US tries to head off another energy crisis
The Reagan administration is convinced that the US is consuming its way into another energy crisis. A Department of Energy (DOE) report, to be released tomorrow, warns of a growing dependence by the United States and other Western nations on Persian Gulf oil, informed sources say. If the current trend continues, the report says, there will be heavy costs to the American economy.
The report will discuss, in varying degrees, a wide range of options that policymakers can employ to reduce US dependence on imported oil. Some of the options include:
An oil import fee.
Opening federal lands like offshore California and the Arctic National Wildlife Refuge for oil exploration.
Deregulation of natural gas at the wellhead.
Repeal of federal regulations like the Fuel Use Act, the windfall profits tax, and incremental pricing of natural gas.
Tax credits designed to stimulate exploration and new drilling.
``It is a very comprehensive report,'' said one White House official, who asked not to be identified, ``it will become the operative document ... the last word on where [energy policy] is going.''
While Americans reveled in the cheap gas prices that began in late 1985, non-OPEC producers stopped looking for new sources of oil and closed wells that were too expensive to operate. Energy analysts are now saying that while oil consumption is increasing, non-OPEC sources of oil are decreasing, forcing the US and other consuming nations to turn to the Persian Gulf to meet demand. Some analysts are predicting that the Organization of Petroleum Exporting Countries will be able to raise oil prices significantly by the mid-1990s.
As a result of these predictions, energy policy is once again the subject of intense political maneuvering in Washington. Some congressional representatives from oil-producing states are pushing for an oil import fee, a move the administration opposes. Others in Congress, like Sen. Phil Gramm (R) of Texas, support various tax incentives to stimulate domestic exploration and drilling. Each side would like to see the report support their position.
``If anyone thinks there is support for an oil import fee in the report, they are wrong,'' says Doug Elmets, press secretary for the DOE. But one administration official indicated that Senator Gramm ``should be very happy.''
Texas Gov. William P. Clements Jr. says he expects the report to conclude that there is ``no free market in the oil business, there needs to be some stabilization in the price.'' Such an admission by this administration would be a ``monumental change,'' and ``a giant stride toward a remedy,'' according to Governor Clements.
Sources say the report walks around the free-market issue, but it does imply that some actions need to be taken to protect domestic oil producers.
``They will stop at the water's edge,'' predicts Eli Bergman, executive director of Americans for Energy Independence. ``The report will pinpoint areas of vulnerability, but there will be few policy proposals.'' White House insiders agree, but say that the study was never supposed to make policy recommendations, only options.
Some energy analysts do not expect the report to emphasize conservation and alternative energy sources, like solar power. This will come as a disappointment to those who see the solution to energy dependency involving more than simply pumping additional oil.
National-security adviser Frank Carlucci had told several oil state congressmen that he would recommend that the President issue a national-security directive to look at ways to deal with the energy problem. This leads to speculation that the administration was turning over the reigns of energy policy to the National Security Council. Administration sources now indicate that Mr. Carlucci got too far out front and has been told to pull back.
The White House's Office of Management and Budget opposes an oil import fee, and has reportedly been playing a heavy hand in the last-minute decisions on what the report will include. ``Our concern was to make sure that the conclusions reached were based on good assumptions,'' explains Randy Davis, former associate director of OMB.
Every option had to undergo a tough cost-benefit analysis, according to Mr. Davis, who was the lead OMB official working on the report until he left the agency two weeks ago for the private sector.
Congressman Beau Boulter (R) of Texas complains that the ``OMB does not have an adequate appreciation of how important our domestic energy industry is to our strategic security. There is some price to be paid.''