Low Oil Prices Called a Trojan-Horse Gift

Michael Kinsley offered a cynical view of America’s current energy situation in his article (Editorial Pages, April 6), “No Pity for the Energy Belt.”

Kinsley argues that unemployment and recession in Texas, Louisiana, Alaska and elsewhere due to falling oil prices are justly deserved--a proper punishment for past prosperity. His desire for revenge is understandable, but it has no place in a public policy debate about something as important as the nation’s future supplies of energy.

Short-term price declines bear a long-term cost that will be paid by all Americans, and Kinsley, along with many politicians, either don’t realize it or are unwilling to face up to it. They are all too eager to grab Saudi Arabia’s short-term gift--in truth, a Trojan horse--of low oil prices.

The United States is in an energy war of attrition. If the war continues unchecked, it will soon cost our country at least 1 million barrels per day of domestic oil production (over 10%) as we curtail enhanced oil recovery projects and shut down high-cost stripper production. The price war will also stimulate demand and reduce exploration activity. Adding up all of these factors, we project a near doubling of imported crude oil and products by the early 1990s if the price war continues.

The cost to the country will soon be high, including lost tax revenues, increased unemployment, weakened banks, a decimated domestic petroleum industry and, most important, diminished national security as we return to excessive dependence on OPEC oil

Kinsley should be able to understand this is not the free market at work. It is predatory price cutting designed to cripple America and return OPEC to the power it exercised so willingly in the 1970s.

My concern is not directed to the economic health of the Sun Belt or any one state or any one company; my concern is for the nation as a whole and its ability to control its own energy destiny.

Kinsley’s proposal to tax domestic and foreign oil would discourage usage (commendable) but would do nothing to promote domestic exploration and production development. In addition, such broad-based consumption taxes tend to become permanent, irrespective of changing future conditions.

In contrast, a flexible security fee on imported crude oil and refined products (as I and others have proposed) would both restrain energy demand and stimulate domestic production and reserve replacement. A properly structured fee--one without exceptions--would provide a floor price for domestic crude oil at a level necessary to ensure long-term development of America’s energy reserves.

With such a fee, if imported prices go down, the fee goes up (taking crude oil to the total of, say, the 1985 average price of $27 a barrel). If prices go up, the fee would go down. Lower prices have been with us such a short time that restoring them to levels of only three months ago would have a minimum impact on the economy.

Oil is a strategic commodity for the entire United States--not just certain regions. All Americans benefit from a strong domestic petroleum industry. We must not forget the lessons of the 1970s and again surrender control of our energy future to OPEC.

FRED L. HARTLEY

Los Angeles

Hartley is chairman and chief executive officer of Unocal Corp.