CRAZY AS IT SOUNDS, it sometimes seems that U.S. energy policy might be improved if the policy-makers knew nothing of the spot oil market.
Too often, policy has shifted hither and yon as oil prices rise and fall. Prices go up, we reward conservation, slap a windfall profits tax on the producers and create a Strategic Petroleum Reserve. Prices go down, we forget about filling the stockpile, de-emphasize conservation and talk about killing the windfall profits tax.These are all short-term, and often short-sighted, approaches to a long- term problem. The question of the United States' long-term energy goals and how to achieve them continues to be neglected.
Recent weeks have highlighted the long-term concerns, as military activity in the Persian Gulf raised fears of supply disruptions. The United States now imports more oil than it did during the 1973-1974 crisis and is vulnerable to a cutback in foreign supply. Nonetheless, temporary gluts of oil on world markets continue to keep prices down and discourage investments in energy efficiency.
The last few years have seen policy-makers revoke some tax incentives for domestic drilling and exploration, slow down purchases of oil for the Strategic Petroleum Reserve and allow tax credits for residential energy conservation to expire. If the Reagan administration had had its way, it would have ceased buying oil for the strategic reserve altogether. In fact, the administration has resisted the very notion that the energy future should be planned for. The market, we are told, can handle it.
The industry, meanwhile, has its wish list. Open up the Alaska National Wildlife Refuge and California's outer continental shelf. Kill the windfall profits tax and renew tax incentives for drilling. Slap a tax on imported oil.
But the industry's desires, although sold with the promise of promoting energy independence, do not represent a sensible energy policy for the United States. Repealing the windfall profits tax before its scheduled 1991 expiration will have little effect on exploration, because no tax is being collected due to low oil prices. Opening the Alaskan reserve and the Pacific shelf to development will simply accelerate the depletion of U.S. oil. The favored tax incentives would generally do the same.
The oil industry's interest is fundamentally at odds with the nation's long-term energy interest. The industry is to extract oil from the ground, using its own production to supplant competing foreign oil in the U.S. market. The nation's interest is, on the one hand, to promote energy conservation, and on the other to encourage the discovery - but not the exploitation - of new domestic oil and gas reserves, while consuming foreign oil that is cheaper to obtain. Oil companies, of course, have no incentive to seek oil they will not be permitted to pump. The free market will not lead them to act in ways consistent with the nation's long-term needs.
National oil policy needs to reconcile these contradictions. A start has been made: the Strategic Petroleum Reserve, now holding 530 million barrels, is sufficient to tide the United States over for several months in the event of a cut-off of foreign oil, and its very existence may discourage major price hikes by foreign cartels. The national security problem for the United States is to boost production quickly if a supply disruption occurs. Without that capability, the strategic reserve loses much of its strategic value.
When it comes back into session next month, Congress will be besieged by interests offering short-term solutions to the long-term energy problem. We hope it will skip the arguments over drilling in wildlife refuges and repealing taxes that have no bite, and focus on two far more fundamental questions. How can we best guard against the consequences of a resurgent oil exporters' cartel? And how can we speed the transition of the U.S. economy away from its dependence on oil?