The good news is that Americans are burning a lot less oil this year the bad news is that the US must keep buying from OPEC anyway
To some extent Americans face a brighter energy outlook than they did a year ago, because they are burning much less foreign oil. Yet, for a variety of reasons, the struggle to obtain and pay for energy supplies will absorb a great deal of government money and attention in coming years -- no matter who is elected president next month.
Nor will it make much difference, from the standpoint of shaping national energy strategy, whether that president is Ronald Reagan or Jimmy Carter.
Ineluctable facts, including the instability of the Middle East, will continue to press tough and costly choices on Americans and their leaders.
First, the good news:
Americans are saving oil. So far this year, reports the Department of Energy , US oil imports have run roughly 20 percent below the level of last year.
The last few weeks tell an even more striking story, with imports of crude and refined products averaging 5.4 million barrels daily, a full 30 percent below last year's total.
But conservation has its limits. Part of the savings stems from this year's economic slowdown, which has reduced industry's use of oil. When the economy resumes growth, oil consumption may climb.
"There is," says Georgia Macris, editor of Petroleum Intelligence Weekly, "an irreducible demand for oil," until alternative energy sources -- more coal, synthetic fuels, solar -- play a larger role than they do today.
Until that time comes, and it lies several-to-many years down the road, the noncommunist world's oil need will be 27 to 28 million barrels of oil daily (mbd) from the Organization of Petroleum Exporting Countries (OPEC), whose 13 members control 80 percent of international oil trade.
"Dribbles of new oil will be discovered, here and there," says Miss Macris, "party through World Bank efforts to help poor countries develop indigenous sources of energy. Also, industrial lands will make a desperate effort to develop alternatives to oil."
Nonetheless, she and other experts foresee a bedrock need for OPEC oil at about the present level of production for some years to come.
In 1979, says the Petroleum Industry Research Foundation Inc., total demand for oil by the noncommunist world was 51.5 mbd. This year's demand is estimated at 50.3 mbd, down a bit because of conservation and generally slow economic growth.
Of that total, 27.5 mbd came from OPEC countries, before the Iran-Iraq war. Cartel production now is about 24 mbd, with Iraqi and Iranian oil lost to the world market.
Saudi Arabia and three other Gulf producers -- Kuwait, the United Arab Emirates (UAE), and Qatar -- are expected to boost their output to make up a little less than one-third of the shortfall, perhaps a million barrels a day. For the rest, oil-consuming countries will have to draw on their stockpiled oil.
Pricing leverage remains with OPEC. "We may, and will, reduce OPEC's share of our total energy supplies," said Miss Macris. "But this is a far cry from breaking OPEC's pricing power."
Alternative fuels, especially synthetics, will be as costly as the most expensive cartel oil and, says Miss Macris, "will just keep on nudging up the price of OPEC oil."
This illustrates a point persistently made by John C. Sawhill, chairman of the Synthetic Fuels Corporation -- that Americans remain financial hostages to OPEC.
In 1979, the US paid $60 billion to foreign oil producers to import 7.8 mbd. This year, says Dr. Sawhill, the nation's oil import tab will be $90 billion for much less oil.
"Our 1980 oil import bill," said Sawhill, "is equal to the net assets of General Motors, Ford, IBM, and General Electric combined."
Assistant Treasury Secretary C. Fred Bergsten puts it another way. Last year , he says, it took 33 percent of all US exports to pay for foreign oil. This year, the figure will be between 35 and 40 percent.
Sources of foreign oil also have changed dramatically in recent years. In 1970, 71 percent of all petroleum imported by the US came from neighboring Canada and Venezuela. Only 11 percent came from Saudi Arabia, Nigeria, Libya, and Algeria combined.
By 1979, these four states had become the top-ranking suppliers to the United States, furnishing 60 percent of foreign oil bought by Americans. Three of these countries are Arab, leaving open the possibility of a boycott if the US were to side with Israel in another Arab-Israeli war.
In 1973, at the time of the first Arab boycott, only 15 percent of US imported oil came from Arab lands. Now the figure is almost 50 percent.
Against this background, the next president of the United States must trace the path toward US energy independence -- or, more exactly, reduced dependence on foreign oil.
First requisite, says Robert McClements Jr., executive vice-president of the Sun Company Inc., is for the US to find and extract all the domestic oil and natural gas possible.
Drilling activity is nearly at an all-time high, spurred by the progressive decontrol of domestic oil prices put into place by President Carter.
By Oct. 1, 1981, US oil prices are scheduled to reach the world level. As this process goes on, domestic crude becomes more profitable for companies to pump and refine.
Nonetheless, few experts in the industry expect either a production surge or marked growth in proved US oil reserves. Reserves in particular are declining, despite the addition of North Slope oil from Alaska.
Ronald Reagan's claim that if only the industry were unshackled from government controls plenty of new oil would be found, is discounted by many specialists.
If, however, the concept is broadened to include other forms of domestic energy -- principally coal and synthetic fuels -- optimism grows.
The US indeed is the "Saudi Arabia of coal," in the sense that vast reserves of the black, dirty fuel underlie American lands. Mr. Carter's goal is to double US coal production by 1990, to at least 1.2 billion tons a year.
Domestically, the push is on to substitute coal for oil or natural gas in utility and industrial boilers. Overseas, other nations clamor for American coal.
The market is there. But billions of dollars will be needed to ensure that American air is not befouled in the process, as well as to dredge rivers and harbors and build the infrastructure to move coal to US ports and onto ships.
Synthetic fuels -- oil and gas from coal, shale, biomass, and tar sands -- are not immediate answers but fuels of the future, because a huge and varied industry must be constructed almost from scratch to develop and produce them.
Vehicle for this development is the brand-new Synthetic Fuels Corporation, created by Congress to funnel an initial $20 billion -- to come from the windfall profits tax on decontrolled oil -- into loans, guarantees, and joint ventures with private firms.
The obstacles are formidable. No known technology can produce important quantities of synthetic fuels without transgressing existing laws safeguarding air and water quality.
Even if environmental problems are solvable, no one is yet sure how much fuel can be produced efficiently from each alternative source and at what price.
All this, in rough outline, is the energy agenda confronting the next president of the United States, as he strives to bridge the gap between fossil fuels and energy sources of the future, including nuclear fusion and various forms of solar.
The agenda assumes that Middle Eastern oil will continue to flow, not only to the US but to other oil-importing lands. Loss of any substantial portion of Arab oil could plunge the world into a nightmare scenario of economic turmoil and deprivation.