New Teeth for Energy Policy?
Golle, Vince, Futures (Cedar Falls, IA)
The 10,000 or so independent oil and gas producers in the United States have long feared depressed world crude oil prices -- the industry's werewolf. The beast began baring its teeth in December, forcing many mom-and-pop outfits to run for cover. Rumblings of government intervention -- such as import tariffs -- could boost oil prices, keeping these businesses solvent.
Crude oil prices were near $15 a barrel when the Independent Petroleum Association of America (IPAA) asked President Clinton to stem the flow of rising imports, the result of tumbling prices. The IPAA argues that the current import situation threatens America's national security and needs immediate attention. The White House may have different types of ammunition to prop up domestic crude prices, but dare it raise the gun? Doubtful, say administration sources. Talk of an oil import fee has surfaced. Then there are tried-and-untrue forms of price control. Other possibilities include allowing exports of Alaska North Slope crude that would stimulate production efforts; tax cuts for independents; and an easing of environmental restrictions, says Tom Burns, an oil economist with Chevron Corp. in San Francisco.
"None of these things is a magic silver bullet," says a State Department source. Outside of the president calling depressed oil prices and rising imports a national emergency, the United States is at the mercy of non-U.S. producers, he and other administration sources say.
By next December, the Department of Energy (DOE) hopes to identify the disease and cure for the domestic industry by coordinating an interagency study to assess the near- and long-term economic, environmental and security implications of rising U.S. dependence on non-U.S. oil. Meantime, independent producers grow weaker.
"We are operating so close to the edge that one month of crude oil prices at $13.50 will wipe out the entire limited profit made in the first 11 months of (1993)," says Deas Warley of Midland Resources in Midland, Texas. "If (these) prices continue well into 1994, we may not be able to survive the year."
The Department of Energy (DOE) itself is fidgety. This year, oil imports are projected to be 45% of U.S. consumption, a 15-year high, according to Joey Lucas, a DOE spokesman on policy.
Following the 1970s Organization of Petroleum Exporting Countries embargo until 1985, the oil import rate was on a downward path, says Lucas. "Now, the rate is spiralling back up. It is the (DOE's) view that our dependence on non-U.S. …