Addicted to Oil

The war in the Gulf, for many, symbolized a newly found American strength. But the Gulf war also revealed American weaknesses at home, particularly the disastrous lack of an energy policy that has caused U.S. oil imports to skyrocket. Unless this problem is dealt with in the "window of opportunity" provided by the end of the Gulf war, the next Middle Eastern oil crisis may be only a short time away.

Ironically, the Bush administration has been at work on its national energy strategy since its first few months in office, but to little effect. That strategy was announced just a week prior to the end of the Gulf war, and it turned out to be strikingly ineffectual. The Bush approach is a mild variant of the now-discredited Reagan plan: subsidizing favored industries, allowing others to choke in a distorted energy market, and letting the country's oil imports soar.

Yet even before Saddam Hussein sent his tanks into Kuwait, the world oil situation was deteriorating steadily. The Middle East's share of the market has been rising at more than one million barrels per day each year, and the world is again as dependent on the Persian Gulf as it was in 1980.

Indeed, in the 10 years since, the Middle East's share of world oil reserves has risen from 59 percent to 68 percent. Meanwhile, production in the United States and the Soviet Union, two of the leading producers, is falling. Steep oil price hikes during the 1990s were a virtual certainty, even without Saddam Hussein's assistance.

While Middle Eastern producers still had four million barrels per day of spare oil-pumping capacity when the Gulf crisis began, all of that thin reserve was needed to compensate for the embargo of Iraq and Kuwait. Projected increases in demand could eliminate that margin by the late 1990s, holding out the prospect of even steeper price increases in the future.

Rising U.S. oil imports are a major reason for the Persian Gulf's renewed dominance, a dangerous reversal of previous trends. From 1973 until 1986, the energy efficiency of the U.S. economy improved nearly 30 percent, which made it possible to cut the nation's annual fuel bill by $150 billion. As prices rose and new policies were implemented, U.S. oil imports fell from a high of nearly nine million barrels per day in 1978 to just five million barrels in 1985.

During the past five years, however, U.S. oil consumption has risen rapidly. By early 1990, the United States was importing more than eight million barrels of oil each day, the highest level of imports since 1979. Last year, imports made up about 45 percent of U.S. oil consumption.

Oil imports have been pushed up in part by declining U.S. production, which has fallen by 1.6 million barrels daily since 1985. As a pioneering producer, the United States has already heavily exploited its oil reserves and has a reserves-to-production ratio of just nine years, far lower than the 100-plus years available to most Persian Gulf producers.

Meanwhile, oil from Alaska's North Slope, which temporarily compensated for declines elsewhere, peaked in 1988 and has declined by more than 12 percent since. Continuing declines in production could increase U.S. dependence on imports to 75 percent by the year 2000.

In short, the U.S. energy picture is growing closer to that of Europe and Japan, which lack cheap domestic energy sources and have to work hard to function amid high energy costs. While it is true that other industrial nations import a larger share of their oil, U.S. petroleum use per person is more than double the level found in other industrial nations -- making the country more vulnerable to sudden price increases and perhaps more willing to "pay any price" to defend Middle Eastern oil supplies.

Even with the allied victory in the Gulf war, it is clear that no amount of military might can ensure permanent political tranquility in the troubled Persian Gulf region. Ultimately, the threats to the governments of Iraq, Kuwait, and Saudi Arabia -- which collectively own two-thirds of the world's proven oil reserves -- will come from internal political forces that are difficult to predict, let alone control.

IT REMAINS TO BE SEEN whether the United States will seize the opportunity presented by the Gulf war to redirect its energy policies and redefine its energy future. But if a turn-around is to occur, the national energy strategy is the vehicle with which to accomplish it.

As described by Secretary of Energy James Watkins two years ago, the national energy strategy was intended to "establish clear goals for our future and provide a yardstick to measure forward movement." After a decade of rising oil imports, a new start on the country's energy future seemed imminent.

What has emerged instead is an outdated set of legislative proposals, most of them unlikely to reduce oil imports significantly or accomplish any other important goal. No binding themes, clear goals, or measures of progress have been suggested. The Bush administration seems to lack both the vision of an alternative future and the political will to pursue the energy policy needed. For Secretary Watkins, this assortment of legislative proposals is an embarrassment. It is unlikely to be taken seriously by Congress, would accomplish little if passed, and can hardly be confused with the "comprehensive national energy strategy" originally promised.

Secretary Watkins asserted last year that the clearest single message he heard during a year's worth of Department of Energy (DOE) hearings was the need for the United States to spur energy efficiency throughout the economy. But when the energy strategy left the hands of the DOE in mid-December, analytical assessments were left behind and politics as usual took over.

Since then, White House advisers picked among the 67 DOE proposals and methodically removed most of those that would have reduced oil dependence. Proposals to improve automobile fuel economy, accelerate solar energy development, and set tough federal efficiency standards were casualties of the process -- many of them crossed out in a draft that was secretly leaked to the press.

Instead, the proposed White House plan centers around an effort to boost energy extraction and help the president's oil industry friends. This losing battle ignores the fact that mining our national treasures for the few remaining drops of oil will do little to ensure long-term energy security.

The section of the Arctic National Wildlife Refuge that would be opened to drilling under the administration's proposal is an ecologically fragile stretch of plain along the Arctic coast of Alaska. The Interior Department's mid-range estimate of the oil in the refuge is only a little more than three billion barrels -- only as much as the United States consumes in six months. Peak production from the refuge would not exceed 500,000 barrels daily. The United States is now losing nearly that much production each year. So under even the most optimistic scenarios, domestic drilling will not reverse the downward spiral in U.S. oil production.

Neither will nuclear power, which the Bush administration wishes to promote via expedited reactor licensing. Licensing problems are hardly at the root of nuclear power's problems, and in any case, oil-fired power plants account for only 4 percent of U.S. power generation. More nuclear power would mean less use of domestic coal, not of foreign oil.

THE BUSH ADMINISTRATION HAS ignored the energy lessons of the late '70s and early '80s when oil dependence fell rapidly, largely as a result of energy conservation. The improved efficiency of the U.S. economy since 1973 saved the equivalent of 14.5 million barrels per day in 1989.

This is 50 times the potential contribution of the Arctic Refuge. Studies indicate that it could be increased by the equivalent of more than 20 million barrels of oil per day by the year 2000, using only existing technologies.

Automobiles remain at the root of U.S. oil dependence. Some 43 percent of the country's oil is used by cars and another 20 percent by trucks and airplanes. If average fuel economy were seven miles per gallon higher, the United States would be importing two million fewer barrels of oil each day. But the new energy strategy includes no provisions to improve auto fuel economy, and one recommendation would actually weaken existing standards.

Meanwhile, DOE's budget reflects old priorities. More than 60 percent of its proposed 1992 funding goes to nuclear weapons production and cleanup. Remaining funds are concentrated on fossil fuels and nuclear technologies.

The $274 million to be spent on all energy efficiency research and development in 1992 is less than the U.S. military spent on cruise missiles alone during the Gulf war. Meanwhile, the administration has called for real cuts in the 1992 budget for renewable energy research and development, and has eliminated a proposed production incentive for electricity generation from renewable sources. Only the oil companies continue to get new tax breaks -- $2.5 billion worth in last year's budget agreement.

U.S. energy policy as described by the administration's new strategy is bereft of clear goals; resources are scattered among technologies, and funding is guided largely by industrial interests. This non-plan would point the United States down an energy path that not only sacrifices national security and the environment, but the economy as well.

With all eyes on the Gulf, Congress is ready to act and will likely come up with more reasonable legislation. Already, bills have been proposed to create higher fuel economy standards for cars, encourage the development of renewable energy, and accomplish other important goals. Environmental and consumer groups have proposed that renewable energy research and development programs be tripled, and many state governments are working on energy strategies of their own. President Bush and his outdated energy policies are already being declared dead on arrival by many Republicans as well as Democrats.

On this rare occasion when the path for action is clear, the president has missed a golden opportunity to steer the United States toward a more viable energy future. This domestic failure will one day be judged by historians alongside his conduct of the Gulf war itself.

Christopher Flavin was vice president for research and an energy policy analyst at the Washington, DC-based WorldWatch Institute when this article appeared.