Tripping Into an Energy Minefield : Shortsighted Oil Policy, Not the Gulf, Should Be Our Concern

Are we crazy? It’s hard to watch the ongoing turmoil in the Persian Gulf without a sense of despair. The clear message, one that has been repeated often since the early 1970s, is that the United States and the entire industrial world could lose vital oil supplies in a moment. But the message is ignored. There is now hardly a peep in Washington about adopting the essential policies to limit our vulnerability.

Everyone debates the wisdom of escorting reflagged Kuwaiti tankers. No one looks beyond the current crisis. We need an oil excise tax of 20 or 25 cents a gallon to discourage consumption. We need a larger strategic petroleum reserve, as do the Europeans and Japanese. These measures wouldn’t isolate industrial nations from a catastrophic cutoff of Mideast oil. But they would provide time to cope with the social, economic and (probably) military consequences of a prolonged loss of Persian Gulf oil.

Of course, our position today is stronger than during the crises of the 1970s. Although in 1986 the Persian Gulf contained two-thirds of the non-communist world’s 619 billion barrels of proven oil reserves, the non-communist world used less oil--despite larger economies and bigger populations--than in 1973. American cars average 18 miles per gallon of gasoline on the road, compared with 14 in 1973. In Europe, coal and nuclear power cut oil use for industrial and utility boilers. New oil supplies from Mexico, the North Sea and developing countries have reduced production by the Organization of Petroleum Exporting Countries.

We also now have strategic petroleum reserves. The U.S. reserve totals 530 million barrels, equal to about 90 days’ worth of U.S. imports. Excess commercial oil stocks bring total available oil inventories to about 120 days’ worth of imports. In Japan and Germany, equivalent figures are about 80 days’ worth of imports. The available stocks of all industrial nations equal 100 days’ worth of total imports, but more than 200 days’ worth of Persian Gulf imports. The industrial world could probably cope with a prolonged cutoff of Persian Gulf oil today.

Nevertheless, today’s stocks are inadequate. The problem is not just one for today or tomorrow. It stretches well into the next century. Of course, no one can say precisely what the needs will be 10 or 20 years from now, because no one can judge the odds of a catastrophic cutoff, when it might happen or how long it might last But the trends are clear. Modest economic growth will probably raise oil consumption, while non-Persian Gulf reserves will be depleted and output will fall. Dependence on Middle Eastern oil would rise.

Energy planners assume that any upheaval in the Persian Gulf would reduce oil supplies only temporarily. Whoever wins would need oil revenues, it is reasoned. That’s plausible. The worst case examined in a recent Reagan Administration study on energy security was a six-month cutoff of Middle Eastern oil. Unfortunately, the Middle East has a way of defying Western logic. Future conflicts might not have a clear winner. The Iran-Iraq war has dragged on for seven years; Lebanon is in a state of permanent civil war.

But our policy is to dawdle. The U.S. strategic reserve is being filled at a desultory rate of 75,000 barrels a day. At that pace the target of 750 million barrels will not be reached until 1995. Even that is in-adequate. The reserve ought to be enlarged to the original target of 1 billion barrels. But there is no current planning to do so. These things take time. Site selection, environmental studies and engineering require up to five years of preparatory work.

As for an oil tax, it has drifted off Washington’s political agenda. The Department of Energy estimates that a 25-cent-a-gallon tax would reduce the use of oil by 1 million barrels a day by 1995. Over a year, that is the equivalent of having 365 million more barrels in the strategic petroleum reserve. Considering today’s large federal budget deficits, a tax on oil ought to be a natural.

There is no solace in the fact that the United States relies on the Persian Gulf countries for only a small portion of its oil imports. Without adequate reserves or effective international sharing, a crisis would trigger a bidding war for all available supplies. The strains on the Western alliance would be enormous. The common threat requires common precautions by all industrial nations.

But we cannot urge our allies to take steps that we won’t take. Of course, there are practical problems. An oil tax would be inflationary. To minimize that effect, it ought to be introduced slowly--say, a penny a month. The main objectives are clear: to promote energy efficiency and to fill the strategic reserve while oil supplies are ample.

These measures involve present costs and discomforts to guard against a possible future hazard. It’s a matter of political prudence and social discipline. Events from the Middle East--the recent riots in Mecca, the ongoing Iran-Iraq war--are constant reminders that the hazard is real. A sensible society would take heed. And so the question remains: Are we crazy?