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US Security, Way of Life Hang on Stable Oil Flow

As politicians plot America's energy future, national defense and environmental concerns rank high. Stories below and on facing page.

THE national security of the United States depends as much on a strong economy as a strong military. And both of those rely on an abundant, inexpensive, and secure supply of energy."Energy fuels our economy and permeates our lives," says Peter Saba, whose planning group in the Department of Energy (DOE) worked on President Bush's proposed national energy strategy. "People view energy security as one component of our national security." "You have to define national security in terms of a way of life, and not as just life itself," adds Tom McNaugher, a senior fellow at the Brookings Institution. He'd probably get agreement from millions of drivers who waited in line to buy gasoline in 1973 and 1978, and who winced at pump prices last fall. Only 2 percent of the nation's energy is consumed by the military during peacetime. And even that might shrink as the armed forces take such planned steps as reducing in size by 25 percent, curtailing annual exercises, and shortening training flights. The key issue, of course, is wartime access to energy. "The strategic threat to the United States is increasing," says Richard Thomas, director of the Center for Strategic Technology at Texas A&M University. "The Soviets continue to deploy four SS-24s and -25s aimed at you and me every month. The Soviets recognize that their existence as a superpower - a status that they very much desire - rests on their ability to threaten the United States. And so the Soviet threat is not going to go away." Even if the cold war really is over, there will be other conflicts, Dr. Thomas says. "Is there any doubt that we are now the cop in the world?" He and other analysts are confident of the military's access to energy. The question is logistics, as always. Admiral Nimitz, who commanded the Pacific fleet during World War II, estimated that the fighting in that theater would have lasted two years longer if the Japanese surprise attack on Hawaii also had destroyed the US fleet's vast stock of oil - every drop shipped from the mainland. Similarly, Thomas doubts full thought has been given to where the US will preposition fuel for rapid-deployment forces after foreign bases close. "When you are mounting 2,500 to 3,000 sorties a day, fuel requirements are enormous." That level of activity was achieved by the allies during the Gulf war. US forces alone consumed 48.3 million barrels of fuel during operations Desert Shield and Desert Storm. Reliance on Saudi refineries was "extensive," according to the Defense Fuel Supply Center. Tankers wer e nearby as a backup. And Thomas and other analysts worry more about the economy than the military. "What we discovered in the '70s was that the economy can adapt to any price of oil - if you give it time," Dr. McNaugher says. "It's the shocks that really cost you gross national product, growth, and employment, because the economy is sticky. It just can't adapt fast enough." That means, these analysts say, that it was worthwhile to defeat Iraqi leader Saddam Hussein, whose control of Kuwait and intimidation of Saudi Arabia would have let him hike world oil prices. But there's no point in trying to eliminate oil imports, says the DOE's Mr. Saba. "Energy independence is no longer either a realistic or effective goal because we are in an interdependent international energy market, especially with oil." When one barrel goes up in price, they all go up, even those produced at hom e. "In this global economy, you can run but you can't hide," adds Richard Farmer, a principal analyst with the Congressional Budget Office (CBO). Saba says the steady decline in US consumption of energy per dollar of GNP is "a good trend that we are trying to build on." But it gives Dr. Farmer little comfort. "That doesn't say anything about whether or not you're more dependent on foreign energy, or whether or not a disruption in import supplies or an increase in world oil prices is likely to have a bigger impact," he says. The US may use energy more efficiently, but oil is now concentrated in the transportation sector and other places where there's no easy substitute. And a tight market and the concentration of 66 percent of the world's oil reserves in the unstable Persian Gulf region make large price swings likelier than in the past, he says. Saba says the national energy strategy has over 100 action items for improving US energy security. These promote efficiency, production, and diversity of source and type of energy. The result will be a more stable energy market, he says. The government also controls the 600-million-bbl. strategic petroleum reserve. Oil prices plunged last January when Mr. Bush drew down the SPR by 17 million bbl. at the start of Desert Storm. But by then US consumers had endured five months of higher prices. The extra $21 billion spent on oil tipped the country into recession, the CBO says. So why didn't Bush use the SPR sooner? "The purpose of the reserve is not to be used as a price-control mechanism and intervene in the market every time there is a little blip," Saba says. "The market is the best mechanism to correct itself." He adds that the President may only resort to the SPR when a disruption looks imminent. There was no shortage of oil last fall, McNaugher agrees. Still, he says, "an earlier announcement of a willingness to use the reserves" would have calmed the market and dampened price increases. Officials are now considering how to add another 400 million bbl. to the SPR as cheaply as possible.