Are We Serious About Energy This Time?

Oil, the fuel that made the American economy powerful in this century, got a mention in the State of the Union message as President Bush promised to introduce a “comprehensive national energy strategy” to reduce U.S. dependence on petroleum imports, through “conservation, efficiency and increased development and use of alternative fuels.”

Details of the strategy--which the Department of Energy is said to have worked on since Bush took office two years ago--will be spelled out to Congress this week or next.

But Americans have heard about “comprehensive” energy programs before. The Nixon-era Project Independence didn’t eliminate imports, and the Carter-era synthetic fuels extravaganza proposed to spend $20 billion on shale oil and liquid coal but faded to oblivion in a couple of years.

This time the goals are more realistic: to control imports, not eliminate them. The new program’s aim will be to cope with energy in this decade rather than set a path for the 21st Century. Some likely features will be:

* More alcohol in gas tanks.

* More natural gas powering city buses and use of natural gas in general.

* Programs to mandate or encourage higher gas mileage for cars and conservation in electricity.

* Incentives for production of domestic oil and gas--probably including exploration of the environmentally sensitive Arctic National Wildlife Refuge in Alaska.

Solar energy will get some research and development support, but this energy strategy will have little government money behind it--which may be shortsighted. To be sure, the priority right now is to reduce dependence on the unstable Middle East. But the United States should recognize also that this war marks the beginning of the end for oil. Therefore, we must prepare for what comes after, even while dealing with the present danger.

In the new energy strategy, politics will be the driving force as Congress disposes what the White House proposes. Alternative fuels will find a lot of support. Farm Belt members of Congress know the appeal of ethanol, a grain alcohol that can be mingled with gasoline and burned in today’s car engines as gasohol--for a 10% saving on gasoline, or a hypothetical saving of more than 100 million barrels a year of imported oil.

Natural gas will receive broad support as an environmentally clean and abundant fuel--with a nine-year supply at present production trends, and a 30- to 50-year supply in reserves. Market demand for natural gas is already urgent in areas such as the Northeast, where supplies are limited by pipeline restrictions dating to now-repealed regulations. Easing those restrictions and expanding access to natural gas will be key features of the new energy program, says Kenneth Lay, chairman of Houston’s Enron Corp. and a member of the Secretary of Energy’s advisory board.

Conservation will be pushed through price incentives, as it is now by electric companies sharing energy economies with their customers. In automobiles, a system of rebates for fuel-efficient cars may be financed by a tax on fuel-extravagant cars. And there will be incentives for domestic oil and gas production.

Conservation and production worked in tandem before, says Daniel Yergin, author of “The Prize,” a history of oil that has become a best seller since publication in December. After the first oil shock in 1973, higher gas mileage standards and other conservation measures saved 2 million barrels a day, and new production in Alaska added 2 million more.

But since 1986, conservation gains have diminished, and U.S. oil production has declined by 1.6 million barrels a day--the equivalent of Kuwait’s prewar output.

As a result, the United States imports 45% of its oil and is reaching a danger level--for ourselves and the world. Yes, Japan and Germany import all their oil, and we import less than half. But our imports--7.4 million barrels a day--represent more oil than Japan and Germany use together. If we were to increase import dependence to 60% or 70%, it would truly starve the world for oil.

Still, the new energy strategy is unlikely to include a heavy tax on gasoline, as is common in Europe and Japan, where motorists pay $4 to $5 a gallon. We have cheap gasoline--but we don’t have cheap defense programs. The next time you fill the tank, mentally add 50 cents a gallon for the cost of Patriot missiles and M-1 tanks. That would be true cost accounting.

Clearly, we must conserve and change. The hope will be to hold imports at present levels or slightly below in this decade, when oil may still be reasonably available. Saudi Arabia plans to expand production, and with the postwar return of Iraqi and Kuwaiti oil, a world using 60 million barrels a day should have a safety margin of about 10%--providing there’s not a new war or disruption.

But even beyond the threat from the unstable Middle East, the United States should realize that oil, which gave its industry an edge in this century, is fading as the world’s fuel. The key to industrial advantage in the 21st Century will be another energy form. That’s why the U.S. government shouldn’t shortchange research into solar, as it appears to be doing.

The United States used to be the big producer of the kind of solar cells that can heat water or power a village in India, says Gerard McLarnon, president of Applied Solar Energy Corp., a small high-tech company in City of Industry. But now other countries are plowing ahead. Japan, with its strong government-backed energy program, is using solar cells to extend the lives of electric-car batteries--making strides both in energy and transportation technology. The U.S. government has no similar program, and General Motors’ experimental electric car ignores solar power.

Maybe the new comprehensive strategy should borrow some research funds from missiles and tanks and devote them to energy. That might just be the wisest long-term investment the American economy could make.