenda meeting, staff said most
regions of the country "have adequate or better reserves and are likely to face no problems." The news is not quite so good
for power prices, however. Staff explained that regions highly dependent on natural gas as a power plant fuel will see power prices start out this
summer higher than average and then move upward due to higher natural gas prices. Noting that gas storage inventories are very healthy, well above
the 5-year average, staff acknowledged that they are perplexed by the continuing high natural gas prices, but have concluded that soaring oil prices
are the main culprit. For some unexplained reason, the prices of the two fuels tend to track each other, despite the lack of any real physical connection
between them. "In effect, gas-fired generation will be competing with natural gas storage fill through the summer in the West, possibly affecting prices
as well," said Office of Market Oversight and Investigations (OMOI) Deputy Director Stephen Harvey. The pipeline grid appears able to handle the load,
but "we will be watching storage fill to see if there are any potential longer-term effects on gas supply."
Coal prices are at very high levels as well, meaning that even those regions dependent on coal-fired generation will also likely see higher power prices
this summer, according to staff. The same is likely to be true for the Pacific Northwest because of the lack of water available for hydro generation
compared with an average year, staff predicted. With the exception of California -- which experienced well above average precipitation this past winter --
the analysts declared that the outlook for hydro electric generation "is not good for this summer." The states of Washington, Montana and Oregon face
"very low" levels of snow melt, with water reserves only about 66% of average. On the other hand, staff said late precipitation in British Columbia and
Idaho have left those two states better off hydro capacity-wise than they were a year ago.
Staff assured the commissioners that they do not expect the Pacific Northwest-- or any other region of the country -- to see
serious electricity disruptions this summer. Under extreme weather conditions, however, staff said reserve margins in
southern California would become "inadequate" in August, and "very tight" in September. Staff stressed that these potential
supply problems will exist only under "fairly extreme conditions, and may not appear at all." The problem is that the National
Oceanic and Atmospheric Administration (NOAA) is forecasting above-normal temperatures this summer for much of the western half of the United States, and near sizzling
temperatures for the desert southwest. "If the weather plays out as projected by NOAA, there will be a lot of stress on the western grid," FERC staff said, leaving the grid
"Spikes
particularly vulnerable to transmission disruptions or generation outages, and increasing the likelihood of price spikes."I want to be clear about this," said Harvey.
and interruptions are not the most likely result. We believe that the most likely situation is no serious disruption."
Staff stressed that if price spikes should occur, they will most likely be due to market fundamentals rather than power
sellers' manipulating markets. Many western utilities have contracted to cover most of their needs under longer-term
contracts and therefore will turn to the spot markets "only under more extreme circumstances," staff reasoned. The
analysts also noted that the Commission has established behavioral rules that clearly establish the types of behavior that
will leave a seller subject to charges of market manipulation, and that FERC's staff will be watching closely for any
signs of misconduct.
The prospect of power price spikes caused Commissioner Nora Mead Brownell to ask staff to "validate" all data related
to summer supply, demand and prices to defend against "an automatic assumption of market manipulation" should
power prices spike. "I think, given the experience of 2001, when prices go up there will be an automatic assumption that
there was market manipulation, when it is pretty clear" that most of the West is going to be relying on gas, given the
lack of hydropower, Brownell observed. Thus, she wants staff to make people aware that high natural gas prices could
drive up the price of power this summer.
Consumer responses offset the effect of price spikes

Hadley, Hudson, Jones, and Vogt 01 [all are partners in the Oklahoma Corporation Commission, an energy laboratory,
THE POTENTIAL ECONOMIC IMPACT OF ELECTRICITY RESTRUCTURING IN THE STATE OF OKLAHOMA PHASE II REPORT, October,
http://www.ornl.gov/sci/btc/apps/Restructuring/OKPhaseIIforWeb1.pdf]
RESPONSE OF CUSTOMERS TO REAL-TIME PRICES
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Customer response to high peak prices lowered the peak demand by roughly 9% in our model, lessening the need for
new capacity. The response of customers to real-time prices has a modest effect on average prices paid. Its larger
impact is on prices paid at the peak. In the case without elasticity impacts, market prices were 120 ¢/kWh during the
short time when all plants were at full capacity. In the case with elasticity this price peaked at 100 ¢/kWh. With
elasticity and consequent flatter demand profile, peak prices do not have to rise as much to lower demand to available
capacity.
Prices have little economical impact- our estimates are higher than the actual effects
Hadley, Hudson, Jones, and Vogt 01 [all are partners in the Oklahoma Corporation Commission, an energy laboratory,
THE POTENTIAL ECONOMIC IMPACT OF ELECTRICITY RESTRUCTURING IN THE STATE OF OKLAHOMA PHASE II REPORT, October,
http://www.ornl.gov/sci/btc/apps/Restructuring/OKPhaseIIforWeb1.pdf]
OVERALL ECONOMIC IMPACT TO STATE
The scenario with the highest price increases raised prices an average of 12 percent, in a commodity that accounts for
2.3 percent of state production. Against this aggregate backdrop, it is not surprising that the electricity rate changes have
very small impacts on the overall economy of the state. Depending on the price-change scenario, employment in the
state could fall by three or four one-hundredths of one percent while other property income could rise by about one-
third of one percent. The differences in impact across the scenarios also are small. These impact projections are likely
to be on the high side of actual, long-run impacts, since the assumptions of the input-output framework, as well as
assumptions we adopted for this study, minimize the opportunities to substitute away from electricity in both final and
intermediate demands. We did not attempt to simulate the potential for substitution away from electricity into natural gas for some energy uses, but over a five- to
ten-year period, if some classes of rates stayed twenty to twenty-five percent higher, some substitutions surely would occur in specific uses such as heating, air conditioning and
water heating.
Very much empirically denied- we had the worst energy crisis in 01 and our economy’s fine
Associated Press 01 [Bush: Energy problems severe, no quick solution foreseen, Mar 20,
http://findarticles.com/p/articles/mi_qn4182/is_20010320/ai_n10143193?tag=content;col1]
WASHINGTON (AP) -- The nation is facing the most serious energy shortages since the 1970s, the administration said
Monday, and President Bush declared there are "no short-term fixes."
power problems in California that threaten to spill into other parts of the country,
Bush gave no recipe for dealing with the immediate
nor the growing concern about another spike in gasoline prices this summer.
Underscoring the worries, rolling blackouts swept across California on Monday for the first time since January as electricity
reserves dwindled.
demand for energy has outstripped supply and "as a result we're finding in certain
The president, meeting with his energy task force, said
parts of the country that we're short on energy."

Econ
Incentives to prioritize energy usage protect against blackouts
Kling 03 [Arnold Kling received his Ph.D. in economics from the Massachusetts Institute of Technology in 1980. He
was an economist on the staff of the Board of Governors of the Federal Reserve System from 1980-1986; Electricity
Economics, Aug 20, http://econlog.econlib.org/archives/2003/08/electricity_eco.html]
Smith and Kiesling are saying that incentives to prioritize energy usage could be used to prevent blackouts. For example,
my electric company offers me lower rates in exchange for the ability to shut off my air conditioner for 15 minutes at a
time when there is peak demand. I was not required to take this option, but I chose it. What Smith and Kiesling are saying is that
these sorts of adaptations might prove to be less expensive than adding to capacity under a regime without any
incentives to reduce peak-load demand.
Most of the other commentary on the blackout says that we need to throw tens of billions of dollars at new electricity infrastructure.
However, the approach that Smith and Kiesling recommend seems to me to offer greater reliability sooner and with
much less expense. It would have the additional benefits of conserving energy, reducing pollution, and improving
homeland security.
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Econ- A/T: Kills Grid
New solar resources protect against grid failure
Electricity Journal 06 [Understanding the Benefits of Dispersed Grid-Connected Photovoltaics: From Avoiding the
Next Major Outage to Taming Wholesale Power Markets, July 24,
http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VSS-4KGG1RK-
3&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid
=10&md5=38d701c99192631a6aed3a620f0e9a29]
Thanks to new solar resource assessment techniques using cloud cover data available from geostationary satellites, it
is apparent that grid-connected PV installations can serve to enhance electric grid reliability, preventing or hastening
recovery from major power outages and serving to mitigate extreme price spikes in wholesale energy markets.
Empirically denied- 2001 breakdown

New York Times 01 [Testing Limits of the Northeast Grid, Aug 10,
http://query.nytimes.com/gst/fullpage.html?res=990DE1DE123FF933A2575BC0A9679C8B63]
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The scalding weather pushed the Northeast's power grid perilously close to its limits yesterday, smashing records for
electricity use and driving prices to record highs, as officials scrambled for ways to avoid overloading the system.
Power system managers declared states of emergency and ordered a 5 percent voltage reduction from Maine to Virginia.
Utilities asked businesses and government agencies to close early and turn off machinery, and called on others to rely on their
backup generators.
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Spikes Inevitable
Volatility has emerged because of flawed structure and lack of information on consumption
Journal of Property Management 01 [A periodical from Chicago, Illinois on property management., A new
energy economy: Valuing information, Mar/Apr,
http://findarticles.com/p/articles/mi_qa5361/is_200103/ai_n21470037?tag=content;col1]
Market volatility. A distressingly high degree of volatility has emerged in the commodity markets in response to growing
regional disparities in supply and demand for both electricity and natural gas. In the case of California, volatility and
concern has risen as a result of an incomplete and/or flawed deregulatory structure. Marketers and utilities attempt to
protect themselves from this volatility through risk management (hedging) and other forward-pricing strategies and by
offering their customers value-- added services and products. This is why many utility companies now offering telecom and
broadband services, energy audits and conservation incentives, customer assistance centers, and electronic bill presentation and
payment.
If they possess the necessary information about their consumption, energy users can dampen some of their exposure
to price volatility by better defining supply contract terms and by implementing load-- management strategies, such as
demand aggregation (buying pools) or onsite (distributed) generation.
Natural gas prices make electricity price increases inevitable

Houston Chronicle 5/31 [Texas: Electricity price flies off the grid, http://www.energybulletin.net/node/45318]
The price of electricity already was rising toward records because of climbing natural gas prices. Now it's getting an
extra boost from unexpected spikes in the wholesale markets where electricity is bought and sold in bulk.
For several days this month and in April, the price of power briefly spiked in the so-called balancing market where the
state's grid operator buys electricity at 15-minute intervals to keep supply and demand in balance.
Those prices didn't show up directly on any homeowners' bills, but they may have helped push two smaller electric retailers out of
business, dumping almost 25,000 customers back into the market.
Price spikes caused by 3 things the plan does not influence

Megawatt Daily 04 [subset of McGraw ill, reports on electricity news, ERCOT: Spikes caused by outages,
constraints; May 13, lexis]
The price spikes were caused by "transmission outages, services and maintenance creating a little congestion," a PUC
spokesman said, adding the jump in prices was "mainly a result of the shoulder season." That explanation is similar to the
one offered by ERCOT officials shortly after the real-time prices climbed.
The PUC said its market oversight division would investigate the higher prices shortly after the spike. The spokesman said the
market oversight division is continuing to investigate.
The state's Sunset Advisory Commission staff also has called for ERCOT to contract with a private, independent company to monitor
the wholesale electricity market. PUC and ERCOT officials have said they do not object to the recommendation.
Price spikes caused by heavy use of AC in hot weather

Associated Press 06 [Snowy privatisation won't increase prices, Apr 16, lexis]
"So it's in Snowy Hydro's benefit to drive prices high so that people have to protect themselves against
that volatility and they are one of the few companies that can actually provide that protection," he told the Nine
Network.
But Mr Charlton said prices were set by demand and price spikes were caused by the heavy use of air
conditioners when there was hot weather.
"We cannot drive up the price, the price is determined by the demand," he told the Nine Network.
"It's in our best interests to come in and generate when those prices spike and drop the prices back
down because we are paying out on our derivative contracts when those prices are above the strike
price or the swap price."
Mr Charlton said Snowy Hydro was not the only supplier and if it held back supply to meet demand others would fill
the gap.
If the newly privatised company did try to manipulate price spikes in the short term, it would soon lose
business to other peak electricity producers.
No link and alt causes- consumer and seasonal load, supplier risk, and non-energy costs
Rose 07 [Kenneth Rose is an independent consultant and a Senior Fellow with the Institute of Public Utilities (IPU) at Michigan
State University, The Impact of Fuel Costs on Electric Power Prices, June,
http://72.14.205.104/search?q=cache:KCd4m1RYmroJ:www.appanet.org/files/PDFs/ImpactofFuelCostsonElectricPowerPrices.pdf+electr
icity+price+spikes+inflation+-china+-russia+-sri+-lanka&hl=en&ct=clnk&cd=16&gl=us]
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While natural gas prices have certainly played a role, looking at the data shows that simply attributing electricity
price increases to only the cost of fuels used to generate electricity is overly simplistic at best. Other important
factors that determine electricity prices are the level of customer load and the seasonal variation of load, and
supplier risks and other non-energy costs. In addition, it is likely that other unaccounted for factors may also help
explain electricity price changes.
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Spikes Inevitable
California electricity meltdown spilled over to the rest of the US and makes spikes inevitable
for years- investment is also down
Penner 01 [Dr. Peter S. Fox-Penner, Principal of The Brattle Group, Inc., Before the Senate Committee on the Budget January 30,
2001; http://budget.senate.gov/democratic/testimony/2001/foxpenner_econsechrng013001.pdf]
Mr. Chairman, much has been written and said about the electricity crisis in California, and I will not dwell on it in these remarks.
However, there are four irrefutable features of the California crisis. First, there is a critical shortage of natural gas pipeline capacity
into the state. Second, there is an equally critical shortage of generation and transmission capacity in California and across much of
the West. Third, the state failed to maximize its conservation and demand reduction opportunities, both of which are critical for
effective electric markets. Fourth and finally, all these factors ensure very high prices for power throughout the West for the next
several years. Today, throughout this region, wholesale power prices are six times as high as last year’s levels and the
highest they have been in at least 60 years.
These features are more troubling, Mr. Chairman, because they are likely to occur - - or are already occurring - - in much
of the rest of the United States. Parts of the U.S. have ample generating capacity, but other regions are perilously low
on reserves, and new transmission lines are not getting 3 built. Amazingly, in a nation whose electric demand has
increased over 14% in the last six years, total industry investment in transmission assets has declined, and very few
major new lines are underway anywhere in the U.S.
The implications of this situation are that high and volatile natural gas and power prices are likely to be with us for
several years, especially in the West and transmission-constrained urban areas. In contrast to oil prices, which are not at levels high
enough to cause a major dislocation, electricity and gas prices are projected to remain sufficiently high and volatile so as to
introduce an unprecedented degree of uncertainty over the economy during the next few years.
Spikes will be caused by Iraq War

New Orleans City Business 02 [Electricity prices not expected to follow gasoline surge, Apr 8,
http://findarticles.com/p/articles/mi_qn4200/is_20020408/ai_n10172256]
As the economy regains steam and gasoline prices continue to rise, should companies expect electricity costs to
increase during the next few months as well? Industry experts say it's not likely since the current spike in gasoline
prices isn't tied to a surge in economic activity, but rather by the war against terrorism and tensions between Israelis
and Palestinians.
The average cost of gasoline jumped by more than 14 cents per gallon within the past three weeks largely because of fears over
unrest in oil-producing countries in the Middle East. Gas prices stayed low earlier this year because of an oversupply that has since
leveled off. Electricity prices are mainly tied to the commodity cost of power plant fuels such as natural gas, heating oil
and coal, and weather, which can spike demand. Base electricity rates are fixed in Louisiana, but utilities also pass through the
cost of power plant fuel to customers each month through fuel adjustment fees. Last year, those charges were higher because
utilities were trying to recover costs from record- high natural gas prices during winter 2001. But overall, bills were lower
since we had a relatively mild summer. Forecasters expect natural gas prices to stay below last summer's averages. The commodity
price for natural gas was $3.71 per million British thermal units last week compared to $5.06 per million BTUs a year earlier. Larry
Benedetto, research director for local investment firm Howard, Weil, Labouisse, Friedrichs Inc., expects natural gas to average about
$3 per million BTUs this summer. A relatively mild summer, fall and winter reduced demand for natural gas, allowing suppliers to fill
reserves. Natural gas storage levels are projected to end the heating season this year at more than double last year's level, according
to the U.S. Energy Information Administration. Administration officials expect overall demand for electricity to stay flat this
summer compared to last, largely because of reduced industrial activity. "There will probably be no (overall) growth in
demand, assuming normal weather," says Dave Costello, economist with the Energy Information Administration. "The recession
we had was largely defined by the dramatic declines in industrial production, and until that really gets on its way to
recovery, these energy components aren't going to be really strong." Industrial demand for power fell by 8% last year.
Costello doesn't expect industrial demand for electricity to significantly increase until at least the third quarter. The administration
projects industrial demand for power will grow by 1.4% in 2002 and 3.3% in 2003. Weather is the ultimate variable in power costs. A
hotter-than-usual summer could also spike demand and increase prices, Costello says. Utilities prepare detailed forecasts for power
demand based on weather variables from the past few years. That information is proprietary and most utilities don't release forecasts
for competitive reasons. The National Oceanic and Atmospheric Administration is predicting a slightly hotter than average summer for
Louisiana. One of the factors that could influence weather later this summer is an "El Nio" that climatologists suspect is developing in
the Pacific Ocean. An El Nio occurs when waters in the Pacific are warmer, causing climate changes and severe weather in parts of
the world. Depending on its severity, an El Nio could increase temperatures.*
Different markets make increases inevitable

Purdue News 01 [Electricity prices could rise if wholesale markets function poorly, Nov 7,
http://news.uns.purdue.edu/UNS/html4ever/011107.Sparrow.energy.html]
Before 1996, utilities purchased electricity strictly from other utility companies because federal regulations prohibited
independent power producers from entering the wholesale market. But since that restriction was removed, many so-
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called "merchant plants" have been springing up in the Midwest and across the nation. In Indiana alone, six such plants have
come online since the federal change and another 14 new plants have been proposed so far, Sparrow said.
Electricity from merchant plants is especially needed during the hottest summer months, as the power grid strains to meet energy
demands, he said.
If enough of the producers that sell wholesale electricity to utilities merge in the near future, the result could be
drastically higher peak-demand prices. That's because the fewer, merged companies that remain could, independently
of each other, decide to withhold electricity during times of peak demand, increasing their own profits but causing the
wholesale price of electricity to spike upward dramatically.
Natural gas prices make spikes inevitable

MTC 5/15 [Massachusetts Technology Collaborative, Diversifying Sources of Electricity ,
http://www.masstech.org/cleanenergy/important/fueldiversify.htm]
Dependence on natural gas presents another issue in terms of electricity prices. Since the Massachusetts electricity
industry was deregulated to introduce a competitive electric market, electricity prices have become extremely volatile. This volatility
has been partially attributed to the combination of our reliance of natural gas and our increased demand for electricity.
As demand has increased, natural gas has been in shorter supply and its prices have become more volatile. In turn,
this has made overall electricity prices more volatile.
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Spikes Inevitable
Spikes occur every five hours and do not cause economic collapse
Business World 06 [Unstable power supply weighs on Visayas' participation in electricity spot market, Sept 21,
lexis]
Cebu City - Peak periods, consisting of four to five hours a day, that eat up the reserve power in the Cebu-Negros-Panay
grid and push supply to critical levels have been a cause of concern for the Philippine Electricity Market Corporation (PEMC)
during the six-month test run of the Wholesale Electricity Spot Market (WESM) in the Visayas.
Lasse A. Holopainen, president of WESM operator PEMC, said in a forum yesterday that during the six months that his company
has been testing the WESM on the Visayas, the price of electricity here had been "very low" for 17 hours and soars to
"very high" levels for about five hours from 1 p.m. to 3 p.m. and then again from 5 p.m. to 8 p.m. amid periodic high
demand.
Natural gas prices are the main cause of spikes- Florida proves
Sun-Sentinel 07 [Florida newspaper, FLORIDA NEEDS TO STORE NATURAL GAS, Apr 25, lexis]
This past December, Floridians paid 22 percent more for their electricity than the national average.
According to recently released statistics from the U.S. government, the average retail price of electricity in December 2006 was $8.49
per kilowatt hour. Florida's average was $10.33. Even worse, while average U.S. electricity prices rose only 28 cents in
December 2006 (versus December 2005), Florida's prices increased by 16 percent, up $1.43.
Why?
Much of Florida's electricity is generated from power plants using natural gas. Natural gas is a clean, efficient and
usually economical energy source.
But, sometimes snowstorms in the Northeast or hurricanes in the Gulf of Mexico cause natural gas prices to spike.
When this happens, power producers in many states can use the natural gas they have in storage rather than pay
these temporarily high rates.
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Spikes Won’t Happen

Government will issue caps to limit the impact of energy price spikes
Bunn and Karakatsani 03 [Corresponding author: Professor Derek W. Bunn, London Business School , professors
@ London Business School, Forecasting Electricity Prices,
http://www.london.edu/assets/documents/PDF/2.3.4.12.1_Karakatsani_and_Bunn_2003_FEP_pdf5.pdf]
Finally, although the imperfections of electricity market create a richness of structure for modellers, and most of these
economic, technical and behavioural influences can be captured by a mixture of econometric and stochastic
specifications, the political sensitivity of electricity should not be underestimated. Even though the markets have been
liberalised, regulatory interference is never far away (see Bower, 2003), and high prices only have to persist for a few
months before price caps emerge, as indeed they have in the Britain, Spain and California. Similarly social, industrial and
environmental polices are always on the horizon, as we have seen recently, with carbon taxes and renewable credits. It
would appear prudent, therefore, that an analysis of institutional intent should provide the very basic set of background assumptions,
followed by a strategic analysis of the major players, before a dynamic structural and stochastic specification of the pricing model is
attempted. From a forecasting perspective, this will require the time series and econometric specifications to be consistent with
higher level political and strategic models, which will inevitably be of quite a different, more subjective character.
That’s especially true today- companies are capping bills to reduce prices specifically for this
year
Daily Record 5/22 [Baltimore newspaper, Come June, all businesses in Md. will pay more for electricity,
The number of businesses that bid for their electricity every quarter will swell on June 1, along with the bills of all non-
residential customers.
Last week, the Maryland Public Service Commission announced that to avoid price spikes for those businesses
transitioning from "Type I" to "Type II" customers, their bills would be capped from June through August at no more
than 15 percent higher than what they paid in 2007. Instead of sticking utilities with the cost of capping the bills, the
PSC said all other non-residential customers would pay the balance.
Energy Star prevents prices from getting out of hand

Edison Foundation 06 [The Edison Foundation is a nonprofit organization dedicated to bringing the benefits of electricity to
families, businesses, and industries worldwide, Why Are Electricity Prices Increasing?, June,
http://www.eei.org/industry_issues/electricity_policy/state_and_local_policies/rising_electricity_costs/Brattle_Report.pdf]
Another federal initiative that is helping to reduce energy and electricity consumption is the ENERGY STAR program.
The “ENERGY STAR” label identifies products, practices, services, homes, and buildings that meet government
guidelines for energy efficiency. Introduced by the U.S. Environmental Protection Agency (EPA) in 1992 for energy-efficient
computers, the ENERGY STAR program has become a broad platform for promoting energy efficiency across the
residential, commercial, and industrial sectors. The program has grown to include efficient new homes that became
eligible for the ENERGY STAR label in 1995 and more than 40 product categories for homes and businesses, such as
clothes washers, TVs, and refrigerators.37 While the ENERGY STAR initiatives are separate from the utility DSM programs described
earlier, EPA in some cases partners with utilities (as well as home builders, manufacturers, and others who play a key role in getting
energy-efficient equipment into the market).
EPA estimates that the ENERGY STAR programs saved a total of 126 billion kWh of energy and 25 GW of peak power in
2004—the amount of peak power required for about 25 million homes. These programs also prevented the greenhouse gas
emissions equivalent to those from 20 million vehicles.38
DSM programs prevent electricity prices from soaring

Edison Foundation 06 [The Edison Foundation is a nonprofit organization dedicated to bringing the benefits of electricity to
families, businesses, and industries worldwide, Why Are Electricity Prices Increasing?, June,
http://www.eei.org/industry_issues/electricity_policy/state_and_local_policies/rising_electricity_costs/Brattle_Report.pdf]
EIA also collects data on the energy and demand savings achieved by utility DSM programs. These savings have been relatively
consistent over the 1994 to 2004 period, which suggest that DSM programs initiated in the early 1990s have produced relatively
consistent savings over the last 10 years. For example, EIA found that in 1994 DSM programs saved a total of 57,421 GWh of
energy, which is equivalent to the annual output of seven large nuclear units or the annual output of about 20 500-
MW-generating units operating at a 66-percent capacity factor. In 2004, these programs saved 54,710 GWh of energy.
DSM programs also reduce peak load. According to the EIA data, DSM programs have reduced peak load by at least 23
GW over the 1994 to 2004 period. Peak load reductions have been relatively consistent over this period, ranging from a low of 22.9
GW in 2000 to a high of 29.8 GW in 1996. (Peak demand savings will be more sensitive to weather than energy savings and
therefore somewhat more likely to vary from year to year.) In 2004, peak load reductions were 23.5 GW, a significant
savings—a typical new combustion turbine (CT) is about 100 MW, so existing DSM programs have displaced the need for more than
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200 CTs nationwide. Approximately 60 percent (14.3 GW) of the demand reduction savings were achieved by energy-
efficiency programs, with the remainder attained through load-management programs.
Supreme Court ruling makes any risk of a spike unlikely

LA Times 6/27 [Supreme Court deals blow to states on electricity, http://www.latimes.com/business/la-fi-power27-
2008jun27,0,5575040.story]
The U.S. Supreme Court ordered federal regulators Thursday to revisit a decision upholding high-priced electricity
contracts that California utilities and others signed amid the chaos and soaring prices of the state's 2000-01 energy
crisis.
The move gives officials from California, Washington and Nevada another chance to convince the Federal Energy Regulatory
Commission that the long-term deals should be nullified or renegotiated because the terms were based on electricity
prices that were grossly inflated by illegal trading schemes carried out by Enron Corp. and others.

States have developed means to stop excessive prices
AGA 08 [American gas Association, The Impact of Industry Restructuring on Electricity Prices, 7/5,
http://www.aga.org/Research/studies/impact_industry.htm.htm]
Under the expected restructuring of the U.S. electric utility industry, electricity prices are forecast to fall by 14 percent
in real terms between 1996 and 2015. Real price changes will range from declines exceeding 25 percent in the highest cost states or
regions to flat to rising prices in the lowest cost states or regions.
Real price declines are forecast at 26 percent for the industrial sector, versus about 9-10 percent for the residential and commercial
sectors.
To minimize or defer real price increases, especially for residential and commercial ratepayers, the states with the
lowest costs will elect not to allow retail access.
In the highest cost states, all of which allow retail access, price declines will be the greatest once stranded cost
recovery ends (between 2005 and 2010)
States have done measures to protect against spikes

Greenwire 6/12 [news station, UTILITIES: Texas power price spikes undergo scrutiny, lexis]
Texas electric grid operators are scrambling to fix the causes of a recent wholesale power market spike that put four
electric retailers out of business.
New rules issued Monday are designed to give the Electric Reliability Council of Texas greater flexibility in how it
handles power congestion.
During an emergency meeting of the Public Utility Commission yesterday, officials described other causes of the
spikes, including the way software systems calculate market prices. They said the software allowed the spikes
because the cost of relieving congestion on the power lines created a "shadow price" -- meaning the spikes do not
indicate scarcity of power in the markets but flaws in the rules used to run the markets.
The balancing market sells power on 15-minute intervals to keep the system in balance at what was supposed to have
been a cap of $2,250 per megawatt-hour. Prices typically average around $100 per megawatt-hour, but in May it spiked several
times, hitting $4,000 one day.
There is no probability for sharp price increases and hydroelectric power prevents them
anyway
Hutzler 02 [ACTING ADMINISTRATOR for ENERGY INFORMATION ADMINISTRATION,
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DEPARTMENT OF ENERGY, HEARING ON THE EFFECT OF THE ENRON BANKRUPTCY ON THE FUNCTIONING OF ENERGY MARKETS, Feb
13, http://www.eia.doe.gov/neic/speeches/hrtest020213/testim0213.htm]
Until the U.S. economy begins to recover in earnest and domestic fuel inventories are pared to more normal levels, the
probability of sharp price runups is minimal. In addition to the demand and fuel cost factors that have reduced the
level of electricity price volatility since last winter, there has been a significant number of new electric generating plants
added to the U.S. inventory over the last year or so. Current estimates are that there has been about a 73,500-megawatt (9.3-
percent) increase in generating capacity between the end of 1999 and the beginning of 2002. Approximately 2,000 megawatts (3.9
percent) have been added in California. Furthermore, it is generally expected that a significant recovery in hydroelectric
power availability on the West Coast is likely this year. Such a development would further reduce the likelihood of
renewed pressure on electricity prices in the region regardless of the specific entities engaged in trading there.
Price spikes will be short lived due to deregulation

Business Wire 98 [The National Energy Marketers Association Calls on Regulators to Speed the Pace of Deregulation to Avoid
Shortages, Brown-outs and Mitigate Future Price Spikes, July 13,
http://findarticles.com/p/articles/mi_m0EIN/is_1998_July_13/ai_50164268?tag=content;col1]
WASHINGTON--(BUSINESS WIRE)--July 13, 1998--The National Energy Marketers Association (NEMA) held an emergency session to
identify causes and solutions to the unprecedented spike in power prices.
"It appears that the 'go-slow' partial deregulation of electricity in the United States has created regulatory and
operational uncertainties that exacerbate both generation and weather-related shortages. 'Price spikes are nothing
new'. They are the sign of a new commodity market finding its equilibrium.
"In fact, the speed with which the price spike disappeared is a sign that electricity deregulation is on track and will work
more efficiently if both state and federal regulators speed up the restructuring of the nation's electricity markets," said
Craig G. Goodman, NEMA president, and former national energy policy official in the Reagan and Bush Administrations.
Advanced notice technology means spikes have little chance of getting out of hand
Taylor and Schwarz 06 [Thomas N, Duke Energy, USA; Peter M, University of North Carolina, USA; Advance notice
of real-time electricity prices , Feb 18, http://www.springerlink.com/content/j05ln51l46521342/]
Abstract Many utilities are offering real-time pricing (RTP) to their large industrial customers. Under RTP, hourly rates
change with real-time supply and demand. As compared to fixed rates, RTP shifts price risk from the utility to the
customer. With such a change, it is natural to ask if there is an optimal level of advance notice of prices. This paper contains a
simulation of real-time rates for industrial customers with and without advance notice of prices. Advance notice is valuable to
customers who can increase elasticity of substitution. This value must be weighed against the cost to the electric
utility from an increase in demand forecast error. The simulation suggests that day-ahead advance notice increases
welfare for reasonable magnitudes of customer elasticity and utility forecast error.
Empirically, as electricity prices go up natural gas prices will offset them

Gazette 06 [Colorado Springs newspaper, Go ahead, turn on the heat, Oct 17,
Winter is coming. Fire up the furnace and reach for your wallet.
That's usually the mantra as temperatures begin to drop, but Colorado Springs residents will be paying less this winter to heat their
homes and businesses than a year ago.
Natural gas prices have plunged, and Colorado Springs Utilities locked in a low price for its gas supply to guard against
billing spikes.
While other utility services such as electricity and waste water have risen, they are more than offset by the substantial
drop in gas rates.

Companies will offset the increased prices- empirically, they did so after Enron’s collapse
Electric Power Supply Association 02 [Enron Questions & Answers,
http://72.14.205.104/search?q=cache:G_8JLR2BbT0J:www.epsa.org/forms/uploadFiles/enron_qanda.doc+electricity+pri
ce+spikes+inflation+-china+-russia+-sri+-lanka&hl=en&ct=clnk&cd=81&gl=us]
Were electricity consumers harmed by Enron’s collapse?
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No. In the days and weeks following Enron’s fall, there were no price spikes in electricity markets and the power
continued to flow. Although Enron had been a dominant player in the energy trading business, competition has
evolved to support a large number of vibrant companies. These companies quickly and effectively picked up the slack
created by Enron’s sudden departure. In the days and weeks following Enron’s bankruptcy, power supplies remained
constant, trading and marketing continued without disruption and prices remained stable.
Prices won’t rise and permit the recovery of capacity costs

Borenstein 08 [Severin, Director, University of California Energy Institute, Response to Critiques of
“The Market Value and Cost of Solar Photovoltaic Electricity Production”, Jan-Feb,
http://faculty.haas.berkeley.edu/borenste/SolarResponse.pdf]
“7. GUESSTIMATE: Ignoring real-world non-energy capacity payments in revenue requirements of peaking turbines”. In fact, the paper
is very careful in discussing capacity payments. The basic model I use is for an “energy only” electricity market, such as is currently
used in Texas, in which there are no capacity payments. The point of capacity payments is to provide the “missing money” that
results when wholesale electricity prices are not allowed to rise to the level necessary to clear a very tight market by rationing down
demand. The elimination of such price spikes, through price caps or system operator behavior, is what justifies the
creation of a capacity market. In my simulated prices, those extreme price spikes do occur and, by construction, are
sufficient to permit recovery of capacity costs. Those price spikes at times of high demand are the basis for the higher
valuation of solar PV power that I report. I also analyze an alternative scenario in which prices are not allowed to rise above
the marginal cost of the highest cost generator. In that scenario, generators recover capacity costs through a constant per-kWh
payment. Prices in that scenario are much less volatile to the detriment of solar PV valuation.
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Internal Link Turn – Spikes Help Econ

Turn- energy spikes lower inflation and don’t affect industries
recently a senior economic research analyst there., Do Energy-Price Shocks Affect Core-Price Measures?, Nov, downloaded from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1029612]
Energy-price shocks do not appear to affect industrial production or the federal funds rate in our model, but they do have
an asymmetric impact on inflation expectations in each of the models. Positive energy-price shocks do not seem to affect
expectations, but negative energy-price shocks consistently lower inflation expectations by 0.1 to 0.2 percentage point
with a lag of one month. (In the CPI model only, negative energy-price shocks also lower inflation expectations by 0.2 percentage
point with lags of three and four months.) We offer an interpretation of these events in the next section.
There is no energy crisis and spikes are key to encourage conservation, which helps the
economy- their ev is just media scare
Federal Reserve of Chicago 06 [Economists and Rising Energy Prices, May 10,
http://midwest.chicagofedblogs.org/archives/2006/05/midwest_energy.html]
With energy price spikes grabbing the headlines, economists are rushing to provide perspectives and context on the impacts of
today’s fossil fuel scarcity. Because energy prices were so low for such a very long time, some of us had gotten out of the
habit of focusing in our policy discussions on the role of markets in determining price and availability, and how market
prices can help economies adjust to temporary scarcity. Now, to our general horror, there are scenes of people picketing
gasoline stations in protest of high prices and the like. Perhaps we have neglected to educate the public about how energy
prices are generally set competitively in global markets. More importantly, from a longer term perspective, we need to
remember that rising energy prices are often the best policy to encourage conservation by consumers and to enhance
supply by producers.
By the standards of recent history, households are not generally in an energy crisis. In a recent Chicago Fed Letter, staff
economists David Cashin and Leslie McGranahan examined U.S. household energy consumption over time and across groups. They
report that recent shares of household expenditure on energy have not approached their historic highs. Energy consumption
amounted to roughly 7% of household expenditures between 1990 and 2004, on average, versus the highs of 11% experienced in the
early years of the 1980s. As of 2005, the share had only crept up to 8.5%. While the authors offer no projection for 2006, I can offer a
rough appraisal.
Turn- higher prices increase supply and efficiency in industries

The Spike 07 [news site, Classic price control crisis, Oct 12, http://ivo.co.za/2007/10/12/classic-price-control-crisis/]
If that means prices are going to rise, fine. I’d rather pay more for electricity and actually get it, than pay less and be
told by my state electricity supplier to invest in “gas bottles and other emergency equipment”.
As Friedrich Hayek said, the cure for high prices is high prices (hat tip: Neil Emerick, Free Market Foundation). Only when prices
are permitted to rise will they attract competition and investment. In turn, this competition will result in lower profit
margins and a systemic decline in prices. But much more importantly than providing cheap electricity efficiently, only
by permitting prices to float freely as demand dictates, will supply rise or fall to match that demand. Price caps on
electricity can have only one outcome: shortages.
Turn- increased prices save money in the long term

Tabarrok 01 [Alexander Tabarrok is Research Director for The Independent Institute, Assistant Editor of The
Independent Review, and Associate Professor of Economics at George Mason University. He received his Ph.D. in
economics from George Mason University, and he has taught at the University of Virginia and Ball State University,
Raising Electricity Prices Will Save Money, July 30, http://www.independent.org/newsroom/article.asp?id=8]
Swapping lower prices today for higher taxes tomorrow is not a good trade. Future taxpayers will pay higher taxes
whether or not they conserve electricity today. Future taxes create costs in the future but they do not have any
offsetting benefits on electricity consumption today. If instead we raise prices today, we not only reduce our taxes
tomorrow but we also create incentives to reduce our total electricity bill.
Reducing the demand for electricity will save consumers and taxpayers money. We will consume less at higher prices
and a reduction in demand will reduce electricity prices. One reason prices have risen so high is that on many hot days
California is pushed to the brink where total available supply meets demand. Squeezing the last watt of electricity out of generators
pushed to the maximum is much more expensive than producing the average watt.
Turn- spikes key to inform companies of the threat, and to encourage tem to reevaluate their
electricity units
Business Wire 07 ["Off Peak" Residential Water, Space Heating Offers Benefits for Electric Utilities, Nov 1,
http://findarticles.com/p/articles/mi_m0EIN/is_2007_Nov_1/ai_n27431235?tag=content;col1]
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MONTROSE, Colo. -- Peak load constraints and dramatic wholesale market price spikes are encouraging electric utilities
to reevaluate the value and benefits of promoting residential demand response and "off peak" water and space
heating programs. Three utilities will offer their perspectives in a webinar titled "Residential Demand Response Program Design and
Implementation" to be presented on Thursday, November 8, 2007 at 2:00 p.m. Eastern. Details are at
www.marketdevelop.com/webinar.html.
This Market Development Group webinar is co-hosted by the Peak Load Management Alliance with Marathon Water Heaters and
Steffes Corporation.
Three utilities will explain how they develop and implement programs that aggressively promote electric space and
water heating in ways that help manage residential energy demand through direct load control or innovative rate
design. The presenters will include:
* "How Demand Response Activities Reduce Wholesale Power Costs" by Ed West, Director, Telecommunications and Control, Dairyland
Power Cooperative
* "Marketing Space and Water Heating with Energy Control" by Theresa Drexler, Senior Market Planning Specialist, Otter Tail Power
Company
* "WattWatcher[R] Time-of-Use Program Guarantees First-Year Savings" by Mark Schwantes, Director of Corporate Services, with Suzy
Bynum, Energy Management Advisor, LaPlata Electric Association
This webinar will help other electric utilities better understand how demand response and "off peak" marketing
programs are increasing net revenue margins while reducing wholesale power costs and supply constraints. The webinar
is intended for senior and mid-level staff at private, public and cooperative utilities interested in developing and implementing off-
peak and demand response programs. This agenda will have something of interest to introductory as well as advanced audiences.
Internal Link Turn – Spikes Help Econ

Electricity price spikes cause increase in cost-recovery initiatives, including energy efficiency
and an RPS
PR Newswire 6/6 [Dramatic Rise in Fuel Prices Prompts Proposed Cost-Recovery Increase in N.C. Rates,
http://findarticles.com/p/articles/mi_m4PRN/is_2008_June_6/ai_n25489613?tag=content;col1]
RALEIGH, N.C., June 6 /PRNewswire-FirstCall/ -- The same global economic influences that have caused prices to rise
dramatically at the gas pump have pushed up the cost of other fuels in recent months. The increase - particularly in
the price of coal used in electricity generation - has prompted Progress Energy Carolinas to seek an increase in the fuel
component of the rates paid by the company's N.C. customers.
The company today filed a petition to increase rates by about $424 million, to address the significant under-recovery of fuel expenses
from prior years and the anticipated higher expense of fuel for the next year. The company also has filed to recover expenses
associated with the implementation of energy-efficiency and demand-side management programs, as well as a
renewable energy portfolio standard, both of which are required under the state's energy law enacted in 2007.
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AT Spikes  Inflation
No link between prices and inflation
EEI 08 [EEI is the association of U.S. shareholder-owned electric companies, Edison Electric Institute, Electricity:
What A Bargain!, May 12, http://www.getenergyactive.org/value/prices.htm]
That’s because electricity prices—unlike the prices for most other goods—did not keep pace with the rate of inflation for
many years.
From 1987 to 2007, electricity prices rose, on average, by 1.8 percent per year, while inflation rose at a rate of 3.1
percent per year. Overall, the price of one kilowatt-hour of electricity (in nominal dollars) has increased by 43 percent since 1987,
while the prices of other consumer goods like gasoline, health care, housing, food and beverages, and transportation have increased
at much higher levels.1
Prices don’t effect inflation- trends prove

EIA 04 [Energy Information Administration, part of DOE, Electricity Retail Price Fact Sheet , Oct 27,
http://www.eia.doe.gov/cneaf/electricity/page/fact_sheets/retailprice.html]
Trends in real electricity prices—prices from which the effects of inflation are eliminated—show somewhat different results.
U.S. retail electricity prices declined through the 1960s, increased through the 1970s and mid-1980s, and have been
decreasing steadily since. Currently, the Nation as a whole is enjoying the lowest real electricity prices since the late 1960s (see
graph).
Empirically, fluctuations don’t lead to inflation and the Fed would control it anyway
Reuters 03 [U.S. inflation in check as energy prices plunge, Nov 18,
http://www.icsmag.com/Articles/Breaking_News/20eaa6854bd88010VgnVCM100000f932a8c0____]
WASHINGTON, Nov 18 (Reuters) - U.S. consumer prices held steady last month as plunging energy prices offset increases
in the cost of food, homes and lodging, the government said on Tuesday in a report that showed little change in inflation
trends.
The consumer price index, the most widely used gauge of U.S. inflation, was unchanged in October, the Labor Department
said. The so-called core index, which strips out sometimes volatile food and energy prices, rose 0.2 percent.
Markets largely shrugged off the data, which came was close to expectations. Economists had expected both the overall CPI
and the core index to rise 0.1 percent.
Analysts said the report showed a lack of inflation and suggested the Federal Reserve could keep overnight borrowing
costs at a 1958 low of 1 percent for some time to try to spur employment growth without worrying about prices flaring.
San Francisco Fed President Robert Parry, speaking in Tucson, Arizona, suggested the central bank could afford to be patient on rates
because inflation was unlikely to rise much with joblessness high and a high rate of unused industrial capacity.
Electricity has a small impact on inflation

RBA 01 [Reserve Bank of Australia, Statement on Monetary Policy, Nov,
http://www.rba.gov.au/PublicationsAndResearch/StatementsOnMonetaryPolicy/Boxes/2001/2001_11_e_box.pdf]
Electricity prices affect the CPI directly through households’ consumption of electricity, and indirectly as changes in
input costs faced by businesses are passed on to prices of other goods and services. Electricity has a weight of 1.8 per
cent in the CPI and, in the near term, as the majority of households will be covered by regulated contracts containing
subdued price increases, the direct effect on inflation will be fairly small. Although electricity comprises less than 2 per cent
of total intermediate inputs used in production, it accounts for much more in selected industries – electricity comprises up to 8 per
cent of intermediate inputs in parts of the manufacturing industry. The size of recent price increases for some businesses will have a
significant effect on their overall costs and may feed through to consumer prices. R
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Steel
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AFF – Non Unique

Non-Unique – steel prices are increasing in the status quo
Ogg 8 (Jon, Editors of 24/7 Wall St., Goldman Sachs & Massive Steel Prices (X, NUE, ATI, STLD, SCHN, GNA, WOR, AKS, ROCK, RS,
CMC), March 20th, http://www.247wallst.com/2008/03/goldman-sachs-m.html) //am
Goldman Sachs is out with a call raising its steel company earnings targets after above expectation steel prices and
tighter supplies that represent a physical steel shortage. It sees some US steel prices rising from $700 recent targets
up to a new $850 target per short ton. It also sees 2009 prices above 2008 prices and sees wider spreads with raw
steel compared to scrap costs.
Non-Unique – steel prices have soared over the past year

Lieberman 6/2 (Jonny, published on the thetruthaboutcars.com. More Bad News: Steel Prices Nearly Double, 2008,
http://www.thetruthaboutcars.com/more-bad-news-steel-prices-nearly-double/) //am
This year's trend towards– let's face it folks– inflation continues. Just as our bodies are 75 percent water, the average modern car
contains 2400 lbs. of steel; the average SUV is comprised of 3000 lbs. of the stuff. In late 2007, steel was selling for $535 a ton.
Today? How's $1,035 per ton grab you? It's grabbing steel execs you know where. No, there. According to Automotive News,
tensions are rising as steel makers tear up contracts. They're demanding more money from automakers, who are of
course resisting. Regardless, ArcelorMittal, the world's largest steel maker, is about to impose a $250 per ton
surcharge. That's about 20 to 40 percent over what current contracts stipulate. Long story short, look for the price of your next car
to be about $500 higher. Also, this might be a great time to invest in carbon fiber futures.
Non-Unique – electricity and steel prices have already reached high levels
Kramer 7/1 (Becky, The Spokesman-Review, Newsprint Firm Fights Upgrades: Rising Electric Rates at Issue, 2008,
http://www.redorbit.com/news/business/1458613/newsprint_firm_fights_upgrades_rising_electric_rates_at_issue/) //am
Jul. 1--Two decades ago, when Ponderay Newsprint Co. built a plant on the Pend Oreille River in Usk, Wash., cheap
electricity was one of the draws. The plant makes paper for more than 100 newspapers, including publications of McClatchy Co.
and Gannett Co. Inc., which are part owners of the plant. In this rural corner of northeastern Washington, Ponderay Newsprint paid
one of the lowest electrical rates in the state as a customer of the Pend Oreille County Public Utility District. For years, the relationship
was cordial. The utility district owns the Box Canyon Dam, which generates more electricity than the county's 13,000 residents can
use. Ponderay Newsprint became the utility's largest customer, purchasing half of the dam's electricity. Last week, however,
attorneys and managers for the utility and Ponderay Newsprint sat stiffly across from each other in Spokane County
Superior Court. The divisive issue: $122 million worth of upgrades to Box Canyon Dam. The utility says the 50-year-old
dam needs new turbines, which will boost the dam's electric output by 8 percent and improve fish passage for endangered
bull trout, plus a host of other improvements. Ponderay Newsprint says it can't afford the higher electric rates that will result from the
work, some of which is required in the dam's new federal license. According to Ponderay Newsprint's estimates, the work will
cost the plant $8 million annually in higher electric rates, amounting to a 50 percent rate increase. That threatens the
viability of the plant, which employs 180 people in an economically distressed area, company officials said in court
documents. "It makes it more difficult for us to remain competitive in our industry," added Tom Garrett, Ponderay
Newsprint's human relations manager. On Wednesday, the company will ask Judge Kathleen O'Connor for an injunction. Ponderay
Newsprint wants the court to prevent the utility district from signing a mediated agreement with the federal government to complete
the dam's relicensing requirements, until the $122 million in improvements can be vetted at a civil trial. "The escalating costs of
this project are alarming," said Garrett, who said the initial cost of upgrading the turbines was $17 million. "This spring
... it was clear to us that the public utility district was going ahead with the turbines, with or without our approval. That's when we
went to court." Officials at the utility district acknowledge that costs have risen dramatically since the late 1990s, when the turbine
project was first discussed. The new turbines now carry a $76 million price tag. The utility plans to spend another $46 million to
replace other 1950s-era equipment at the dam. "Unfortunately, there's been kind of a perfect storm here in the commodity market,"
said Jack Snyder, a consultant for the utility district who says higher metal prices are partly to blame. The turbines are made of
stainless steel and the generators are mostly copper wiring. Copper prices have tripled in the past five years, and steel
prices have also shot up, Synder said. Protecting endangered bull trout was also costlier than anticipated, he said. The utility
planned to install one fish-friendly turbine to aid bull trout migration on the Pend Oreille River and reduce the dissolved gases that
give young fish gas-bubble disease -- a condition similar to the diver's disease known as the bends. The Federal Energy Regulatory
Commission, however, required two fish-friendly turbines as part of the relicensing. Snyder said the utility eventually opted to make
all four turbines fish-friendly so it wouldn't have to pay for two turbine designs.
Non-Unique – the rise of steel prices is inevitable
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Muzzi 4 (Doreen, Farm Press Editorial Staff, High steel prices from suppliers impact farming, April 17th,
http://westernfarmpress.com/mag/farming_high_steel_prices/) //am
Prices of hot-rolled steel have risen 66 percent in the last eight months, to nearly $500 a ton in February, according to Greg Ibendahl,
an agricultural economist at Mississippi State University in Starkville, Miss. “There seems to be no end in sight to the higher
prices. Steel is now priced at the time of delivery, something that has not happened in three decades. What's more,
some suppliers are even charging $800 per ton to guarantee delivery of cold-rolled coils in April, and other mills are
making delivery only at the market price in effect when the steel ships. Some other steel mills are levying surcharges
and limiting orders,” Ibendahl says. Dennis Short says the 4-inch by 6-inch rectangular tubing he frequently uses in his
Short Line Manufacturing business in Shaw, Miss., has jumped in price from $4 per foot quoted in the last days of 2003 to
$6.43 per foot by the end of February. “I was quoted a price of $5.54 per foot that I thought would be good for the
month of February, but when I ordered a bunch of steel tubing Feb. 22 that price was no longer any good. The price for
rectangular tubing jumped to $6.43 per foot by the end of February, and has increased a few more times since then,”
Short says.
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The Steel Industry is already going down
Patterson 7/2 (Michael, reporter for Bloomberg, U.S. Stocks Slump as Oil Surges; Dow Average Enters Bear Market, 2008,
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAqckw708F4M&refer=home) //am
Nucor, the largest U.S.-based steel producer, slid $10.29, or 14 percent, to $61.94. U.S. Steel lost $21.95 to $153.40.
The S&P 500 Steel Index tumbled 13 percent, the steepest drop since September 2002. The gauge is still up 2.7
percent this year. Demand for primary metals dropped 2 percent in May, the Commerce Department said today.
Bookings for iron and steel fell 1.7 percent. GM said yesterday it will cut North American production this quarter by
about 12 percent after its June U.S. auto sales fell 18 percent.
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AFF – Imports Solve

Importing steel solves high costs
Jackson 08 (Dale, producer at Buisness News Network, China's energy crunch a chance for power play, 3/18,
http://www.lexisnexis.com.proxy-
remote.galib.uga.edu:2048/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4083680301&format=GNBFI&sort
=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4083680304&cisb=22_T4083680303&treeMax=true&treeWidth=0&csi=303830&d
ocNo=1) //am
Chinese authorities are also aggressively pursuing alternative energy sources such as wind and solar power, and
attempting to supply the growing global alternative energy market. More than 20 plants have been built to produce
polysilicon - a vital ingredient for solar panels. But polysilicon is extremely hazardous and a recent news report on China's refusal to
install costly protective technology caused a selloff in publicly traded solar power companies such as SunTech Power, China Sunergy
and Markham, Ont.-based Canadian Solar. Mr. Brebner holds out little hope for alternative energy as a short-term solution. "The
magnitude requirements for energy within China are so vast I think it's not really going to make a difference over the next five to 10
years" he says. UBS expects power demand in China to rise 12.5 per cent in 2008 - prompting rationing and a continued
push by the government to limit domestic aluminum and steel production. Either way, analysts say China will likely
need to rely more on imports. Mr. Brebner says that scenario could create opportunities in power-related
commodities along with global aluminum and steel suppliers such as Alcoa Inc., United States Steel Corp., Norsk Hydro
of Norway and Russia's Mechel OAO.
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AFF – alternatives to steel solve high

prices
Newly Developed fibers are a financially advantageous alternative to steel.
Bagsarian 04 (Tom. Writer in the concrete producer, Stealing from steel: the skyrocketing price of steel has precast
and ready-mixed producers switching to fibers, June,
http://findarticles.com/p/articles/mi_m0NSY/is_6_22/ai_n6062482) //am
A few years ago, Lamarre Concrete Products tested a fiber reinforcement system, but the Greenville, N.H., precast
producer decided not go ahead with the program. "We found it wasn't economical to make the switch at that point,"
says manager Mike Lamarre. But that was then, and this is now. A lot has changed--namely, the price of steel rebar and
mesh. With these high prices, producers and their contractor customers are giving fibers a closer look. And they like
what they're seeing. With the price of steel going up, now is an excellent time to make the switch. In early spring,
prices were so volatile, some buyers of steel were being told the quotes were only valid for one hour. Buy the steel at
that price at that moment, or risk paying a higher price later the same day, they were told. In addition to raging steel
prices (see sidebar on p. 19), Lamarre suffered the double whammy of limited availability. "Prices started increasing at the end of last
year," Lamarre explains. "We were shopping around to get the best price and we found price was less of a problem than actually
getting ahold of the product that you needed. Many times, it was not available." Lamarre is speaking of 6x6, No. 10 wire mesh for
septic tanks. "Normally, lead times are a couple of weeks," he says. "It's in stock and you just have to line up a shipper. They were
telling us about lead times of six weeks. We've never had to deal with that sort of lead time." The producer used Strux Synthetic
Structural Fiber Reinforcement from Grace Construction Products as an alternative to wire mesh. They poured several septic tanks
with various dosages of the fiber and performed some destructive testing. It met within 5% of the 6x6, No. 10 wire mesh and within
the tolerance for replacing that portion of the reinforcement. The fibers add to the cost of the concrete, but this is a wash, considering
the steel it replaces. "Even though the Strux is slightly more expensive, the labor savings is going to offset that cost, and then some,"
Lamarre adds. Customers, probably oblivious to the switch to fibers, have been pleased with the results, Lamarre says.
If steel prices continue to rise, fiber will replace steel

The phones started ringing off the hook in January at Van Der Vaart Inc., owner of four Sheboygan Concrete ready-mixed plants in
Wisconsin. Steel prices have become "a real concern," especially for small contractors who were caught off guard by the
increases, says sales manager Rich Lohr. Customers were seeking an alternative to rebar and wire mesh, particularly 6- and
10-gauge. The producer has been using steel fibers and a blend of steel and polypropylene fibers from SI Concrete,
mostly for poured walls and flatwork. Both contractors and owners have been pleased. Fibers offer other advantages,
in addition to cost and supply. It's easier to place concrete with fibers, compared to stepping or tripping over wire mesh
and rebar. It's a labor savings for customers. Concrete with fibers also is easier to handle. "From time to time, someone gets
cut on the wire," says Lamarre. Fibers are easier to place and that makes scheduling trucks much more reliable. "If the
concrete is going on multiple mats of wire mesh or on rebar, we really don't know how scheduling is going to go until they get halfway
through the pour, which can be difficult," Lohr explains. "However, if it's steel fiber or polypropylene, the reinforcement's already in
the concrete. If they tell me it's going to take 20 minutes, I'm going to believe it."
Customers will start switching to fiber if steel prices continue to surge

Producers and contractors will face a big question if or when steel prices fall to levels of a year ago: Will fibers lose
their momentum in favor of rebar and wire mesh once again? "Customers like using fibers better and I think they'll
continue to do so," says Lohr. "I'd rather see them go with fibers, even if we make a little less money because I think it makes a
better product, which is going to help the entire market." Steel prices had leveled by the middle of April, he adds. It doesn't
necessarily take a surge in steel prices to sell fiber-reinforced concrete. THE CONCRETE PRODUCER previously reported how Rinker
Materials, based in West Palm Beach, Fla., sold 1 million yards of fiber-reinforced concrete in a single year. That wasn't last year; it
was 1998. Circle the reader service number for more information from the manufacturers of these fiber products.
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AFF – Impact Takeout – Steel Industry

Collapse
As complaints about the steel industry are lessening and as demand is increasing, the steel
industry remains healthy
MEPS News 4 (HIGH STEEL PRICES ARE NOW STARTING TO BITE, International Steel Review, 11/22,
http://www.meps.co.uk/viewpoint11-04.html) //am
The sharp rise in the price of steel over the last year or so has come as a shock to many consumers. Users, notably
construction companies and manufacturers, have been complaining about the cost of their most important raw
material. Their balance-sheets have in some cases suffered a severe jolt. Buyers’ concerns are understandable. Never
have they faced price increases on this scale. In fact, they have had their steel on the cheap for decades: by any
measure, the trend in steel values has been way below the level of inflation for more than 20 years. It was the steel
companies’ profits that suffered. We detect growing signs of acceptance by end-users. Complaints about price hikes
appear to be lessening. Steel producers report success in getting sizeable price adjustments from their largest
customers. In Japan, for example, major automobile manufacturers are said to have agreed to pay an unprecedented
second price increase this year for their steel sheets: normal practice is for one annual agreement. Leading European
strip product mill Arcelor says 90 percent of its purchasers in the automotive sector and two-thirds of its packaging
customers have agreed to increases in contract prices for 2005. The gains are at least 20 percent and in some cases
as much as 50 percent: but this still leaves them below spot market rates which for cold rolled coil have gone up by
close to 70 percent since this time last year. US manufacturers of domestic appliances, so-called “white goods”, are
lifting prices in order to offset a growth in raw material costs. Appliance makers have announced price increases of
between 5 and 10 percent from the start of 2005. They expect to be successful, which means the consumer will pay
the higher price of steel. In the automotive sector, Delphi is among the major steel users who have issued profits
warnings blamed on escalating input costs. At the same time it expressed concern about the financial stability of some
of its smaller sub-contractors. Several US component manufacturers have declared bankruptcy. Yet these very sharp
increases in steel prices do not seem to have done serious harm to demand. Even excluding China, total steel
consumption so far this year is up by 5.7 percent. Availability of steel, rather than the price, is still the first concern for
many users. To take one specific example: output of structural steel fabrications in the UK is at a 15-year high this
year, despite the rise in steel costs. With the squeeze on raw materials set to continue for the foreseeable future, we
do not expect the days when steel was cheaper than potatoes to return any time soon.
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AFF – collapse inevitable – there are

other threats
China’s rapidly expanding steel industry is already limiting the power of our domestic industry
[insert cite]
C: Major Threats There are two threats to the domestic steel industry’s ability to maintain its strength in the
commercial market and, on that basis, its vital role as a defense industry supplier: One is the high rate at which China
is expanding its steelmaking capacity and, more recently, the rapid growth of Chinese exports of steel mill products to
the United States. The other is foreign government subsidies for the purpose of stimulating the growth of steelmaking capacity.
China Unquestionably, steelmaking capacity in China has expanded at an unprecedented rate, as is illustrated by the
relevant numbers contained in the Report. Unfortunately, much of the remaining discussion is considerably off the mark. This is
difficult to explain, given the wealth of available information about the internal Chinese politics of industrial growth and the struggle
among the fiefdoms of power. Are the authors of the Report so overburdened with work that they do not have the time to keep up
with even the most essential readings? Alternatively, they might be unwilling to perform alterations on their slogans, once they set
them afloat, for fear of not being consistent (consistency being a core virtue of the U.S. steel industry). At any rate, word must have
gotten around to them by now that the central government of China lacks the capability of keeping a tight rein on its steel industry.
In fact, no one seem to have much control over the entire industry. However, individual provinces hold a great deal of sway over the
actions of steel companies operating within their boundaries. Each province is pushing for growth, because that is what maximizes
their tax revenue. The provinces harboring the bulk of China’s steelmaking capacity have shown little interest in
coordinating their policies regarding the steel companies in their respective domains or, for that matter, in promoting
mergers across provincial boundaries. Consequently, there is a chaotic aspect to the manner in which the industry
expands both capacity and export volume as well as to steel pricing. For this reason, any discussion of industrial or
trade policy cannot totally circumvent some distinction regarding the division of labor and the division of power
between the central government and the provincial governments. In many instances, local authorities as well have
some influence over the actions of companies in their region. From their high-altitude view of China, the authors of the Report
fail to discern such distinctions. Instead, they insist on the use of such non-specific and, in the case of China, not very meaningful
terminology as “China’s government remains intimately involved in the steel industry,” “the growth of China’s steel sector has been
heavily influenced by government intervention,” and “government-directed industrial policy.” As noted, they may have thought these
terms up years ago, felt comfortable with them and—regardless of non-congruent evidence, decided to stay with them. How happy
the (central) government bureaucrats in China would be if they commanded the kind of control over the steel industry which the
Report attributes to them. Another problem has to do with the discussion of China as a non-market economy (NME). In NMEs, most
businesses are publicly financed, owned and controlled. To call such funding a subsidy, as the authors of the Report do, therefore
makes little sense. They also apply that appellation to acts of ”favorable tax treatment as well as export-credit and R&D support.”
The question arises, compared to what? Did the authors take the trouble of thoroughly investigating the Chinese tax, export-credit
and R&D systems and then to verify that, on average and over an extended period, the steel industry was taxed at a lower rate and
received more support in the other two areas than a large sample of other heavy industries in China? If they did, they might have
been so kind as to furnish a few of their sources plus some more detailed findings. Subsidization Any reader who made it this
far should be warned, the worst is still to come. It comes in the form of a relentless pounding with sickeningly
repetitious verbiage aimed at the ominous policies of unidentified foreign governments. There is “government support
and aid” that “inevitably contribute to excess production and market-distorting international competition.” But it is the
last two short paragraphs--bristling with references to “foreign government intervention,” “measures taken by foreign
governments,” “inappropriate foreign government interventions,” and “continued foreign government interventions”—
that should leave no doubt in a reader’s mind that foreign governments are insidious and they are trying to get us
Many will not be able to resist being captivated by such a high-caliber and profoundly enlightening investigation.
However, others may conclude that—to paraphrase an expression in the last paragraph—the domestic steel industry is
in serious jeopardy, if this Report represents its best efforts in the area of economic analysis.
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AFF – steel not key to military

The innovation of more advanced weapons makes steel a necessity of the past
Martin Anderson, a senior lecturer in management at Babson College in Wellesley, Mass, does not agree. He depicts the scenario
of being cut off from a steel supply as highly unlikely. Rather, he says, the U.S. would probably "take over the foreign
source with nuclear weapons." If the U.S. were cut-off, he believes recycling available scrap would be a sufficient
enough source of materials. In addition, Anderson is opposed to the protection of domestic steel from foreign markets.
In his words, "the easiest way to keep a domestic industry is to open it to the full forces of global competition." Robert
Reich, a former U.S. Secretary of Labor and current professor of social and economic policy at Brandeis University in Waltham, Mass,
takes a similar view. He feels that steel is less critical to national defense than in times past. He believes that, "new
technologies [have] provided many substitutes for steel."
Breakthroughs in intelligence trump the need for domestic steel

Finally, Edward Turzanski, a political science professor at LaSalle University in Philadelphia, believes that traditional assets such as
provided by the steel and petroleum industries are no longer as important in the face of international conflicts. He
would rather see the further development of breakthrough technologies that aid military intelligence. In Turzanski's
words, "By far, the most important areas of technological challenge are maintaining qualitative advantage in air
delivery of military personnel, material, and ordnance - - and [in] those technologies which allow the U.S. to discern
the capabilities and motives of allies and adversaries."
The military uses very little steel

Lynch 1 (Michael W., contributing editor from reason magazine, Cold Steel The U.S. steel industry needs massive failure, not
another bailout, December 6th, http://www.reason.com/news/show/34286.html) //am
The union argues that past government guarantees of pensions and loans would cost billions if the firms fail. But those costs are
sunk, and are the result of bad policy subsidizing ill-conceived private agreements. That's hardly an argument for putting taxpayers
on the hook for billions more in health care and retirement benefits, and passing higher costs on to consumers. As for national
security, the U.S. military uses very little steel, 0.02 percent of domestic steel delivered. "The military argument is not
only bogus," notes Dan Griswold, associate director of the Cato Institute's Center for Trade Policy Studies, "but in so far
as it's significant it cuts the other way." Why, after all, would we want our military to spend more on a major input than
necessary?
The amount of steel that the military uses is only a very small fraction of what the industry
produces
Finally, the protectionists suggest that there are national security reasons to prop up ailing steel firms. Relying on
international sources of steel during times of war is unwise, they claim. In reality, the U.S. military’s demand for steel
is only a small fraction of our national output of steel and our domestic suppliers can easily meet that demand. From
virtually every perspective, tariffs on steel will do little more than raise prices for consumers to subsidize an industry
that is not viable in its current configuration. Nonetheless, the steel industry continues its search for federal
assistance. Steve Miller, the new CEO of the now bankrupt Bethlehem Steel, is no stranger to Washington. A key executive at
Chrysler when it received its bailout in 1979, Mr. Miller is banking on Washington one more time to bail out his new industry. And if he
has his way, tariffs are just the beginning of Washington’s payoffs to the industry. Many in steel industry have their eyes on a
taxpayer bailout of their “legacy” costs.
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Boosting reliance on domestic industries is an unreachable goal – a globalized industry can
fulfill our goals as we will not be at war with every country at once
McKenna 5 (Ted, journalist of the journal of Electronic Defense, Support your local armsmaker: the defense industry is as global
as, if not more than, any other industry. Does this hurt or help a nation's military effectiveness?, August, Gale Group Databases) //am
Like personal computers that include components made in many different countries, military technologies today, from jet aircraft to
radios to naval ships, may ostensibly be American or French, but probably consist of parts made around the world. Generally
speaking, economists say globalization is a good thing: it drives competition among nations and the businesses within
nations, with consumers able to purchase the best products at the best prices. But does globalization risk putting a
country in a weak position militarily? What if pure competition results in a country increasingly purchasing its weapons
from other countries? Will it be cut off from its sources of supply in time of crisis? A recent symposium at the US
Industrial Defense College in Washington, DC, debated the matter, with participants reaching mixed conclusions. Many
of the speakers at the June 2 symposium on the "US Defense Industrial Base: National Security Implications of a Globalized World,"
held at the National Defense University at Ft. McNair, noted both the shrinking number of US defense contractors and the increased
use by the US and other countries of overseas suppliers. Dr. Jacques Gansler, a former undersecretary of defense for acquisition,
technology, and logistics, noted that, following the fall of the Berlin Wall and the end of the Cold War, over 50 defense suppliers in the
US began consolidating into what is today about a handful of major vendors. Cutbacks in defense spending account for much of the
consolidation. "America demanded a peace divided." Gansler said. "The defense budget was cut by $100 billion, and this affected
weapons procurement first." Too many shipbuilders and too many aircraft plants existed to fill the shrinking demands by the military,
so consolidation had to happen. Also driving consolidation in the industry has been greater overseas competition lust as clothing
manufacturers like Nike have seen the need to move labor overseas where it is cheaper, or else lose out to competitors with lower
costs. US defense manufacturers have also outsourced production offshore, if only in its acquisitions of technologies that make up
large weapons platforms. Will consolidation lead to less innovation and higher prices for the US military? Attendees at the
symposium said it may indeed. Competition for defense contracts today, particularly large ones, is generally between no more
than three companies, and often just two, and this may not be enough to ensure that the buyer gets the best deal possible. Students
of economics would have a hard time arguing that two suppliers will create much competition. They would call it a duopoly, said Dr.
Kenneth Flamm, the Dean Rusk Chair in International Affairs at the University of Texas Lyndon B. Johnson School of Public Affairs.
Benefits of Competition But a global defense industry means more overseas competition for local vendors Bidders for US
contracts today are often from other countries. The current competition to provide the US Army with new cargo aircraft
is a prime example: the parent companies of the two contenders are EADS and Finmeccania, both of which are
European, although the two competitors have US companies operating as the prime contractor (see "Rivals Vie for US
Army Cargo Program," JED, July 2005, p. 17). Inevitably, the influx of foreign bidders for US contractors prompts
protectionism. Rep Duncan Hunter [R-CA], chairman of the US House of Representatives Armed Services Committee, has sought to
pass laws preventing the US DoD from purchasing defense products with less than 50% US-made components. Other legislation
pushed by US lawmakers would require that all machine tools used in the manufacture of defense products be US-made. Probably
such extreme measures won't pass, given their general lack of support among the military leadership and members of Congress, but
the temptation to pass laws mandating purchase of locally made products--or at least to subsidize their production or provide
manufacturers with tax breaks--is not limited to the US. Major defense-contract awards today typically include extensive details about
how a large portion of the work will be done within the country in question. Often, legislators such as those in the US Congress are not
the only advocates of protectionism, the manufacturers themselves drive campaigns like the various proposed "Buy America"
provisions, noted Mark H. Ronald, president and CEO of BAE Systems North America. Military officers themselves are not
necessarily particularly concerned about where weapons come from, however. It's whether they can get what they
need to be effective that matters, they say. Lieutenant General Michael M. Dunn, president of the National Defense University,
said that discussions about "Made in America" drive him crazy, because products manufactured today often have components from
around the world, whether or not people are willing to recognize that fact. Working as a staffer at the Pentagon in 1979 General Dunn
said he was once asked by someone in Congress what percentage of the F-16 was made in the US. Not sure about the answer, he
asked his boss at the time. General Ronald Yates, who told him the answer was 97.2%. Some while later, a member of a Dutch
delegation asked General Dunn the same question, and again General Yates told him 97.2%. "Being pretty good at math. I knew these
numbers didn't add up, so I asked him how this could be. He said, 'I don't really know what the amounts are, so I just tell everyone
97.2%'" Flow of Ideas The defense industry has always been basically global in nature, according to Pierre Chao, senior fellow at the
Center for Strategic and International Studies, who noted that nuclear weapons were developed in the US by German emigre
engineers, as was much of the US space industry. Werner Von Braun, for instance, a former director of NASA's Marshall Flight Center
and a primary designer of the Saturn V launch vehicle, led the team in Germany that developed the V-2 ballistic missile during World
War II. Today, the new generation of ships being built for the US Navy are based on European designs, as is the US Army Stryker
vehicle, which is a Swiss design by way of Canada, Chao noted. Globalization is a fact of the defense industry, and although
countries may try to fight it, they won't win, Chao said. Creating "Buy America" provisions won't result in strong US-
based military technology. They will simply lead to products that are more expensive and probably not as good as the
US would acquire through unfettered competition. If a weapon system consists of components made in Malaysia,
China, the Netherlands, and a number of other countries, then surely the US balances the risks, as it would be unlikely
to go to war with multiple countries at once. In addition, cheaper labor costs overseas simply leaves the US no choice
but to outsource production overseas, or at least to pick and choose what types of products to specialize in
manufacturing. Products like kinetic kill vehicles or antennas are often described as being produced in the US, and yet Alan
Tonelson, research fellow at the US Business and Industry Council Education Foundation, noted that the products may be made up of
hundreds or thousands of components that are themselves not from the US. "What globalization means is that you either go oversees
or your business comes under enormous pressure to compete on price," Tonelson said. "Against China, that is not a competition you
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want to be in." Easy access to new technologies requires military buyers to look worldwide, experts say. Instead of being
the innovator of data-networking technologies, as it was with the Internet, today the military is more and more reliant
on the commercial industry for new solutions (see "Military Takes Page From Consumer World," JED, July 2005, p. 28). More than
any other, the computing and telecommunications industries are leaders in matters of offshore outsourcing, and it is precisely
computing and telecommunications that are the critical components of the development strategies for the most advanced militaries
like those of the US. Data networking, as opposed to the weapons platforms themselves, will make forces lighter, faster, and more
effective, or so the thinking goes. Better communications among forces will permit better tracking of friendly and enemy forces,
targeting, and other issues of command and control (see "The UK's Military Makeover," JED, March 2004, p. 35).
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AFF – Uniqueness O/w the Link

The steel industry will continue to compete
Griswold 98 (Daniel T, director of the Center for Trade Policy Studies at the Cato Institute., Industry Sets Steel Trap for U.S.
Economy, October 23rd, http://www.freetrade.org/node/154) //am
The U.S. steel industry is not about to close up shop. Thanks in large measure to the presence of foreign competition,
American steel companies have been forced to become much more competitive in recent years, with the number of man-
hours required to produce a ton of steel falling from 10.1 in 1982 to 3.9 today. (Some of the more advanced "mini-mills" can produce
a ton in fewer than 2.0 man-hours.) American steel companies remain the dominant players in the domestic steel market,
supplying three-quarters of the 118 million tons of steel Americans consume annually. Despite the rise in imports, most
of the major U.S. steel companies continued to operate at a profit in the third quarter of 1998. Why should the U.S.
economy be hit with a special-interest tax to subsidize an industry that still dominates the world's largest market?
The steel industry is on a massive comeback

Fletcher 6/1 (Michael, The Washington Post, Defying odds, U.S. steel industry making comeback, 2008,
http://www.signonsandiego.com/uniontrib/20080601/news_1b1steel.html) //am
The U.S. steel industry is enjoying a new era of prosperity less than a decade after crippling production costs and lower-priced
imports helped trigger a huge wave of bankruptcies that some thought would leave it permanently tarnished. Buoyed by sharply
reduced employee costs, soaring global demand, dramatic consolidation that has tamped down cutthroat competition and a
weakened dollar that has made imports less attractive, steel prices have tripled in the past five years. For the first time in
decades, companies operating in the United States have added capacity and workers. German steel maker ThyssenKrupp
is building a $4 billion plant in Alabama that is expected to open in 2010 and employ 2,700 workers. Nucor has applied for permits to
build a $2 billion plant in Louisiana that would manufacture iron to supply its processing plants. The Russian giant Severstal recently
purchased the Sparrows Point steel plant outside Baltimore, promising to invest a half-billion dollars to update it and then run it at
capacity. Severstal is also bidding against Essar Steel, an Indian firm, for control of Esmark, which runs a mill in West Virginia. In
addition, the company is expanding its Severcorr plant in Mississippi, which is among about a half-dozen mills expanding across the
country. “There hasn't been this much building in 25 to 30 years,” said Michael D. Locker, president of Locker Associates, a steel
consulting firm. “We are in a new period here. I don't see us going back to the old period of high imports and low prices.” Steel
companies have also become hot investments. As a group they have outperformed the overall stock market by wide margins in
recent years. The American Stock Exchange's Steel Index, which is composed of steel stocks, increased an average of
49 percent a year from 2003 to 2007, while the Standard and Poor's 500-stock index had an average annual increase
of just over 13 percent during that period. So far this year, the steel index has climbed 25 percent, and the S&P is
down 5.6 percent. “If you would have said that was going to happen back in 2002, it would have been thought of as unimaginable,”
said Christopher Plummer, managing director of Metal Strategies, a consulting firm. “What has happened in the industry in
recent years is like night and day.” Less than a decade ago, the domestic steel industry seemed to be collapsing under
a string of bankruptcies and a flood of imports that made steel a potent symbol of the failures of U.S. manufacturing in
a global world. The industry shed more than 400,000 jobs in the United States from the 1980s to the early part of the
current decade. More than 40 companies tumbled into bankruptcy, leaving thousands of retirees without health
coverage and with sharply reduced pensions. Many of the bankrupt companies were later snapped up by private-
equity firms, which were able to restructure the mills into larger, more-efficient enterprises that in many cases found
new investors. The new owners invested in technology, and freed of the pensions and other legacy costs that
burdened previous owners, they were able to run the businesses more cheaply. Now, steel prices are at historic highs,
surging 70 percent in the past year alone, along with the prices of the iron ore, coke, scrap, gas and coal used to make
it. The escalating prices have not dampened demand even during the ongoing U.S. economic downturn, as much of
the steel on the global market is being consumed in China, India and fast-developing areas of the Middle East. “I have
never seen anything like it, and I have been in the business 45 years,” said Barry Rhody, president of E&E Corp., a
steel consultancy. “There has been unprecedented demand for steel.” That demand, coupled with a weak dollar,
spiraling shipping costs and the fact that many steel producers in the United States own mines that produce the raw
materials that go into steel, insulating them from commodity price shocks, has made the domestic industry more
competitive against imports. The price of steel, while perhaps nearing a peak, is likely to remain high because of the
consolidation that has taken place in the industry and the expectation that overall global demand will remain strong,
analysts say. In the past, large swings in the price of steel have been common, as companies were unable to adjust
production to account for routine changes in the business cycle. Adding to the pressure on steel makers, the industry
was highly fragmented, fostering brutal price competition. But now three companies – U.S. Steel, Nucor and AcelorMittal USA –
control nearly 70 percent of the country's production of sheet steel, which is used to make such products as automobiles, highway
guardrails, storm doors and home appliances. That dominance allows the firms to better control price and production levels than in
the past, when big buyers had more leverage in setting price and mills found it more economical to run at full capacity, regardless of
demand. “Today you have fewer but much stronger companies that are able to manage across more volatile conditions more
effectively,” said Nancy Gravatt, vice president of communications for the American Iron and Steel Institute, an industry group. Part of
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the credit for steel's rebirth goes to the pragmatism of the United Steelworkers. The union became a supporter of mill consolidations,
agreed to more job flexibility in labor contracts and went along with a move to replace guaranteed pensions with defined-contribution
plans. The union was able to extract agreements from owners to streamline companies' management ranks and set aside a share of
profits to fund health-care and prescription drug plans for retirees and their families who had lost them in the wave of bankruptcies.
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The industry will always remain and provide a large amount of domestic needs
Arabe 1 (Katrina, ThomasNet Industrial Newsroom, Halting Further Steel Industry Erosion, August 10th,
http://news.thomasnet.com/IMT/archives/2001/08/halting_further.html) //am
It's no secret that the U.S. steel industry has seen much better days. Economists have a few suggestions for renewed growth. At a
casual glance, the U.S. steel industry appears to be humming along nicely – steel shipments have been consistently
high, with 2000 being the best year for shipments since 1981. But underneath the surface the steel industry is steadily
eroding. U.S. integrated steel mills, in particular, are having a tough time. This has become apparent as one major steel producer
after another files for bankruptcy. In the wake of these grim omens there has been no shortage of conjectured explanations for the
industry's current ills. Heads of steel industry associations have taken the line that the illegal dumping of imported steel is to blame.
According to the president of the United Steelworkers of America (USWA), Leo W. Gerard, "The problems…are not of our own making.
Domestic producers are being flooded with steel imports." Taking the assumption a step further, Andrew Sharkey III, president and
CEO of the American Iron & Steel Institute (AISI), advocates government intervention. "The industry needs a sustained period of
import stability. That is the one fundamental issue." Those outside the industry, however, are painting a different picture. "I don't see
any evidence that imports are to blame," says Joseph Zoric, professor of economics at Franciscan University of Steubenville. If imports
are not the culprit, then who is stealing the fire from the integrated steel producers? Industry analysts say a proliferation of U.S. mini-
mills, producing steel at lower costs by using electric-arc-furnace (EAF) technology, have gained a large share of the steel market
over the past 25 years. According to Robert Crandall, an economist at the Brookings Institution in Washington, "The change in
import's share of the market from 25 years ago isn't more than 10%. The big integrated steel companies have lost much more market
share - almost 30% - to mini-mills." Data from the AISI appears to back up these arguments. According to their statistics, mini-mills'
share of raw steel production capacity has expanded from 17.4% in 1971 to 47% in 2000. The Steel Manufacturer's Association shows
a similar increase - 14% to 49% - between 1981 and 2000. By contrast, the AISI estimates that imports account for 22.3% of U.S.
shipments in 2000, only 10% higher than they were in 1973. According to Zoric, "It is competition from the U.S. mini-mills that has
caused the reductions in market share and the reductions in jobs at large integrated mills. When you look closer, you see that the
mini-mills are doing OK and that it is just the big integrated mills that seem to be having problems." According to industry analysts,
factors such as a worldwide overcapacity, devalued currency abroad, a strong U.S. dollar, a rise in gas prices and a struggling
domestic economy have exposed the weak infrastructures of U.S. steel producers. It is apparent, economists contend, that top heavy
management, high labor costs, inflexible work rules and the outdated condition of their facilities have made the integrated mills less
competitive. The mini-mills have exploited the larger mills' slack to make gains on the market. John Tumazos, a steel industry analyst
at Sanford C. Bernstein & Co. LLC, New York, makes the following observation: "Bethlehem Steel Corp. has three times as many
employees as sales warrant. It has more people standing around smoking cigarettes outside its headquarters building than Nucor
Corp. (a successful U.S. mini-mill company) has inside its entire building." Economists point out that U.S. steel producers have only
been achieving returns of 8% when in fact they need profit margins of at least 12% in order to reinvest in technology. This lack of
funds has prevented U.S. steel producers from constructing any new integrated mills in two decades, a situation that has allowed
producers from other countries to gain an advantage. Because of this inequality, hot-rolled steel from U.S. integrated mills is often at
a $100 a ton disadvantage compared to countries such as Korea, where labor costs are lower and the technology is more up-to-date,
or Brazil, where iron ore costs less and is of a higher grade. These dynamics have lead many economists to believe that the
government should refrain from subsidizing failing companies or erecting import barriers. Their advice is to let noncompetitive mills
go out of business. According to John Tumazos, "The worst thing the government can do is subsidize the losing companies
and perpetuate the weak. There will always be a domestic steel industry in the U.S. The question is whether we will
supply 65% or 85% of our [domestic] needs." Others add that if the U.S. steel industry is given another chance, then it
will need to change its management and business plans. Economists assert that, left unchanged, these factors will
condemn the industry to repeat its mistakes. Industry analysts believe that if U.S. integrated steel mills are going to recapture a
significant portion of the market, they will need to be more competitive on pricing. Since steel is considered a commodity, those who
buy it look at price, as opposed to service or quality, as the determining factor. Understanding this to be the case, industry analysts
advocate a radical revamping of steel companies' operations towards cost efficiency. According to Waldo Best, an analyst at Morgan
Stanley Dean Witter, Inc., "They will have to reduce overhead costs and labor costs, change how raw materials are purchased, and
make changes to their manufacturing strategy." They also add that the integrated mills' technology needs to be updated. Others are
advising integrated mills to combine their operations with the more efficient mini-mills, either through mergers or contracts, a move
that would require some companies to go out of business or for the government to address retiree-pension and health-care liability
issues. As these issues stand, healthy steel companies are wary of merging with companies that have liabilities or union contracts
that could siphon millions from shareholders. As far as government intervention is concerned, President Bush has asked the
International Trade Commission to investigate the effects of imports on the steel industry to determine if trade barriers
should be erected. The results of the inquiry are not expected until December. In the meantime there is a great deal of conjecture
over what path the president will take. Charles A. Bradford, of Bradford Research Inc., New York, disagrees with many by predicting
the president will protect the mills, a decision he considers "bad economics." Putting it bluntly, Bradford sums up the opinion of many
economists, "If we continue to support the inefficient and failing companies, not only is that type of investment useless, it is
detrimental to both the domestic steel industry and downstream users of steel in the U.S."
Neg claims are exaggerated – even in a worst case scenario the government would help the
industry like it does now
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Despite efforts by the steel industry to wrap the issue in American jobs at risk due to unfair foreign competition, the
simple facts of the matter suggest the industries' woes are of their own making. Increased productivity and the rise of
more efficient American “mini-mills” have threatened the older steel plants at a time when market demand has slackened.
The mini-mills, which are highly competitive, have grown from a small niche market in the 1970s to a significant
component of America’s domestic steel industry. These mills tend to be smaller and produce products from recycled scrap
metal. They are efficient and require far less labor than the older and larger “integrated steel mills.” While U.S. steel output has
remained relatively constant at 100 finished tons a year for the last thirty years, mini-mills have gone from producing 10 percent of
that output to producing half of America’s steel output. Claims about protecting American jobs ring hollow as well. In the first
place, productivity gains reduced the demand for labor. Where 10 man-hours were required to produce a ton of steel in
1980, less than four are required today (“Steel Quotas Will Harm U.S., Brink Lindsey and Daniel T. Griswold). But more
importantly, there are far more jobs created by those who use steel than those who produce steel. Pushing steel prices higher
through tariffs and protectionism threatens a broader swathe of our economy. Industries that use steel employ 57 workers for every
one worker in the steel industry and steel users account for more than 13 percent of America’s GDP while steel producers generate
only 0.5 percent of the GDP (Dan Ikesnson, “Steel Trap: How Subsidies and Protectionism Weaken the Steel Industry,” Cato Institute,
March 1, 2002). With respect to claims of unfair competition from abroad, it is important to realize that the federal government
has coddled the American steel industry for years. Tariffs and quotas have been used to keep out competitors, as have
the anti-dumping laws and countervailing duties. For example, the Cato Institute found that since 1997, over ¾ of all
antidumping and countervailing duty measures have been on steel products. And according to Dan Ikenson, “If selling below cost
really does constitute unfair trade, U.S. producers have a lot of explaining to do. Under the current definition of dumping under U.S.
law, every U.S. steel company that is losing money is guilty of dumping here in the home market.” (“Steel Trap” Cato Institute, March
1, 2002, p. 4).
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The weak dollar will keep the domestic steel industry healthy
Krouse 5/27 (Peter, Newshouse News, Weak Dollar, Strong Demand Raise Steel Prices, Production, 2008,
http://www.freerepublic.com/focus/f-news/2021944/posts) //am
CLEVELAND, OH — The last time the U.S. economy was in or near a recession, the U.S. steel industry was tanking, too.
Not this time around. U.S. steelmakers are full sail amid the doldrums. That's good news for Northeast Ohio, where several mills
churn out steel for such diverse products as oil wells, farm tractors and drainage culverts. A number of reasons account for the
industry's stability. Less competition, for one. The carnage earlier this decade led to widespread consolidation, leaving three
major producers of flat-rolled steel, used widely in vehicles and appliances: ArcelorMittal, U.S. Steel and Nucor. Domestic demand
plays a part, too. Even though auto production and new-home construction are down, several other U.S. industries that use steel
in their products and equipment remain healthy. The energy sector is one. Agriculture is another. Strong demand overseas also
has helped. It has gobbled up much of the steel that might otherwise be imported to the United States, while those still inclined to
ship here have found the weak dollar cuts into their profits. On the flip side, the weak dollar has made domestic steel
and its end uses more attractive to customers overseas. As a result, steel prices have hit historic levels. "Unprecedented
is really the adjective that sums it all up," said Steve Peplin, chief executive officer of steel user Talan Products in Cleveland. Much of
the price increase has been from surcharges applied to steel because of the high cost of raw materials. Iron ore is way up, evidenced
by the surging stock price of iron ore and coal producer Cleveland-Cliffs Inc. Coal used to make coke for the blast furnace also has
shot up. So, too, scrap metal, the main ingredient in steel produced in an electric arc furnace. Meanwhile, metal users are feeling the
pinch. Talan Products, which stamps out specialty fasteners, expects to pass on much of the steel price increases. "We're not going
to go out of business," Peplin said. Others might not be so lucky. Eventually, as prices rise, steel users look for substitute materials
such as aluminum or engineered plastics. It's not a question of the steel producers making exorbitant profits, Peplin said. It's just
capitalism at work. "They deserve to make some money when they can," he said. In Cleveland, ArcelorMittal's plant along the
Cuyahoga River is running flat out. Last year, the mill produced 2.5 million tons of steel. This year, it's slated to hit 3 million tons, said
Terry Fedor, general manager of the Cleveland mill as well as rolling mills in Weirton, W.Va., and Lackawanna, N.Y., and coke ovens in
Warren, Ohio. "I think a lot of it has to do with the weak dollar," he said. The dollar has kept imports at bay, providing
more opportunity for domestic mills. Also, some of the plant's customers are exporting more, Fedor said. The Cleveland mill
produces a lot of steel for the auto market and those orders have held up, Fedor said, although he couldn't explain why. Also, the
plant recently added Whirlpool Corp. as a customer. The appliance maker has a plant in nearby Clyde, which is where Fedor believes
the steel from Cleveland is sent. Meanwhile, Republic Engineered Products — a Fairlawn, Ohio, maker of steel bars, with major plants
in Lorain and Canton — has been through two bankruptcies this decade. It's now on solid ground as a subsidiary of a Mexican
company. The bulk of its steel goes into auto parts like gears, axles and shafts. Republic has seen shipments drop recently to one of
its major customers, American Axle, which has idled most of its plants because of a labor strike. But several other markets have
picked up the slack, said Ted Thielens, vice president in charge of sales, marketing and planning. The general industrial market is very
strong, he said, and export markets have opened up. Three to four years ago, exports accounted for less than 1 percent of Republic's
sales. Now they're 5 percent to 10 percent. While the company has long sold into Mexico and Canada, the new opportunities have
been mostly in Europe, but also in Brazil and South Korea, Thielens said. Charter Steel's electric arc furnace in Cuyahoga Heights is so
busy the company added a third labor crew to its melt shop in October and plans to add a fourth by April of next year. The electric arc
furnace is where scrap steel is melted to create new steel. As have the other mills, Charter has benefited from the lack of imports.
Overseas steel makers that might otherwise ship to the United States are finding better opportunities in places like Ukraine, the
Middle East, China and India, said Jack Lynch, the company's sales and marketing manager.
U.S. Steel remains too strong to fall – multiple warrants

Simpkins 6/17 (Jason, associate director, Cashing in on Commodities: Gold May Glitter, But Heavy Metals Shine, 2008,
http://www.moneymorning.com/2008/06/17/cashing-in-on-commodities-gold-may-glitter-but-heavy-metals-shine/) //am
United States Steel Corp. (X): U.S. Steel is spearheading a revival in the domestic steel industry. About 30 U.S.-based steel
mills were shut down between 2001 and 2003 as a strong dollar and cheap foreign labor squeezed the American steel
industry. But industry-wide consolidation has reduced production costs and a weak dollar has made U.S.-made steel
more appealing to hungry foreign markets. U.S. Steel shares are up about 46% year-to-date, and are up more than
1,025% from their 2003 levels. Analysts at Deutsche Bank Securities (ADR: DB) just reiterated their “Buy” rating on the
stock, while raising their target price from $165 to $220 a share.
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Auto Industry
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Non-Unique – Auto Industry Weak Now

Non-Unique – Auto Industry weak now
Reuters 08 (July 2 2008, “US Car Sales Hit 15-Year Low, http://www.stuff.co.nz/stuff/4605104a6026.html)
Record fuel prices and declining trade-in values for big trucks and SUVs hit truck sales hard while major carmakers,
including Toyota Motor Corp, struggled to keep up with demand for some popular smaller cars and hybrids. GM was the
industry's main surprise after a sale featuring zero per cent financing for six years allowed the US carmaker to avoid losing sales
leadership in the month to Toyota. In a reversal of recent trends, Toyota trailed GM in June with a 21-per cent sales decline,
reflecting a 31-per cent drop in sales of its trucks like the Tundra pickup. Equally damaging, sales of Toyota's hybrids
including the market-leading Prius hybrid dropped 27 per cent as dealer inventory ran short of demand. "GM was
better than expected, and it looks like Toyota missed a big opportunity in the month," said Jesse Toprak, an analyst
with industry-tracking web site Edmunds.com. Ford Motor Co sales were down 28 per cent, while Chrysler LLC sales fell
36 per cent, the weakest result in the industry. Now controlled by Cerberus Capital Management CBS.UL, the privately held
carmaker relies on light trucks for almost 70 per cent of its sales. By contrast, Honda Motor Co, which boasts the most fuel-efficient
vehicle line-up among major carmakers, bucked the downturn and posted a 1 per cent sales gain. Sales for Nissan Motor Co dropped
18 per cent. The sales rate for light vehicles dropped to 13.6 million units on an annualized and seasonally adjusted basis, down from
15.7 million a year earlier, according to tracking firm Autodata Corp. It was the weakest month since August 1993. Most
analysts and major carmakers now expect full-year US sales to end up near 15 million units, down from 16.15 million in
2007 because of the devastated US housing market, high fuel prices and weak consumer confidence. GM SALES IN
SPOTLIGHT On the adjusted basis tracked by Wall Street analysts and investors, GM's sales were down 8 per cent. Analysts, on
average, had expected a decline of more than 15 per cent, according to a compilation of forecasts. June had three fewer sales days
than the same month a year earlier, leading to a difference of about 10 percentage points between adjusted and nonadjusted figures.
The Auto Industry is already going through an economic crisis and experiencing decreasing
investor confidence
Fowler 08 (Bree Fowler, AP Business Writer, Yahoo! Finance, July 2 2008, “GM shares fall below $10 for the first time
since 1954,” http://biz.yahoo.com/ap/080702/auto_stocks.html)
Shares of General Motors Corp. plunged Wednesday to close below $10 for the first time in more than half a century,
on worries about the company's cash needs and speculation about a possible bankruptcy protection filing down the road. GM shares
fell $1.77, or 15.1 percent, to close at $9.98. Their session low of $9.96 marked their lowest point since Sept. 13, 1954,
when they hit $9.92, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for
splits and other changes. The drop came after a Merrill Lynch analyst cut his rating for GM to "Underperform" from "Buy"
and slashed his price target for the company to $7 from $28, saying that the decline in automotive sales has been
more severe than anyone expected and will likely continue through next year. "We believe there is potential downside in the
stock below $7 and that bankruptcy is not impossible if the market continues to deteriorate and significant incremental capital is not
raised," John Murphy wrote in a note to investors. David Healy, an auto analyst with Burnham Securities, said the $10 mark is a
purely psychological one but highlights the automaker's dramatic share price plunge since the beginning of the year,
along with worries that the company may have to file for bankruptcy protection. GM shares are down about 60
percent this year. "My own opinion is that they're unlikely to file," Healy said. "But the conditions in the auto industry are so
tough for everybody right now, especially for GM, and that's why people see this as plausible." Healy said he thinks GM has enough
cash to get it through the year, along with the ability to obtain additional financing if needed and raise cash through the sale of assets
such as overseas operations. Automakers' shares have taken a beating in recent months, hurt by rising oil prices and a
weak U.S. economy, along with a shift in consumer demand away from gas guzzling sport utility vehicles and pickup
trucks and toward smaller, more fuel-efficient cars and crossovers. Since July 2, 2007, GM shares have tumbled about
74 percent and the company's market capitalization has dropped to $5.65 billion from $21.5 billion. Investors on
Wednesday shrugged off better-than-expected June sales that sent GM shares surging as much as 12 percent the previous day. The
automaker reported an 18.2 percent drop in U.S. vehicle sales from a year ago but retained its traditional U.S. sales lead over Toyota
Motor Corp., which posted a 21.4 percent decline. Analysts, who had expected a much steeper drop, said GM's sales were able to
outpace those of most other automakers because of late-month incentives and double-digit jumps in demand for certain small and
midsize cars. Deutsche Bank's Rod Lache said that while previous incentive programs have resulted in temporary boosts to GM's
market share, they have generally been followed by drops in later months. "If history is any guide, we would expect GM's sales to
experience 'payback' for the pulled forward sales in the months ahead," Lache wrote in a note to investors. The analyst said GM's
market share could drop back to the 19 percent to 20 percent range, down from its June level of 22.1 percent. Meanwhile, Citi
Investment Research analyst Itay Michaeli slashed his price target on GM shares to $14 from $21, citing liquidity fears. "While we do
not believe GM is facing an immediate cash crunch, the urgency to shore up liquidity to navigate through a difficult 2008-09 has risen
significantly in recent months," Michaeli said in a note to clients. He kept a "Hold" rating. Ford Motor Co. didn't fare as well as its
crosstown rival. The Dearborn, Mich.-based automaker said its June sales plunged 27.9 percent, blaming surging gas prices for
knocking its light truck sales down 35.4 percent. Ford shares fell 35 cents, or 7.4 percent, Wednesday to close at $4.36, passing a
multidecade low of $4.41 set the day before. Despite the sales drop, Lache said Ford remains the best positioned among the U.S.-
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based automakers and has the required cash to ride out a drawn out industrywide slump. "In addition, we continue to believe that
Ford is the most 'fixable' of the three U.S. automakers -- it has effectively consolidated itself to two brands, and we still see
considerable cost savings opportunities within the enterprise," Lache said. June was a dismal month for the industry overall,
which posted a 18.3 percent sales drop, according to Autodata Corp. Only Honda, whose lineup is tilted toward smaller and
more fuel-efficient cars, managed to report a sales increase for June -- slightly over 1 percent.
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Non-Unique – Auto Industry Weak Now

The Auto Industry will weaken as the year progresses – prefer predictive evidence
The Detroit News 08 (Christine Tierney, The Detroit News, July 2 2008, “Auto Sales Likely to Get Worse,”
http://www.detnews.com/apps/pbcs.dll/article?AID=/20080702/AUTO01/8 07020333)
General Motors Corp. and Toyota Motor Corp., the biggest players in the U.S. auto market, predicted Tuesday that sales
would fall this year to their lowest levels in more than a decade after already-weak demand tumbled further in June.
Sales of cars and light trucks slid 18.3 percent last month because of record-high gas prices, sinking
consumer confidence and insufficient supplies of the most popular small and fuel-efficient models. The selling pace in
June translated to 13.6 million cars and trucks on an annual basis, the weakest level in 15 years. "This past month's
auto sales clearly reflect a very difficult situation for our customers, and we think it's going to persist for many, many
months to come, possibly longer," said Jim Farley, group vice president of sales at Ford Motor Co. The decline was exacerbated
by the fact that there were three fewer selling days last month than in June 2007. Stripping out the difference, June sales were down
8.1 percent, according to Autodata Corp. As grim as the figures were, they were not as dire as some forecasts -- and GM shares rose
2 percent after the U.S. automaker reported a better-than-expected performance in June. GM's vehicle sales fell 18.2 percent
last month, while Ford's sales tumbled 27.8 percent and Chrysler LLC's sank 35.9 percent. Toyota, which had been
expected by some to pass GM in June, reported a 21.4 percent drop in sales, due partly to short supplies of its most
fuel-efficient models. Honda Motor Co. bucked the overall market trend, reporting a 1.1 percent sales rise, reflecting continued
strong demand for its Honda Accord, Civic and Fit cars. GM said that on an adjusted basis, eliminating the distortion caused by the
different number of selling days, its vehicle sales were down 8 percent in June. "We had a very solid month in a very challenging
industry," said GM's director of market analysis Mike DiGiovanni. While GM executives said they still expect some signs of
recovery in the second half, record-high gas prices have darkened the outlook. "The overall market is depressed. You've
got people worried about housing values. You've got inflation, you've got people worried about unemployment," said Mark LaNeve,
GM's vice president for sales. The automaker cut its sales forecast for 2008 to 14.7 million cars and light trucks. Toyota also lowered
its forecast for the year to between 14.8 million and 15.2 million vehicles. That would make this year's sales the lowest since 1997,
when 15.1 million cars and trucks were sold. "There are so many things that have driven consumer confidence to lows we
haven't seen since the oil embargo of 1973," said Jim Lentz, president of Toyota Motor Sales USA. Toyota is taking steps to
increase supplies of its small Yaris and Corolla cars and will add a four-door Yaris hatch to the lineup, he said. "Limited supplies of
some high-mileage vehicles have been presenting some challenges for us," Lentz said. With gas now topping $4 a gallon, auto
executives reported an acceleration in the shift in demand not only to smaller vehicles but also to smaller engines
within a model line. Seventy percent of the midsize Fusion cars sold in June had four-cylinder engines -- a 13-point increase from
year-earlier levels. "We have dealers screaming for any type of four-cylinder product from us," said Ford's Farley. In recent months,
crossovers have benefited from demand for more fuel-efficient vehicles. But crossover sales fell in June, Ford executives said, because
many prospective buyers are SUV owners whose vehicles' trade-in values have collapsed. The smallest of Detroit's automakers,
Chrysler reported declines across most of its lineup, apart from its new minivans and fuel-efficient Jeep Patriot. Steven Landry,
Chrysler executive vice president for North American sales, described the current selling environment as the fourth "major trough"
since 1960. All automakers are scrambling to rapidly adjust their model offerings to meet the dramatic shifts in
demand. GM has announced big cuts in truck production and plans to launch 13 midsize or smaller cars and crossovers
in the next 18 months. GM's resilience was due in part to a big, late-month promotion featuring zero percent financing, 72-month
loans and cash discounts. DiGiovanni said GM had not increased its incentives significantly from May levels. Over the past year,
however, they have risen by about $650 to $3,454 per vehicle, on average, according to estimates from online auto research site
Edmunds.com. But Edmunds analyst Jesse Toprak said GM has grown more skillful at targeting incentives. "GM has gotten much
better at how they spend their incentive dollars -- how much to spend, for which car, for how long, and what type of incentive," he
said.
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Alt Cause/ Uniqueness o/w Link

The US auto industry is in a recession – too many factors
Krisher 08 (Tom Krisher, Canadian TV, Globe and Mail, May 13 2008, “US auto industry is in a recession, GM exec
says,”
http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20080513.wgmoutlook0513/business/Business/businessBN/ctv-
business)
The U.S. auto industry is in a recession, General Motors Corp. president and chief operating officer Fritz Henderson said
Tuesday. The automaker's No. 2 executive said GM is selling below trends for the third straight year. He blamed the
sales drop on the troubled housing market, tight credit and higher gasoline prices that are sending
consumers from trucks to cars at a rate much faster than the company has ever seen. But Mr. Henderson told a conference of
banking and insurance industry officials in Warren, Mich., that it has cut costs and rolled out new products. GM also is seeing sales
growth in emerging markets. He also said the first quarter was about in line with GM's expectations, but April's sales drop surprised
the company. He said GM sees more downside risk than upside opportunity for the remainder of 2008. The Detroit-based
auto maker cut its industry wide U.S. sales outlook for 2008 to between 15.3 million and 15.5 million light vehicles
from 16 million at the beginning of the year, largely due to plummeting sales of trucks and sport utility vehicles. That's still higher
than Ford Motor Co., which is forecasting 15 million. Some industry analysts have gone below 15 million, a 14-year low. Mr.
Henderson said the 11-week strike at parts supplier American Axle and Manufacturing Holdings Inc. has had only a minimal effect on
the company's retail sales, largely because it had built up a large inventory of pickup trucks and sport utility vehicles at a time when
the market shifted to smaller vehicles. American Axle makes axles, drive shafts and stabilizer bars mainly for GM's larger vehicles. Mr.
Henderson said the strike cost GM $800-million (U.S.) in earnings before taxes in the first quarter, and he said the company agreed to
American Axle's request to kick in $200-million to help end the work stoppage by the United Auto Workers. "We agreed to do that
because we think it would be the most helpful thing we could do" to end the strike, mr. Henderson said. "We're working hard to not be
involved in those day-to-day negotiations." Mike DiGiovanni, GM's executive director of global market and industry analysis, told the
conference the economy will rebound in the second half of the year but the pace would be sluggish. "We're starting to think that
perhaps the trough of this downturn is going to occur in the second quarter," he said. Mr. DiGiovanni said the threat of a huge credit
crunch has passed, and he predicted home prices likely are to fall further. Home construction, which has a big impact on pickup
truck sales, may be near the bottom of a slump, and the rate of decline is slowing, he said. "I guarantee you pickup
sales will come back," he said. GM in the past has focused its advertising too heavily on trucks, but is in the process of
shifting that "to a new plan that's really going to focus on miles per gallon," Mr. DiGiovanni said. He also said GM will roll out
14 new cars and crossover vehicles in the next 18 months, but only one new truck. GM shares fell 36 cents, or 1.7 per cent, to
$20.40, in morning trading.
The auto crisis is caused by a weak health care system, not high oil prices – kills
competitiveness
Labor Research Association 05 (Working life, LRA, April 15 2005, “The Auto Industry Crisis is a Health
Care Crisis,”
http://www.workinglife.org/wiki/The+Auto+Industry+Crisis+is+a+Health+Care+Crisis+(April+1
5,+2005))
After pushing one of the largest companies in the world to the brink of disaster, General Motors executives began their
annual meeting with UAW leaders on April 14 with plans to intensify their push for health care benefit cuts. GM
announced on March 16 that it would report an $850 million loss for the first quarter of 2005 and earn $1 to $2 per share for
the year, down from its earlier forecast of $4 to $5 per share. The company's cash flow is a negative $2 billion. GM's bonds
are now rated just above junk, and it still owes billions to its under-funded pension and retiree health plans.
Ford cut its profit forecast for the year by 14 percent on April 8 and announced that it will not meet its 2006 goal of $7 billion in
pretax profit. Ratings agencies are now poised to downgrade Ford's credit status. Both companies will cut production and accelerate
layoffs for their white-collar workers. GM's salaried workforce has already been hit with substantial job cuts, wage freezes
and higher benefit contributions. There is no ready solution for the financial problems that may easily overwhelm these
companies. Ford is sitting on an inventory of almost 900,000 vehicles and GM faces substantial overcapacity. Although GM
executives continue to claim that they can regain market share, industry analysts uniformly agree that GM and Ford
have permanently lost their position as the leading car companies in the U.S. U.S. market share for the American
automakers fell from 65 percent in 1994 to 42 percent last year. Toyota displaced Ford as the second-largest car seller in the
country for reasons that have nothing to do with Ford's higher benefit costs. The U.S. automakers have been digging their own
graves for years, but GM faces the highest costs because of its misguided expansion two decades ago. The U.S.
automakers have squandered market share and mismanaged resources, but would like to blame benefit costs for the financial crisis
they have been courting for two decades.The financial crisis born of mismanagement leaves the companies facing costs
they cannot cover, including health care costs. GM paid out $5.2 billion for health care benefits in 2004 and expects to
pay out $5.8 billion this year. These benefit costs are part of the total compensation negotiated in union contracts that
traded what would have been higher wage increases for better benefit provisions. Health benefits, including retiree
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benefits, are simply wages delivered in a different form or, in the case of retirees, deferred for payment at a later date.
The U.S. automakers are now pressing for the equivalent of a wage cut for its union workers and take-backs from its retirees. The
costs have been exacerbated by the unwillingness of the Bush administration and Congress to address the catastrophic rise of health
care costs in the U.S. GM's $73 billion liability for retiree health benefits could be covered three times over by the amount
the U.S. squanders every year on administrative costs for its private health care system. China and India will begin
exporting cars to the United States within the next few years. Car makers in both countries benefit from national health care
systems that pay for employee benefits with public funds. The U.S. automakers are moving more production to Canada
where a national health care program provides coverage for workers and their families for less than one-fifth of the
cost of health benefits on the U.S. side of the border. Benefit costs account for 28.8 percent of compensation costs for private
sector production workers in the U.S., compared with 17.0 percent in Japan, 16.6 percent in Canada and 17.6 percent in the United
Kingdom. Three-fourths of the difference in benefit costs stems from the private health insurance system in the U.S. The
Bush administration has a choice. It can preside over the dissolution of what remains of the U.S. auto industry or it can
take the first steps toward a national solution for the health care cost crisis that is distorting labor markets, driving
down disposable income, leaving millions of Americans without health care and creating the largest competitive
disadvantage that U.S. companies now face.
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AT China Threat
China does not pose a serious threat to the United States Auto Industry – timeframe is ten
years
Cooney 06 (Stephen Cooney, Industry Specialist, Resources, Science, and Industry Divison, April 4 2006, CRS Report
for Congress, “China’s Impact on the Automotive Industry,” http://www.fas.org/sgp/crs/misc/RL33317.pdf)
There appears to be a consensus among observers of both the global automotive industry and the industry in China
that China is not yet ready to challenge the major international producers of fully assembled vehicles in their home
markets. Most of the sources reviewed in the context of the present report talk about a competitive Chinese industry in
a five-to-ten year time frame — or even longer. The British experts Graeme Maxton and John Wormald rate China, among
countries still trying to develop an independent auto industry, as having the best chance of doing so. But they are skeptical that
China, with a state-developed plan for the industry and the world’s largest market potential, can achieve this goal
within the near term. Each additional one million vehicles sold per year in China, they noted, is the equivalent of one
week’s worth of sales in the advanced industrial countries. Even if China succeeds in creating an export industry, its
greatest impact in the markets of industrial countries may be in small, low-priced vehicles, which many companies
already import rather than producing locally.
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New Tech Key to Auto Industry

New technologies are key to the success of the auto industry
Mackinnon 08 (Jim Mackinnon, Beacon Journal business writer, June 27 2008, “McCain: New technologies key to
auto industry’s future,” http://www.ohio.com/business/22041624.html)
John McCain, making a visit today to the economically challenged Youngstown area, reiterated support for new automobile
technologies of all kinds. ''The old technologies are not coming back,'' the presumptive Republican presidential nominee said
to reporters on his bus called the ''Straight Talk Express'' on the way to the General Motors Corp. plant in Lordstown. McCain was
expected to speak this morning at a town hall meeting with workers at the plant where the Chevrolet Cobalt and sister
vehicle the Pontiac G5 are manufactured. McCain said he understands the importance of the automobile industry to
Ohio. He said automakers will have a rebirth ''that will be associated with new technologies,'' including hybrid cars,
electric cars and fuel cells. GM said last month that it will add a third shift to the Lordstown complex. The third shift — expected to
start in September — could add as many as 1,000 jobs. GM also said last month that its board had approved production of a new
small Chevrolet car in Lordstown in mid-2010. On other topics: McCain said he supports federal efforts on clean coal technology. ''I
want to invest $2 billion dollars,'' he said. The senator said the home foreclosure bailout bill from Congress ''is fine.'' The proposal
would allow the Federal Housing Administration to insure $300 billion in new loans so an estimated 400,000 borrowers could get
cheaper mortgages. McCain said he would have supported other changes in that package to make it more friendly to homeowners.
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Auto Industry Resilient

The Auto Industry will not collapse – they will innovate to defeat high energy prices
PBS 08 (PBS, Online News Hour, Transcript, June 25 2008, “As Oil Prices Rise, Carmakers Look to Electric Future,”
http://www.pbs.org/newshour/bb/transportation/jan-june08/electriccars_06-25.html)
SPENCER MICHELS, NewsHour Correspondent: For decades, the American public has been taunted with the promise that
noiseless, gasoline-free, powerful, and sleek cars that run on cheap electricity were just around the corner. That
moment may finally be at hand, according to General Motors' chairman Rick Wagoner. RICK WAGONER, CEO, General
Motors: The auto industry can no longer rely almost exclusively on oil to supply the world's automotive energy
requirements. SPENCER MICHELS: Cars that don't use gasoline but run on electricity have long been almost ready, but
batteries that would stay charged for a long ride were not. In 1914, Henry Ford's wife drove around in this electric beauty. And
in the last 20 years, big automakers rolled out a series of electric prototypes and hinted they would be available soon. In 1996, I went
for a ride in a $19,000 all-electric sports car called a Zebra, made by a startup in California whose part-owner thought the future
looked bright. GARY STARR, Zebra Motors: We're taking orders for the first limited run of 500, which will be built next year. SPENCER
MICHELS: But Zebra, like a lot of optimistic electric car makers, went out of business, and its successor company, while producing
scooters, bikes, and some short-range vehicles, has not delivered electric full-scale cars yet. Also in 1996, the most famous electric
vehicle of all was put on the market, General Motors' EV1, which it leased to motorists. But in 2003, GM pulled the plug, recalled the
cars, and claimed the public wasn't ready and the cars were not profitable. The revival of electric vehicles
SPENCER MICHELS: The documentary, "Who Killed the Electric Car," told of how GM and Honda physically crushed all the
electric vehicles they had produced. The film blamed GM and others, including the oil companies, for conspiring to
eliminate non- gasoline vehicles. Whatever happened in the past, GM's boss says, today, much has changed. RICK
WAGONER: I guess I'm not going to spend a lot of time looking into the rearview mirror, but what has changed is energy prices
are up. And I don't think it's a cyclical thing. In addition, there's a lot more focus in society on CO-2 emissions, and it's
making clear to me that consumers have different expectations today and are willing to make different tradeoffs for
fuel economy than they were in the past. And if we want to be successful, we've got to get out in front of that. SPENCER
MICHELS: Some companies already say they are in front. Tesla Motors, in California's Silicon Valley, is starting to produce a two-seat
electric sports car that is selling for $109,000. The company has orders for more than 1,000, selling out its expected first-year
production. Tesla's founder, 36-year-old Elon Musk, who started PayPal, has invested $50 million in the company and has no doubt
about the future. ELON MUSK, Founder, Tesla Motors: I've actually made a prediction that, within 30 years, a majority of new cars
made in the United States will be electric. And I don't mean hybrid; I mean fully electric. SPENCER MICHELS: The Tesla sports car,
called the Roadster, accelerates from zero to 60 in 3.9 seconds, which, I can attest, is breathtaking. ELON MUSK: Well, this is faster
than any Ferrari or Aston Martin currently in production. It has fantastic handling, by the way. I mean, this car will crush a Porsche on
the track, just crush it. It uses half the energy and creates less than half the CO-2 per mile of a Prius. SPENCER MICHELS: It takes
about three-and-a-half hours to charge the Tesla's batteries. The electricity costs about $4, and the charge lasts just 225 miles,
something the company hopes to improve. The battery, of course, is the key to the Tesla. It's powered by nearly 7,000 of these,
lithium-ion batteries, the same kind that powers your computer. And they go into this metal case, which then goes into the car. It
weighs 1,000 pounds. ELON MUSK: This is really about leveraging a completely new technology that the big incumbent car
companies don't really understand that well. And it's something that is well-suited to Silicon Valley, where electrical engineering
expertise is the greatest in the world.
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Alt Energy Solves Auto Industry

The implementation of renewable energy bolsters the auto industry
Haglund 08 (Rick Haglund, Grand Rapids Press, July 5 2008, “Alternative Energy could revive auto industry,
Michigan economy,” http://blog.mlive.com/grpress/2008/07/alternative_energy_could_reviv.html)
Alternative energy could power an economic renaissance for Michigan, experts say, even though the field is tough and
crowded. "It will be extremely difficult because we're competing with 49 other states," said Brett Smith, of the Center for Automotive
Research in Ann Arbor. "Differentiating ourselves will be very important." Michigan's difference could be its battered auto
industry, which is spending hundreds of millions of dollars to develop vehicles that run on biofuels, electricity and
hydrogen. The sense of urgency has picked up considerably with gas prices topping $4 a gallon, new federal
regulations that will boost fuel-economy standards for cars and trucks to 35 miles per gallon by 2020, and worries
about emissions contributing to climate change. Deriving energy from wind, sun and biofuels such as ethanol -- and
producing the vehicles it runs on -- could become an industry rivaling the Internet-driven boom of the 1990s, some say.
"This may be the technology that will have an impact similar to the computer industry over the next 10 years," said Don Grimes, a
University of Michigan economist. As an example, Grimes points to Rochester Hills-based Energy Conversion Devices Inc., which for
decades lost money developing technologies for solar roof panels, nickel metal hydride batteries and more. Today, Energy Conversion
has a stock market value of $2.6 billion, close to half of General Motors' $5.7 billion valuation. Through its participation in a venture
called Cobasys, the company is working on lithium-ion batteries for GM's next generation of hybrids, which would plug into a standard
home outlet. Overall, about 300 Michigan companies employing 50,000 workers are involved in some aspect of alternative
energy, according to an estimate by the Michigan Economic Development Corp., the state's business-attraction and marketing arm.
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Auto Industry Collapse Inevitable

The collapse of the auto industry is inevitable – link can’t overcome Iraq War
Chicago Sun-Times 06 (Jesse Jackson, Chicago Sun-Times, December 12 2006, “Another Iraq Casualty: U.S. Auto
Industry,” http://www.commondreams.org/views06/1212-29.htm)
One casualty of the debacle in Iraq seldom gets much press, but the inevitable focus on the mess in Iraq too often
overshadows other vital challenges. The American automobile industry is hemorrhaging. Today, Ford will announce that it
will offer buyouts to 85 percent of its salaried work force. Ford is looking to lay off a staggering 52,000 employees by
September 2007. Chrysler has already been merged with the German automaker Daimler-Benz. General Motors is gushing red
ink. This industry has been America's industrial stronghold since Henry Ford perfected the assembly line. After
World War II, President Eisenhower's defense secretary, Charlie Wilson, wasn't far off when he said, ''What's good for America is good
for General Motors and vice versa.'' GM was America's signature company. Its unionized employees won what became the foundation
of the American Dream: secure jobs that paid a family wage, with health care, pensions and paid vacations. Now that social contract
is being shredded by the global marketplace. The foolish, ideological commitment to mindless trade policies over the last several
decades has devastated Detroit. U.S. automakers must now compete with companies from Europe and Japan that bear no
health care costs. General Motors has about three retirees for every one autoworker; Ford has two for every active employee.
Toyota in this country has about 100 retirees in total. The health care and pension costs put U.S. automakers at a staggering cost
disadvantage: over $1,200 a car. If they compete on price, they lose money. If they don't compete, they lose market share. At the
same time, we desperately need the industry to move to hybrid and alternative-fuel cars. Detroit is ready to build cars that use
alternative fuels made from corn or grasses. But the oil industry that resists putting in the E85 (85 percent ethanol) pumps.
These would cut the demand for oil drastically -- and put a crimp in their record profits. The Ford layoffs alone will hit
Michigan, New Jersey, Georgia, Missouri and Ohio big-time, and states like Kentucky will feel the pain. It won't stop with
the auto jobs. The auto suppliers, housing markets, hotels, the retail industries that depend on the demand generated
by relatively well-paid auto employees will be depressed. We see the pain caused by the steel industry's decline. But
the steel industry is a pimple compared with the rash of economic losses that the decline of Detroit will cause. Obviously, this crisis
requires urgent, intense national action. Are we prepared to let the auto industry die? If not, what steps can be taken to relieve the
burdens of their health care and pension costs? What should be expected from the automakers in return in terms of investment, jobs
guarantees, fuel efficiency and alternative-fuel cars? What penalties or incentives should be provided to the oil industry to force
proliferation of alternative-fuel pumps in gas stations? How does all this fit into a concerted drive for energy independence? Yet when
the CEOs of the auto industry sought to meet with George W. Bush before the election, he canceled two meetings with them. When
they finally met, an obviously distracted president gave them all of one hour, and nothing was decided. This is catastrophic.
Understandably, the president and his advisers are focused on what may be the worst foreign policy debacle in our
history, in Iraq. But the collapse of Detroit may well be the equivalent defeat in our economic history. Surely
our auto companies' futures cannot be left to a market in which their competitors enjoy massive state subsidies and
mercantile trade policies. We need a considered national policy for our industrial future. We tend to think of Iraq as a
crisis ''over there.'' In fact, it is taking casualties here at home. The cost of the war is evinced not just by the brave
men and women who are sacrificing life and limb, not just by the literal trillions of dollars that will be wasted, but by
the collapse of America's own economy. It remains neglected as our leaders focus on troubles abroad rather than threats here at
home.
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Aluminum
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Non Unique – already uses alternative

energy
The aluminum industry relies heavily on affordable hydropower
States News Service ’07, "NATURAL RESOURCES DEVELOPMENT REMAINS VITAL TO OUR WESTERN COMMUNITIES." States
News Service 28 Feb. 2007. LexisNexis Academic.
"The U.S. Army Corps of Engineers has estimated that breaching the dams would increase electricity bills for Northwest
ratepayers by $300 million, add $40 million to transportation costs, eliminate 37,000 acres of prime irrigated farmland,
wipe out 2,300 jobs, and cut personal income by $278 million a year. The Corps says the lion's share of the impact would fall
on Eastern Washington and the Columbia Basin. Entire farming communities dependent on irrigated cropland could
disappear, and breaching the dams could be the death knell for Washington's struggling aluminum industry, which
relies heavily on affordable hydropower." Don Brunell, President of Association of Washington Businesses, A Message to Judge
Redden
Non-unique and turn: aluminum giant Alcoa uses alternative energy in the status quo, relies
heavily on hydropower, geothermal
Scherr 07. Scherr, Edmund F: USINFO Special Correspondent, "New Technology Helps Alcoa Cut Greenhouse Gas Emissions,
Waste; Aluminum Giant Cut Its Greenhouse Gas Emissions 25 Percent in Three Years." State Department Documents and Publications
11 Sept. 2007. LexisNexis Academic.
Alcoa, a world leader in aluminum manufacturing, is also leading private-sector efforts to reduce greenhouse gas
emissions and use renewable energy resources. With operations in 44 countries, the U.S.-based company's policies and
innovations have a global effect. The company has been named by the World Economic Forum in Davos, Switzerland, as one
of the top companies in sustainable use of natural resources. Alcoa is also a founding member of the U.S. Climate
Action Partnership, a collection of businesses and environmental groups lobbying the U.S. government for legislation
limiting greenhouse gas emissions. In 2000, the company laid out its goals for reducing its impact on the global
environment through innovation and new technology. The goals included deep reductions in greenhouse gas emissions
and waste product discharges. Alcoa reached its goal of reducing greenhouse gas emissions by 25 percent (from 1990
levels) in 2003, seven years ahead of schedule, even though aluminum production increased during that period. The
company believes that the aluminum industry can be "greenhouse gas neutral" by 2020. Renewable energy is a key to Alcoa's
efforts to reduce its environmental impact. It has used hydroelectric power as a major energy source for its smelting
operations around the world since 1916 and now is evaluating the feasibility of building in Iceland the world's first
geothermal-powered aluminum production plant.
Alcoa uses and endorses solar – proves it doesn’t hurt the industry
M2 07, "Alcoa Installs Photovoltaic Solar Power System At Kawneer Facility, California." M2 EquityBites 24 Aug. 2007. LexisNexis
Academic.
Alcoa (NYSE:AA), a provider of primary aluminium, fabricated aluminium and alumina facilities, reported on 23 August that it has
installed a 588,000 Watt, roof-mounted photovoltaic solar power system at its Alcoa Building and Construction
Systems' Kawneer manufacturing facility in Visalia, California, USA. The solar project will generate clean and reliable
renewable energy and demonstrate the environmental and financial merits of harnessing energy from the sun to
generate electricity on an industrial scale, the company said. The power generated by more than 4,300 Uni-Solar thin
film solar panels will provide around 80% of the 200,000-square-foot facility's electricity needs, during periods when
demand on the electricity grid is highest. In addition, over 200 solar light tubes were installed to supplement the artificial
lighting in the facility with day lighting.
Energy-intensive sectors such as aluminum already working to cut emissions

Claussen 07. CLAUSSEN, EILEEN: PRESIDENT OF PEW CENTER ON GLOBAL CLIMATE CHANGE. "Testimony At the House of
Representatives, Committee on Foreign Affairs." The Pew Center on Global Climate Change. 15 May 2007. 6 July 2008
<http://www.pewclimate.org/what_s_being_done/in_the_congress/may1507.cfm>.
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A third potential element is sectoral agreements, in which governments commit to a set of targets, standards, or other measures
to reduce emissions from a given sector, rather than economy-wide. In energy-intensive industries whose goods trade
globally, which are the sectors most vulnerable to potential competitiveness impacts from carbon constraints, sectoral
agreements can help resolve such concerns by ensuring a more level playing field. Such approaches are being
explored by global industry groups in both the aluminum and cement sectors. We believe it is also worth exploring sectoral
approaches in other sectors such as power and transportation where competitiveness is less of an issue but where large-scale
emission reduction efforts are most urgent.
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Michigan
Non Unique – Aluminum costs will rise

Aluminum prices expected to rise, higher energy costs cause smelter closures
Resource Investor July 1. Nones, Jon. “Aluminum Prices to Soar Higher in Next Couple Years.” Resource Investor. 1 July 2008.
7 July 2008 <http://www.resourceinvestor.com/pebble.asp?relid=44013>
Ron Haruni, editor of Wall Street Pit, has published a new article entitled, “Aluminium Prices Are Expected to Soar by More Than
30%.” Haruni writes aluminium prices are expected to rise by about 33% in the next couple of years. Analysts forecast
that the aluminium price will hit $4,000 a tonne, already up 50% in two years. Electric power represents about 20% to
40% of the cost of producing aluminium, power costs have risen by about 50% for the industry in the past five years.
Higher energy costs could lead to smelter closures.
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No Link – energy use declining

Energy use for aluminum production declining
Aluminum Association 08. "Industry Overview." The Aluminum Association. 2008. 7 July 2008
<http://www.aluminum.org/AM/Template.cfm?Section=Overview&Template=/CM/HTMLDisplay.cfm&ContentID=26509>.
The aluminum industry is a major industrial user of electricity. Since the electrolytic process is the only commercially
proven method of producing aluminum, the industry has on its own pursued opportunities to reduce its use of
electricity. In the last 50 years, the average amount of electricity needed to make a pound of aluminum has been
slashed from 12 kilowatt hours to about 7 kilowatt hours.
The aluminum industry is partnered with the DOE to reduce its energy consumption
Aluminum Association 08. "Industry Overview." The Aluminum Association. 2008. 7 July 2008
<http://www.aluminum.org/AM/Template.cfm?Section=Overview&Template=/CM/HTMLDisplay.cfm&ContentID=26509>.
The aluminum industry employs the latest technology to make the process of refining bauxite ore and reducing alumina to
aluminum more efficient and energy saving. Through its partnership with the Department of Energy (DOE), The
Aluminum Association is vigorously working to help the industry make greater gains in reducing energy consumption.
For instance, there are a variety of ongoing technology projects and activities under the DOE's "Industries of the Future"
program. Additionally, The Aluminum Association, acting on behalf of the industry, has completed a series of vision and technology
roadmap documents. These roadmaps have defined energy and environmental performance targets, identified technology barriers,
and recommended areas of technology that are ripe for precompetitive, collaborative efforts among the industry, government, and
academia. In addition to a generic industry technology roadmap, others have been developed relating to advanced electrode
technology for smelting and fabrication technology specific to the automotive markets.
Energy represents 33% of the total cost of aluminum smelting

RNCOS 06. "US Aluminum Market (2006)." SteelGuru. Sept. 2006. RNCOS. 7 July 2008
<http://www.steelguru.com/reports/detail/US_Aluminum_Market_%2525282006%252529.html>
Energy and labor are two of the major costs for companies in the aluminum industry. Each of these represents a share of
about 33% of the total cost of smelting production in the US. Kentucky is one of the most attractive regions with favorable labor
and energy costs, along with low state & local taxes. The overall cost of doing business in Kentucky is 15% below the US average.
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No link – aluminum industry durable

Aluminum companies can use methods such as surcharges to offset energy prices – Kaiser
proves
CNN Money June 30. “Kaiser Aluminum to Add Energy Surcharges.” CNN Money. 30 June 2008. 7 July 2008
<http://money.cnn.com/news/newsfeeds/articles/apwire/a004fe75c2d69e882c74c35c18115aee.htm>
Aluminum products maker Kaiser Aluminum Corp. said it will add surcharges to all new orders of fabricated aluminum
products beginning July 1 to offset rising costs for natural gas, electricity and diesel fuel. The company said commodity
prices for natural gas and diesel fuel was about 60 percent higher in May compared with the average 2007 price.
"These energy prices are spiraling and highly volatile, so we've elected to introduce a surcharge as the most
transparent method to recover these costs," Chief Executive Jack A. Hockema said. The company said the charges will be
based on indexes provided by the U.S. Department of Energy and will be updated monthly.
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No Link – Carbon price

Aluminum industry not impacted by carbon price
Economist 08. “Emissions Suspicions.” The Economist. 19 June 2008. 7 July 2008.
<http://www.economist.com/finance/displaystory.cfm?story_id=11581408>
Even those supposedly vulnerable industries do not seem to have wilted in the face of a carbon price, according to two
contributors to the study, Richard Baron and Julia Reinaud of the International Energy Agency, a Paris-based consultancy-cum-
watchdog for energy-consuming nations. Ms Reinaud cannot even detect any impact on aluminium, which is as energy-
intensive and widely traded as any good. She points out that a shuttered smelter in Germany reopened in 2007,
despite the rising cost of emissions. There are many explanations for this resilience. One is that booming demand for
aluminium and other commodities has kept all manufacturers profitable. Product specifications that vary from country to
country, meanwhile, help to protect refiners from foreign competition. And Europe has handed out so many free permits to pollute
that the costs of meeting its emissions cap have been negligible so far.
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No Impact – industry wont collapse

Aluminum industry doesn’t collapse as energy prices increase – adjustments and empirics
prove
Brooks 03. "Insights on the Global Aluminum Industry." Alcan Inc. Martha Brooks, Senior Vice President, Alcan Inc., President,
Alcan Rolled Products Americas and Asia and Member of the Board of Directors, The Aluminum Association, to the 2003 China
Aluminum. 12 Dec. 2003. 7 July 2008
<http://www.alcan.com/web/publishing.nsf/Content/Insights+on+the+Global+Aluminum+Industry>.
However, that happy era came to an end, in the U.S. and elsewhere, with the so-called OPEC crisis. The tremendous escalation in
energy costs that followed events of 1973 in the Middle East couldn‘t help but hit hard at an industry that, essentially,
involves the conversion of electrical energy into a usable and stable material — an “energy bank”, as some have
described it. We also experienced a significant increase in publicly-owned or sponsored smelting capacity in various
regions of the world — capacity that tended to be less sensitive, in the short term, to the disciplines of the marketplace
and the pressures for return on investment. I don’t mean to imply, however, that 1973 marked the abrupt end of good times for
the U.S. industry as a whole. In fact, the downstream end of the business had yet to reach full speed — more about that in a minute
or two. The OPEC crisis was only the first of three major shocks that rocked the global industry during the latter
decades of the 20th century. The second major shock was the inception in late 1978 of commodity trading in
aluminum ingot on the London Metal Exchange. This sparked the beginning of “disintermediation” or the breaking
apart, of the supply chain, triggering a shift from producer pricing to terminal-market pricing. That led, in turn, to
effective economic separation of upstream primary operations from downstream fabricating activities – a reality that
has been evolving and maturing since.
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Electricity Prices 1 NC Shell ....................................................................................................... .....5

Uniqueness – Energy Prices are low ...............................................................................................6

Renewables Expensive....................................................................................................... .............7

Solar Energy Expensive ........................................................................................................... .......8

Hydrogen Cars Expensive.............................................................................. ...............................13

Hydroelectric Power Expensive.....................................................................................................14

Wind Power Expensive..................................................................................... .............................16

Links- TPS............................................................................................................................ ..........20

Internal Link – Price spikes will happen ........................................................................................23

Internal Link – Price Spikes will hurt the economy ........................................................................24

Uniqueness/Brink – Steel Prices barely manageable.....................................................................39

Uniqueness/Brink – steel industry weak........................................................................................40

Uniqueness – steel industry recovering/good................................................................................41

Link – Alt Energy Increases Steel Prices........................................................................................44

Internal Link – high prices bad for domestic industry....................................................................47

Impact – Steel Prices................................................................................................. ....................48

Impact – Military .................................................................................................................... .......51

Impact – government spending ........................................................................................... .........60

Domestic Steel Industry Good – Laundry List ...............................................................................61

Impact Scenario – collapse of the auto industry............................................................................62

A2: Non-Unique........................................................................................................ .....................63

A2: People will cut demand for steel.............................................................................................64

A2: alternatives to steel......................................................................................... .......................66

A2: Weak Dollar....................................................................................................................... ......67

Auto Industry............................................................................................................................... ..68

Internal Link – Industry Collapse...................................................................................................72

Internal Link – Fuel Standards ......................................................................................................73

Impact – Economy .......................................................................................................... .............74

Competitiveness – China ............................................................................................... ...............78

China Stable...................................................................................................................... ............79

Internal Link – high energy prices hurt aluminum.........................................................................81

Internal Link – Aluminum industry key to auto industry................................................................83

Impact – Competitiveness.......................................................................................... ...................84

Semi Conductors......................................................................................................... ..................85

HIGH ENERGY PRICES HURTS SEMICONDUCTER............................................................................86

HIGH ENERGY PRICES HELP SEMICONDUCTORS............................................................................90

SEMI CONDUCTERS KEY........................................................................................ ........................91

SEMICONDUCTORS HURT MILLITARY.............................................................................................97

SEMICONDUCTORS HURT MILLITARY.............................................................................................98

SEMICONDUCTOR INDUSTRY ON BRINK......................................................................................100

SEMICONDUCTOR MARKET IS STRONG......................................................................................102

SEMICONDUCTOR MARKET STRONG...........................................................................................104

SEMICONDUCTORS MARKET WEAK.............................................................................................105

SEMICONDUCTOR MARKET IS GREEN................................................................................ ..........110

RENEWABLES KILL SEMICONDUCTOR MARKET............................................................................111

SOLAR GOOD FOR SEMICONDUCTORS.............................................................................. ..........113

SEMICONDUCTORS KEY FOR NUKE POWER.................................................................................116

SEMICONDUCTOR KEY TO WIND POWER.....................................................................................117

AFF Answers .................................................................................................................... ...........118

Non Unique – Prices High............................................................................... .............................119

Link Turn – Renewables Stabilize Prices................................................................................... ....120

No Internal Link – Spikes Won’t hurt Econ ..................................................................................122

No Internal Link – Spikes Won’t hurt Econ- A/T: Kills grid.............................................................129

Spikes Inevitable ................................................................................................... .....................131

Spikes Won’t happen........................................................................................................... ........136

Internal Link Turn – Spikes help Econ..........................................................................................140

AT Spikes  Inflation........................................................................................................ ...........142

AFF – Non Unique................................................................................................... .....................144

AFF – Imports Solve........................................................................................................... ..........147

AFF – alternatives to steel solve high prices...............................................................................148

AFF – Impact Takeout – Steel Industry Collapse...........................................................................150

AFF – collapse inevitable – there are other threats......................................................................151