- The Washington Times - Wednesday, February 16, 2000

All this talk of record oil prices brings back haunting memories of the winter of 1974. It was cold, very cold. My father turned the temperature way down in our house; thick woolen sweaters were the fashion night and day. Water had to be heated on the stove for washing your hair, which for a teen-ager amounts to an appalling indignity. There were long lines of embittered drivers at the gas stations. The United States and Europe were in the grip of an economic crisis engineered by Arab countries, whose ministers clearly relished the thought of bringing the West to its knees.

Even though oil hit $30 a barrel this week, we are in fact not seeing a replay of the oil crisis of the 1970s, for which we can all be grateful. Back then the politics of the Middle East fueled the crisis, as did fear that the world's oil supply was running out. Experiments with alternative energy sources followed, from giant windmills and solar panels to cow dung and goodness knows what else.

And then it turned out that we were not running out of oil after all. In fact, the world is full of oil, and new innovative technologies developed in the 1990s now allow us to extract ever greater amounts of that wealth. Deep sea drilling reaches new sources of offshore oil. A whole new set of market conditions after the fall of the Iron Curtain have opened the way for new suppliers. Not only that, but natural gas exists in such abundance that oil will some day lose its strategic value. The result of all this being that just two years ago oil hit an all time low of $11 a barrel.

Accordingly, the oil price shocks we are experiencing today are distorted and artificial, a frantic grasp at survival by the leaders of OPEC, the Organization of Petroleum Exporting Countries. Barely touched by globalization and economic modernization, oil is their bread and butter. For instance, oil accounts for 90 percent of gross domestic product of countries like Saudi Arabia and Kuwait. In March last year, OPEC slashed 4 million barrels a day from a global production totaling 75 million barrels. Combine that with a pretty chilly winter in the north and we now have soaring prices and politicians like Sen. Charles Schumer of New York squealing for intervention.

What to do? Trust the Clinton White House, by now an arm of the Gore for President campaign, to find a political angle. As reported by Time magazine, a proposal to dip into the Strategic Petroleum Reserve (SPR) is under consideration by the Energy Department. "What better way to warm the hearts and hands and feet of voters during primary season than devising a plan to knock down the skyrocketing price of home-heating oil and gasoline?" the magazine writes. The administration is said to be considering placing 580 million barrels on the market in a so-called "swap," which will allow private oil companies like Exxon-Mobil to take the oil now and replace it later, plus a small premium for the favor.

Unfortunately, the SPR is not so easy to get at, being stored in salt domes in Louisiana and Utah. It will take weeks. So for now, Energy Secretary Bill Richardson has taken to pleading with anyone who will listen to please go for increased production at the upcoming OPEC summit on March 27. Adding to the problem is the fact that non-OPEC countries have fallen in line with the organization's diktats, countries like Norway, Mexico and Russia. To their credit, the British have refused to follow suit. Should he succeed in these endeavors, Mr. Richardson stands to reap many laurels, moving up the ladder of vice presidential prospects. Doing well by doing good, as they say.

Where are Republicans in all of this? Not too many have been paying attention. And they should. A Feb. 11 statement by House International Relations Committee Chairman Ben Gilman, asking the administration to get OPEC to "turn on the spigot and let the market decide what prices should be," is a rare example. Says Paul Michael Whibey of the Institute for Advanced Strategic & Political Studies in Washington and a close observer of the oil business, "I think this is an important opening. Policy-makers need to promote a new energy strategy for the United States in the 21st century."

In other words, says Mr. Whibey, we should not just be playing politics with oil prices, but lay the groundwork for a new strategy through congressional hearings and a comprehensive energy review of U.S. needs and consumption. That should include looking at new sources in Africa and Latin America, new domestic offshore fields along the West Coast, allowing drilling in Alaska, and much besides. Threatening to open the Strategic Petroleum Reserve, which will bring down prices because of increased supply, and the leaning on OPEC could do some good for now. There is some serious long-term thinking to be done, however, and Republicans need to get in on the act.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide