Credit: Whitehouse.gov, Pete Souza

President Obama seems to have a newfound love of oil.

In his State of the Union Address last night, he emphasized the development of domestic energy supplies, particularly oil and natural gas, but also solar and wind power. 

Although he called on Congress to pass legislation creating a clean energy standard, as he did last year, it was clear that he's focusing on supporting clean energy by doing things within his administration that don't require Congressional support.  

Last year Obama mentioned the word "oil" twice, the first time to call for the United States to end its dependence on it, and the second time to call for funding clean energy development by decreasing tax breaks for oil companies.

This year he mentioned oil nine times (10 if you include a reference to a regulation that categorized cow milk as an oil). Gone was any sense that oil was an addiction, as his predecessor George Bush had called it, or something the United States had to reduce its dependence on. He praised the fact that the U.S. produced more oil last year than it had for eight years, and he said that he is opening more areas for offshore drilling. When he called for the development of alternatives to oil, his reason was that we just don't have enough of it in the United States. 

Although Obama sounded supportive of oil, he did call for an end to subsidies for oil companies and for Congress to "double down" incentives for clean energy. He also said he would continue efforts to make sure oil companies can contain oil spills like the one in the Gulf of Mexico. 

Last year, Obama said that U.S. oil dependency could be broken by turning to biofuels and electric vehicles. He didn't mention either this year. This is in spite of the fact that progress has been made on both fronts. 

Last year was the first full year of sales for new electric cars from GM and Nissan, and several more automakers will start selling electric vehicles this year. The first commercial cellulosic ethanol plants could also start operation this year. Sales of electric vehicles, however, have been slower than expected. And, by now, cellulosic ethanol plants were supposed to have been making hundreds of millions of gallons of ethanol, according to a federal mandate.

While Obama didn't mention electric vehicles, he did talk about high-tech batteries, saying that the U.S. is "positioned" to become the leading manufacturer of these batteries. Presumably, he's referring to electric car batteries and the large factories for making them that the government has subsized. The U.S. certainly is building a lot of battery factories. But it will be difficult for a new U.S. battery industry to compete with the established battery industry in Asia, and in any case, the success of the new factories will largely depend upon sales of electric vehicles increasing dramatically.

If Obama's biggest emphasis last year was on biofuels and electric cars, this year it was on natural gas. He praised domestic natural gas as a resource that is both clean and cheap, and he said that exploiting it could employ 600,000 jobs by 2020. He didn't say how many of those would be new jobs.

Although Obama praised natural gas, he didn't mention any specific support for the industry. Indeed, his only pledge was that he would regulate it, requiring companies to disclose the chemicals they use in the fracking process for extracting natural gas from shale.

Some support for natural gas could come from the clean energy standard—in lieu of a cap and trade system for reducing carbon dioxide emissions—that Obama asked Congress to pass last year, and again this year. The standards would have supported natural gas over coal, since burning it emits about half the carbon dioxide emissions as coal. 

Although Obama mentioned the clean energy standard, that's not really where he focused his attention last year. Instead, he's been working to push forward clean energy by means that don't require Congressional approval, such as new EPA limits on power plant pollution and tougher fuel economy standards. He spoke of working without the support of Congress in his speech, declaring that his administration would allow more construction of clean energy on federal lands, and that the U.S. Department of Defense would increase its use of clean energy sources. Expect Obama to continue this strategy, especially in an election year, when Congress is expected to get even less done.

A year after it first received funding, the Advanced Research Projects Agency for Energy (ARPA-E) got high marks from the congressional committee that spearheaded its creation in its "first annual checkup." In a hearing of the House committee on Science and Technology, the new agency, which is designed to promote the research, development and commercialization off "game-changing" energy technologies, received praise for quickly sorting through 3,700 applications to make 37 awards in its first round of funding. It also fine-tuned its awards process, with the second round of funding going into specific areas of research identified in a series of workshops. Some of the projects that ARPA-E funded have since attracted private support.

The agency's fate, however, remains unclear. It's funding so far has come from last year's stimulus package, not the regular budget, and Congress denied its request for funds for the current fiscal year. [Clarification: Congress did this because the agency already had sufficient funds from the stimulus package to continue operation. The appropriations bill included the following language: "The decision not to provide any additional funding for ARPA-E in fiscal year 2010 beyond the funding already provided does not in any way suggest a lack of commitment to this new program by the Committee."] The President's 2011 budget includes nearly $300 million for the agency, but at a time when Congress is facing pressure to cut spending, that money might not make to the final budget.

John Garamendi (D-CA), noted that President Obama wants a freeze on discretionary spending. In order to do that, while also adding new funding for ARPA-E to the budget, Congress will have to cut funding or subsidies elsewhere. Garamandi has his sights set on the oil industry. "We're spending 10 to 15 billion dollars a year subsidizing an extraordinary industry, the oil industry. We've done if for a century. Why in the world are we continuing to do that?"

One concern raised by several of the committee members was whether ARPA-E's efforts will lead to American jobs. Brian Baird (D-WA), noted that technologies such as advanced batteries, which were invented in the United States, have been "exported" and are now being designed and produced in other countries.

John Denniston, a partner from the venture capital firm Kleiner Perkins Caulfield & Byers who testified before the committee, emphasized that the first step is promoting innovation through ARPA-E--and argued that jobs would follow. "First things first. Let's get the breakthroughs," he said. Denniston also warned that putting restrictions on the use of the technologies once they are produced--such as not allowing them to be produced overseas--would hurt entrepreneurs, since it could lead other countries to restrict technology flowing into the United States.

Electric vehicles may line the long Electric Avenue at the North American International Auto Show in Detroit this week, but you're unlikely to see any in your neighborhood--few companies sell them, and fewer still make cars you can drive at highway speeds.

That's going to start changing in the next couple of years as major automakers roll out electric vehicles and plug-in hybrids (that can commute in all-electric mode, using a gas engine to power longer trips). But because of the high cost of batteries, these cars will be pricey, likely costing several thousand dollars more than comparable gas powered vehicles or requiring separate battery leases on top of the cost of the car.

Because the automotive battery industry is just getting started, there's also a lot of room for cutting battery costs by improving manufacturing and simplifying designs, according to the international consulting firm PRTM. Based on a two-year survey of battery and auto manufacturers and suppliers, it estimates that by 2020, the cost of batteries will drop 50 percent, even without technical breakthroughs in the batteries themselves. For example, while battery packs are now custom-designed for new electric vehicles, modular designs that can be easily adapted for different models could lead to higher volumes and lower costs says Oliver Hazimeh, the head of the global e-Mobility Practice at PRTM. Manufacturers will also set up manufacturing plants closer to customers, to save on shipping costs. Breakthroughs in materials and other technological advances could bring down costs even more.

With such a drop in battery costs, electric vehicles would be just as affordable as gas-powered cars, if you include the fact that electric cars cost less to operate--recharging them costs a lot less than filling up a gas tank, Hazimeh says. One manufacturer, Tesla Motors, claims you can go 250 miles on $5 of electricity. Going that far on gasoline, in a car that gets 30 mpg, would cost about four times that much.

But here's the trick--most people don't calculate how much a vehicle will cost to operate. Convincing them that electric cars are a good deal will require educating consumers, and perhaps inventing some creative financing, Hazimeh says.

Still, it's going to take some time for electric vehicles and plug-in hybrids to catch on. PRTM estimates that by 2020, these cars will only account for 10 percent of new vehicle sales, an estimate that assumes they will catch on faster than hybrid vehicles have.