Energy And Economic Security

Mideast War Underlines The Vital Need To Increase Domestic Oil Production In The U.S.

The war in the Mideast has once again underlined oil's pivotal role in the maintenance of a healthy world economy. We depend on oil for much more than land and air transportation. It heats our homes, drives our agricultural industry, and serves as a vital ingredient in everything from sulfa drugs to dishwashing detergents. In the words of energy consultant Daniel Yergin, "At the end of the twentieth century, oil was still central to security, prosperity and the very nature of civilization." The threat of potential disruptions in supply has highlighted the strong links between energy policy and economic security and has focused the world's attention on effective ways of ensuring that ample, affordable energy supplies are available for the future.

For the past four decades, oil has filled the bulk of the world's energy needs. Because a barrel of crude oil contains more energy more compactly and more inexpensively than any other fuel, oil will continue to hold the dominant role in meeting the world's energy needs for years to come. Even though oil's share of total international energy use has declined from 48 percent to 39 percent since the early 1970s, world oil consumption is as high as it has ever been—growing world demand for energy means 10 million more barrels of oil are now connsumed every day than 18 years ago.

Because of the bulk of the world's known oil supplies lie in the politically unstable Mideast, oil consumers worldwide have sought ways of limiting their dependence of this perennially troubled region. Since Iraq's August 2, 1990, invasion of Kuwait, this search has taken on new urgency.

Following the Arab oil embargo in 1973-74 and the Iranian revolution in 1979, many nations that were fortunate enough to have their own energy resources, including the United States, successfully cut their dependence on oil from the Mideast. Their efforts focused not only on increased oil production, but also on greater conservation and increased reliance on alternative fuels, including natural gas and nuclear power.

As a result of these combined efforts the world's reliance on oil from the Mideast was reduced.

And the efforts to increase oil production around the world resulted in more oil available to U.S. consumers from more stable areas outside the Mideast.

But conservation cannot, in and of itself, eliminate the need for oil.

As the economy and the population grow, total energy use is expected to increase. The U.S. Department of Energy (DOE) projects that, even as newer, more energy efficient technologies replace less efficient equipment, oil will still provide 38 percent of America's energy in the year 2030—not much less than the percentage it provides today.

Nevertheless, Americans have made encouraging progress in energy conservation over the past two decades. The primary reason Americans became more energy efficient was the increasing cost of energy. As energy prices rose in the early 1970s, energy efficiency began to improve. In the following decade, improvement accelerated as higher energy prices led to wider use of new, more energy efficient technologies. Then the improvement slowed in the mid- 1980s as energy prices declined.

However, further gains in conservation are still possible. According to DOE, by the year 2010, an additional 20 quadrillion BTUs of energy (at a cost of over $100 billion) could be saved each year by improving energy efficiency.

Alternative Fuels Using fuels other than oil is also a frequently advocated strategy— and one that can work. Since the 1970s, natural gas, coal and nuclear power have replaced some of the energy once provided by oil, usually in generating electricity.

Many nations continue to develop these sources of energy. The United States could do more today, but many alternatives to oil—particularly coal and nuclear power—are not politically or environmentally acceptable.

For example, more than a decade has passed since the last nuclear powerplant was planned for construction in the United States.

In contrast, nations such as France and Japan are moving rapidly ahead. Nuclear power now provides 74 percent of France's electricity. It provided only 4 percent in 1970. And Japan is planning to provide almost all of its electricity through nuclear power by the year 2000.

Nevertheless, America's energy industry is committed to providing the fuels of tomorrow. Many petroleum companies are actively involved in the search for new and better ways to meet our transportation needs. Fuels such as natural gas, alcohols, electricity, and hydrogen show promise for the future.

Increased Domestic Energy Production "Today, and for some years to come, oil will remain the world's single most important source of affordable energy." Given that fact, nations around the world are stepping up their efforts to locate and produce domestic oil and natural gas supplies— which are frequently found and developed in tandem. Alone among energy-producing countries, the United States, has taken an opposite tack—placing increasing amounts of land off-limits to exploration for new oil and gas fields.

As a result of these growing restrictions new fields are not being developed and domestic oil production is declining rapidly—now about 1.5 million barrels a day lower than in 1985. Increased imports are making up the difference.

Shortly after World War II, only 8 percent of the oil our country used came from overseas. As recently as 1985, we imported only 31.5 percent of our oil. For 1990, however, that figure actually exceeded 50 percent in some months.

DOE predicts that by the year 2000, imports will make up nearly two-thirds of America's supply.

The United States is frequently written off as a source of new energy supplies, but the facts suggest otherwise. According to the U.S. Geological Survey (USGS), 49.4 billion barrels of oil and 399.1 trilllion cubic feet of natural gas remain to be discovered in the United States. And, as energy prices change and the technology for producing these supplies improves, those numbers may grow. Increased domestic energy production could be an option here, if the most promising lands were open to energy exploration and production.

A tiny sliver of land on the coastal plain of the remote Artie National Wildlife Refuge (ANWR) in Alaska has been identified by the Department of the Interior as "the best single opportunity to increase significantly domestic oil production." It may hold as much a 9.2 billion barrels of oil. This would supply an average of over one million barrels of oil a day for 20 years. Peak production from an oil field that size could reach nearly 2 million barrels a day, equivalent to nearly one-third of domestic production in the year 2005.

The entire coastal plain encompassed 1.5million acres ofland, an area about the size of South Carolina.

But at most only 15,000 acres —an area about the size of Wash- ington's Dulles International Airport— would be affected by exploration and production activities. The industry's strong environmental record in the nearby North Slope Oil fields of Alaska demonstrates that oil production can be carried out without harm to the arctic environment.

Nevertheless, the area the Department of the Interior calls the "most outstanding petroleum exploration target in on onshore United States" remains closed to exploration.

Congress must approve opening ANWR before any work can begin.

Offshore Even more substantial supplies of oil and gas lie offshore our nation's coasts—as much as 32 billion barrels of oil and 228 trillion cubic feet of natural gas according to government estimates. Here again, government moratoria on exploration and production have put the most promising areas off limits.

Yet, America's oil industry has been operating off our coasts for decades, and despite some small impacts, the record has been generally excellent. Since 1975, for example, when current offshore safety regulations went into effect, about one-thousandth of one percent of the oil production from off shore lands under the control of the federal government has been spilled. The amount of oil entering the ocean from naturally occurring seeps is many times higher.

The record of the offshore industry convincingly demonstrates that oil can be produced domestically without serious harm to the natural environment. And it can greatly improve the nation's economic wellbeing, providing jobs and income as well as consumer products. The WEFA Group, and independent economics consulting firm, has estimated that developing ANWR alone would provide the nation with 735,000 jobs and raise the gross national product by $50.4 billion by 2005. And offshore oil fields have already made a major economic contribution. Since 1954, when federal offshore leasing began, 28,000 wells have been drilled off our nation's coasts. They yielded 8 billion barrels of oil and 85 trillion feet of natural gas and generated $90 billion in payments to the federal treasury. Conversely, in 1989 payments for foreign oil amounted to nearly $50 billion. The import toll for 1990 will be much greater.

A Realistic Approach To Energy Security In a nationally televised address, President Bush vowed that "Americans must never again enter any crisis—economic or military— with an excessive dependence on foreign oil." Conservation, alternative fuels and increased domestic energy production here at home will all belp address the problems posed by oil imports from the Mideast. Each of these options should be used, with an eye towards both their benefits and their costs. Progress in conservation and alternative fuels will help reduce our import needs over the long term. In the meantime, tapping our own petroleum resources is a common sense way of limiting imports from unfriendly or unstable sources of supply. Americans have petroleum resources here at home that are less costly than continued imports from insecure sources and that can provide a more secure energy future. The decision to develop them is ours.

Other stories from March 1991 issue


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