No Quick Fix for Oil Dilemma

Petroleum industry officials, often with the eager concurrence of federal land managers, argue that national energy security depends on the big oil finds they think can be made in the nation’s offshore regions and in the Arctic National Wildlife Refuge in Alaska. Without such discoveries, the nation will continue to become more reliant on oil imports, particularly from risky sources in the Middle East. But this is a distortion of the nation’s complex petroleum picture.

Upon assuming office back in 1981, Ronald Reagan accelerated the decontrol of oil prices. Thus unshackled, the industry would rush into the field to drill new wells. And it worked--for a while. During 1981, there was an explosion of oil exploration in the United States with a record number of oil rigs at work around the country, an average of nearly 4,000 of them compared with about 2,200 in 1979. But then the free market played a dirty trick on the domestic oil industry. A world-wide oil surplus occurred and prices plunged. No matter how important national energy security might have been, the free market would not produce the oil if the market price did not make it profitable. Thirteen-dollar oil would not do that.

With the stabilization of prices at a higher level, at about $20 a barrel, exploration was expected to pick up considerably in 1989. But it has not happened, according to a mid-year assessment by the industry magazine Oil & Gas Journal. The Journal reported that an estimated 28,000 wells will be drilled, compared with a January forecast of 36,500. Fewer than 800 rigs are at work. All signs had pointed to an upturn in drilling, “but operators have never been more cautious,” the Oil & Gas Journal said.

At the moment, the Bush Administration’s Energy Department is drafting a new national energy strategy. One of the first issues the department must address is the ability, or inability, of the free market to assure a steady domestic supply of oil. And the assessment must also face the long-term reality that any really big discoveries will not guarantee domestic energy security, but merely postpone by a handful of years the day that American oil supplies are drained.

Still, Administration officials such as Secretary of the Interior Manuel Lujan Jr. insist on raising the old specter of growing levels of imports from OPEC countries in an effort to build political support for more oil development in environmentally sensitive areas. But the surest, quickest way to dampen the impact of imports is to revitalize the existing domestic drilling scene, possibly through reinstitution of tax incentives. This does not necessarily involve speculative drilling in areas of high environmental risk, but in known fields that cannot be produced economically at current prices. Such a plan, backed by the continuing buildup of the Strategic Petroleum Reserve, will give the nation a burst of enhanced energy security in the short term.

At the same time, the Administration must pave the way for transition to alternate fuels and safe, non-polluting energy sources and put renewed emphasis on conservation and mass transportation. There is no single quick fix to the nation’s energy dilemma--not in the offshore and Arctic regions, not in a revived nuclear power industry and not even in the free market. The first constructive step down the path to national energy security is the understanding of that reality.