There are still parts of the U.S. oil and gas industry that won't like the message that John Lichtblau, president of Petroleum Industry Research Association, delivered at a hearing in New York last week. They need to hear it anyway.
"...The current and projected level of U.S. oil imports does not present a demonstrable threat to U.S. national security," Lichtblau told the U.S. Department of Commerce Bureau of Export Administration. Anything imposed in an effort to reduce imports significantly "would raise the price of oil to the point where it would cause measurable damage to the U.S. economy."
UNDERSTANDABLE REACTION
Comments like this tend to provoke charges that the speaker cares nothing about domestic oil and gas producers. The reaction flows from an excessively narrow view of things but is understandable in the course of a long slump in U.S. oil field activity. In his testimony, Lichtblau had an answer.
"Acceptance of the argument that oil imports do not present a threat to U.S. national security does not mean that the government should be unconcerned with the domestic oil producing industry," he said. "A pro active policy to stimulate additional oil and gas drilling through tax incentives and royalty waivers for specifically defined new wells, as well as removal of existing federal and state offshore acreage restrictions, could be viewed as being in the national interest, not because of its potential impact on oil imports but because of its significant real economic impact on a core regional industry." It is possible, then, to support the interests of U.S. producers without insisting that such support derive from the presumption that imported oil, at some level, threatens security. This must seem radical in parts of the oil patch. Yet the import security link is obsolete at best.
Compared with those of other industrialized countries, Lichtblau argued, the U.S. level of net import dependency, at 43%, is low. In those terms it will still be low if, as some analysts predict, the dependency rate reaches 60% in the next 15 years. And unlike most countries with large oil imports, the U.S. is nearly self sufficient in natural gas. Lichtblau further pointed out that major exporters have powerful financial reasons not to use oil trade for political leverage and in any case probably cannot do so successfully in the modern market. Furthermore, the U.S. has the Strategic Petroleum Reserve to absorb the shocks of whatever supply interruptions might occur.
To Lichtblau, there's not much the government can or should do to reduce U.S. reliance on imports. Calling current dependency "an organic composite of our present resource limitations and the state of our economy," he said: "No basic changes are possible in the first, although at the margin production does respond to economic incentives or disincentives. To make significant changes on the demand side would require action which would have a spill over effect on the entire economy."
A NECESSARY MESSAGE
Because it implicitly argues against imposition of price supports, many producers won't like Lichtblau's message. But they should listen to and heed it and adjust their political efforts accordingly.
There are good reasons for the government to help producers; U.S. dependency on imported oil isn't one of them. There are matters of energy supply that relate to national security; U.S. dependency on imported oil isn't among them. More of the U.S. producing industry than does now needs to make these distinctions, broaden its view of national interests, and quit mistaking messages like Lichtblau's for antagonism.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
