OPEC after Yamani
THE reverberations from last week's ouster of Saudi Oil Minister Ahmad Zaki Yamani continue to be felt. The import: Western nations need a long-range energy strategy based on more than merely attempting to second-guess OPEC pricing and production decisions. The latter action has too often been the practice in recent years. The absence of a long-range strategy, particularly in the United States, is all too evident: Much of the domestic US oil industry has collapsed. Conservation efforts are faltering. Oil use is rising. And interest in alternative energy sources has flagged.
The reasons for the sacking of Sheikh Yamani -- and his replacement by Hisham Nazer, Saudi Arabia's minister of planning -- remain clouded. Perhaps his replacement was related to internal power struggles within the Saudi royal family, of which the Harvard-educated Yamani was not a member. Perhaps it was because of the rising clout of Iran and other nations within the Organization of Petroleum Exporting Countries (OPEC), such as Algeria and Libya, which are seeking production curbs to help shore up oil prices. Or a combination of factors.
Whatever the reasons, the immediate impact for the West seems clear. Oil prices, for the short run at least, could rise. Whether prices get back up into the $20-a-barrel range, which would be necessary to help spur increased US exploration and production, seems dubious, given the huge supplies now in the oil pipelines. Yet, even a momentary stabilizing of oil prices would be beneficial for the roller-coaster energy industry.
Looking down the roadway, OPEC will not likely regain the hammerlock it once held on Western oil supplies.
But the West, for its part, should not feel overly sanguine about current low prices or huge oil stockpiles. Imports of crude and refined oil products are once again climbing, after having peaked at 45 percent of total consumption in 1977.
Last year Americans used 4.9 million barrels a day of imported oil. That has now jumped to close to 6 million barrels a day and is expected to reach 6.1 million barrels by next year. If that occurs, imports will represent more than one- third of the US oil supply. That, by any measurement, translates into political clout for the overseas suppliers!
Meantime, oil demand in general continues to grow. Oil accounted for roughly 42 percent of total energy demand last year. That is expected to increase to 43 percent or more by the end of the century, despite the growth of alternative energy sources.
What should constitute an American energy policy? At least these key elements:
The US should push forward with the completion of the nation's Strategic Petroleum Reserve, while encouraging other nations to develop their own inventory policies.
Congress should rethink further easings of federal fuel mileage standards, which have the effect of encouraging consumption.
Deregulation of natural gas wellhead prices should be considered.
Most important, the federal government should again encourage development of alternative energy sources (such as solar), while encouraging conservation efforts on the part of both private citizens and US industry.