COLUMN ONE : Addiction to Oil Still Drives U.S. : As gasoline prices plummet, fears of shortages subside. Lawmakers push for a coherent energy policy, but public opinion limits pursuit of strong remedies.
Greg Rawlings isn’t worried about this country’s energy use. “This new truck I have here sort of testifies to that,” the 33-year-old Santa Monica accountant said the other day as he filled the twin tanks of a new full-size Ford pickup at a Van Nuys Arco station.
He concedes that the truck’s gas mileage--about 12 to 15 miles per gallon--did not enter his mind when he bought it. “I don’t think we have a problem with imported oil,” Rawlings said. “I changed from a very expensive car to something I felt would do just as well for me, have more room and let me feel like an American.”
In the aftermath of a war that many observers believe was fought, in part, to protect the West’s access to Persian Gulf oil fields, such attitudes trouble policy-makers, environmentalists, industry officials and others worried about America’s energy future.
For many in the United States, the war offered a reminder and a warning: Oil is a reason U.S. troops patrol the deserts of the Middle East, and oil is what may bring them back there someday if things do not change for America.
The war has renewed the calls for a coherent national energy policy aimed at lessening the nation’s dependence on imported oil, which accounted for as much as half of the oil consumed in this country last year. Most of it comes from the politically unstable Middle East.
There have been calls for such a policy before--after the 1973 Arab oil embargo and again after the 1979 oil crisis spurred by the Iranian Revolution.
But each time, the move toward a comprehensive energy strategy bogged down. Each crisis ended with falling oil prices, which seemingly erased the problem from the public’s memory. And proposed reforms were shot down in the cross-fire between special interests.
Today the United States, with only about 5% of the world’s population, continues to consume about 25% of its energy. And the country is as dependent on oil imports as ever--imports have risen more than 60% since 1985.
Some things have changed. Cars get better mileage. Renewable energy sources are finally coming into their own. The U.S. economy is more energy efficient than it was in the 1970s. Renewed environmental concerns have focused attention on the importance of weaning the nation from fossil fuels.
And now, with war memories fresh, some who have the power to forge a strong new policy believe the will exists to craft one.
“I believe things are different at this point,” said Sen. J. Bennett Johnston (D-La.), chairman of the Senate Energy and Natural Resources Committee, in a recent interview.
“First, the fresh memory of the war will flavor this. Second, we know more. . . . I believe that the American people in general, and members of the Senate in particular, are impressed with the need to have a national energy policy.”
But it is hard to detect a national consensus behind any policy that would get tough on energy. Some say that the current laissez-faire approach served the nation well during the most recent crisis: Although prices soared, no shortages or gas lines developed.
Now, in the afterglow of victory in a war that cynics argue was fought to preserve $1-a-gallon gasoline, Greg Rawlings is hardly the only person who thinks it is high time to return to business as usual.
In Los Angeles and Chicago and New York, in small towns and big cities, life seems to be resuming its previous pace weeks after an informal cease-fire ended the shooting war in Iraq.
Gasoline prices have plummeted since January, and the fuel is now cheaper than bottled water.
Fear of shortages has vanished, replaced by talk of an oil glut. Americans continue to drive alone, to turn up thermostats, to heat their swimming pools.
Even Angelenos who acknowledge that the nation is too dependent on Middle East oil admit sheepishly that they haven’t altered their own lifestyles as a result of the Persian Gulf War.
“When we have to send so much of our money overseas so that we can keep what we’re doing here and keep driving every day, that’s obviously a problem,” said Nick Athas, 35, a movie production associate from Reseda, as he gassed up in Van Nuys last week.
But when asked if he had changed his habits, Athas paused. “I’ll be honest with you. I think about this stuff a lot; it troubles me,” he said. “But I would have to say, no, I should do more.”
Indeed, pessimists wonder if the latest effort to generate an energy policy, like those after the 1973 and 1979 oil crises, will fizzle out as memories of war fade.
“I think people were kind of traumatized by recent events, but I do not believe that there is a clear national will to make difficult decisions,” said J. Robinson West, president of Petroleum Finance Co. Ltd. and a former Interior Department official. “The problem is, energy is a long-term business. . . . And if you’re not prepared to make decisions now . . . once there’s a crisis, it’s too late.”
A problem may be that the true social and political price of dependence on imported oil becomes apparent only during a crisis. Such external costs aren’t factored into the price of a gallon of gasoline in the United States, where gas is cheaper than in most other industrialized nations.
One estimate by Congress’ Office of Technology Assessment says that those costs could add as much as $380 to the price of a barrel of oil, or more than $9 to the tab for a gallon of gasoline. Included in the add-ons: the costs of land or water pollution from petroleum, the tab for environmental cleanups and the price of deploying military troops to secure overseas supplies, as in the Persian Gulf War.
But there is no sign that such costs, in the form of a tax or other market device, will be figured into any national energy policy now under consideration.
Last month, President Bush unveiled his Administration’s national energy strategy--a 268-page tome that relies mainly on encouraging new domestic energy supplies. The aim is to hold the nation’s oil imports at current levels through the early decades of the next century.
One controversial provision of the strategy would open some offshore areas and the Arctic National Wildlife Refuge (ANWR) to oil drilling; another would streamline the regulatory process for nuclear plants. The strategy gives only a passing nod to conservation, alternative fuels and renewable energy, mainly by relying on provisions of the recently passed amendments to the Clean Air Act.
In Congress, meanwhile, scores of bills have been introduced to address some of the same issues, or to strengthen perceived weaknesses in the Administration plan. Legislators want to toughen automobile fuel-economy standards, impose fees on imported oil and create new incentives both for conservation and for development of alternative and renewable energy sources.
The strongest challenge to the Bush plan is a package of bills introduced last week by Sen. Timothy E. Wirth (D-Colo.) and Sen James M. Jeffords (R-Vt.). The bills oppose opening ANWR and instead stress auto fuel economy and conservation.
Between the two extremes is an omnibus Senate bill proposed by Johnston and Sen. Malcolm Wallop (R-Wyo.). Like the Bush plan, it would open ANWR and ease nuclear plant approvals. But it also calls for tighter mileage standards, incentives for renewable energy and diversion of some imported oil into the Strategic Petroleum Reserve. A companion bill would set a $20-a-barrel price floor on oil imports.
Whatever the approach to a policy, all parties say something needs to be done. Those favoring strong government intervention argue that the lack of a coherent policy has left the nation’s economy vulnerable to price shocks. The current recession was spurred in part by last year’s sharp runup of prices. Stampeded by war fears, oil prices soared from $21 a barrel in July to more than $41 a barrel in October.
In addition, some current energy practices harm air quality, possibly contribute to global warming and otherwise threaten the environment--a concern that is receiving more attention than in previous energy crises.
Perhaps most important, backers of a national energy policy argue that the country’s current energy practices exposed it to a costly war in the Persian Gulf--and could do so again.
Without a change in the nation’s patterns of energy consumption, the United States can expect to be importing 65% of its oil by 2010, according to Peter D. Blair, program manager for energy and materials in the Office of Technology Assessment. Other estimates put the figure higher.
Two existing trends set the stage for that ominous prospect: increasing demand for oil in the United States and declining domestic production.
Unaltered, those patterns would leave the United States even more vulnerable to the oil-pricing decisions of the Organization of Petroleum Exporting Countries. The 13 nations of OPEC continue to control three-fourths of the world’s proved crude oil reserves; the largest are in Saudi Arabia, Iraq, Iran, Kuwait and the United Arab Emirates. Some of those nations may be our allies now, but Middle East politics are fickle.
Despite all the good reasons for developing a new national approach to energy production and use, the latest efforts seem to face all the same hurdles as previous endeavors.
The United States has both energy producers and consumers, whose interests are often at odds. In addition, the nation’s energy infrastructure has become increasingly complex. With so many special interests fighting for turf, national consensus has so far proved elusive.
“We have kind of a stalemate,” said John C. Sawhill, an energy official in the Richard M. Nixon, Gerald R. Ford and Jimmy Carter administrations and now president of the Nature Conservancy. “There are proponents--mostly in industry--in favor of expanding production in this country. And there are strong proponents--among the environmentalists and elsewhere--to reduce consumption. The two sides are about equal. And as a result, nothing gets done.”
James R. Schlesinger, President Carter’s energy secretary, once likened the process of developing energy policy to water torture.
“The nation is divided along regional lines, industries, economic income groups and so on,” he said recently. “As a result, you can only obtain relatively small increments in energy policy in most circumstances. In the U.S., a coherent energy policy is an uphill fight.”
In the current fight for an energy policy, the battle lines are familiar. Only the battleground--etched by the Gulf War--is fresh:
* Oil companies favor incentives for new domestic oil drilling, which has declined in recent years. Environmentalists are opposed, mainly because the best sources of new oil are likely to be wilderness areas.
* For their part, environmentalists argue that conservation, stiffer mileage standards for cars and tighter requirements for energy efficiency in buildings offer the cheapest and quickest way to reduce oil imports. They also favor financial incentives for new research and development of alternative and renewable energies.
* But the auto industry opposes new mileage standards, which it says would raise costs and lower safety. The oil industry opposes alternative vehicle fuels, saying they are too costly. Other critics argue that viable renewable and alternative energy technologies are too far off to significantly affect oil imports. The building industry opposes stiff new standards on energy efficiency, fearing the costs.
* The nuclear industry argues for streamlined regulatory standards, contending that delays and uncertainty have contributed to ballooning costs. But anti-nuclear groups challenge the high cost of nuclear plants and raise questions about waste disposal and safety. Moreover, given the inflated costs of some nuclear projects, attracting investors to finance new nuclear plants could prove tricky.
* Some economists argue that stiff new gasoline taxes are the only way to ensure conservation and lowered oil imports. But consumer groups disagree, saying that such taxes would unfairly burden the poor. Businesses oppose such fees, saying they would hurt the competitiveness of U.S. industry. In any case, no politician seems willing to sponsor new gasoline taxes, particularly with an election looming next year.
* The natural gas industry argues that it holds the promise of the most abundant domestic source of future energy. But critics point out that natural gas will not easily wean the nation from liquid transportation fuels, which account for two-thirds of the nation’s oil use.
In any case, it is becoming increasingly clear that previous goals of total U.S. energy independence are unrealistic, economists say.
The reason, they say, is that the easy gains have already been made, and that future efforts to cut imports will win only incremental reductions. The U.S. economy may be much more energy efficient now than it was in the 1970s, but oil imports nonetheless have risen.
The remaining reductions will be much harder to come by, particularly switching the nation’s massive transportation fleet off petroleum-based fuels.
Like its predecessor, the Bush Administration favors allowing the free market to determine the nation’s most efficient energy mix.
“Our approach has been to minimize mandates, minimize regulation, minimize taxation, maximize incentives, maximize the facilitation of the free market,” said Energy Secretary James D. Watkins in an interview.
But critics argue that, without help, alternatives to oil have no chance to compete if oil prices remain relatively low.
Since soaring in October, oil prices have fallen back to about $20 a barrel now, and economists generally expect oil prices to remain between $20 and $30 a barrel for the next decade.
It is doubtful that such prices are high enough to stimulate new U.S. oil production, make alternatives to oil appear more competitive or spur energy users to cut back. High prices helped slash oil imports between 1979 and 1985. But OPEC watchers believe that a postwar cartel will be motivated to keep prices relatively low, precisely to avoid curing consuming nations of their oil habits.
With gasoline prices falling again, what’s to suggest there’s any hope for a new energy strategy?
Public opinion does not bode well for strong measures. It is easy for people to say they want change, but changing behavior is more difficult.
A poll conducted in December by the Alliance to Save Energy, a pro-energy-efficiency group, and the Union of Concerned Scientists, an anti-nuclear group, found that three out of four Americans favor a policy that would reduce demand for oil rather than increase supplies.
Of 12 proposals for reshaping energy use, respondents most favored incentives to develop alternative fuels and tougher mileage standards, the poll found.
The least-liked proposals: hiking gasoline taxes by 50 cents a gallon or opening offshore and Alaskan wilderness areas to oil drilling. The poll also found that Americans aren’t wild about future nuclear development.
Critics of current policy proposals say none of the plans under consideration go far enough; the Bush Administration plan has drawn fire for giving short shrift to conservation and alternative energy.
“The Administration proposal fails to confront the challenges the country faces as we move into the 21st Century,” said Daniel Lashof, senior scientist with the Natural Resources Defense Council, an environmental group. “It contemplates allowing our total oil consumption to increase, when it should be decreasing.” He criticized the Johnston-Wallop bill for the same reason.
Watkins defended the Administration’s strategy as balanced. “We hear (criticism) from all over, and in my opinion, that’s not a bad outcome,” he said. “If I found that one area was saying that this is really just wonderful, I would worry . . . that maybe we have biased it in the wrong direction.”
Others argue that the political realities of the time don’t allow politicians to pursue drastic remedies.
“The big question is whether, with the war over and oil prices low, the public is really going to accept anything controversial,” said Jack Riggs, staff director for the House energy and power subcommittee. “There’s always an election year coming up in a year and a half.”
Johnston tried and failed in the 1970s to pass a law that would raise gasoline taxes by 50 cents a gallon. “I think I got one letter from a woman in Rockaway, N.J., who said, ‘Good idea,’ but other than that, dead silence,” he recalled. “People wouldn’t touch it with a 10-foot pole.”
AMERICA’S THIRST FOR OIL
The Persian Gulf War was largely a war about oil. One of the surprises of the conflict, though, was how little energy prices were affected by all-out warfare in the oil-rich region. Even as the extent of the destruction of the oil industries in Iraq and Kuwait became clear, Americans were in the amazing position of watching prices at the gasoline pump continue to slide. But without a coherent strategy to wean the country away from imported oil, some projections say that imports will only increase. And that means ever greater reliance on the Middle East, which pumps about one-fourth of the oil consumed in the world and holds nearly two-thirds of the world’s proved oil reserves.
U.S. ENERGY USAGE
* Petroleum is the principal energy source in the United States, accounting for 41.4% of total energy use. Two-thirds of the nation’s oil goes for transportation, particularly for the automobile.
* Americans motorists pay far less for gasoline than their European counterparts, whose gasoline is heavily taxed. After the Iraqi invasion of Kuwait, when Americans were grousing about gasoline prices of $1.30 a gallon, French drivers were paying about $4.40 a gallon, while Italians and Swedes were paying almost $5. Not surprisingly, Europeans rely far less on gasoline than U.S. drivers; they have more fuel-efficient cars, and they use more public transportation.
* In 1990, U.S. crude oil production declined for the fifth straight year, to 7.2 million barrels a day, the lowest level since 1961.
* After rising more than 60% between 1985 and 1989, oil imports remained steady in 1990. In 1990, for the first time in seven years, petroleum deliveries declined; as a result, the year’s imports, after rising more than 60% between 1985 and 1989 held roughly steady.
Source: Department of Energy; American Petroleum Institute
PRESIDENTIAL ADMINISTRATIONS AND ENERGY POLICY
* NIXON: The 1973 Arab Oil Embargo prompted President Nixon to formulate Project Independence, a sweeping program designed to wean the nation off oil imports all together by 1980. The plan included easing environmental restrictions on new energy development, halting the switch from coal to oil-fired electrical generation, and creation of an Energy Research and Development Administration. But the goal was considered impossible by some Nixon aides, and the plan foundered in interminable congressional hearings amid public outcry over the energy crisis. In 1974, the Nixon presidency itself came crashing down with Watergate.
* FORD: President Ford picked up the energy baton in 1974, with his own 10-year plan to build hundreds of new nuclear plants, coal mines and oil refineries. The plan was doomed in part by its staggering cost. Some things to emerge from the Nixon-Ford years: the completion in 1977 of the Trans-Alaska Pipeline, the imposition in 1975 of the first fuel economy standards for new cars and the creation of the Strategic Petroleum Reserve.
* CARTER: In 1977, President Carter unveiled his energy plan, which he characterized as “the moral equivalent of war.” The program aimed to unshackle U.S. oil prices and allow them to rise to world levels and also stressed conservation, development of renewable energies and coal. In 1979, the Iranian Revolution led to the nation’s second oil crisis, giving new urgency to a program. One component of the resulting plan was the costly and abortive synthetic fuels project.
* REAGAN: By the mid-1980s, OPEC flooded the world with crude and caused oil prices to plummet, removing the urgency to deal with energy. Cheap oil through much of the 1980s drove the energy non-policy of reliance on free markets.
* BUSH: Heavy reliance on free markets also characterizes former oilman George Bush’s proposed National Energy Strategy. But the Persian Gulf War has renewed calls in Congress for strict mileage standards, conservation, incentives for renewable energy and indirect fees on imported oil.
Source: “The Prize: The Epic Quest for Oil, Money & Power,” by Daniel Yergin.
In 1979, the Iranian Revolution spurred the nation’s second oil crisis, driving oil prices sharply up and lighting a fire under efforts to increase U.S. production of oil, to cut consumption of energy and to seek alternative energy sources. As a result, by the mid-1980s, the nation was able to slash imports drastically. But in 1985, the Saudi Arabians flooded the market with cheap oil, causing oil prices to crash. That spurred consumption, put a financial strain on U.S. companies seeking new domestic sources of oil, and rendered many alternative energy sources uncompetitive. As a result, imports soared to their present levels.
As oil prices fell in the mid-1980s ...
Average wellhead price of U.S. crude oil:
Demand for petroleum products in the U.S., in millions of barrels per day:
Meanwhile, the level of imports surged higher than ever.
Level of oil imports as a % of U.S. demand:
Source: American Petroleum Institute