US needs energy growth

Dec. 18, 2000
Over the past decade, retail gasoline stations have continued to modernize their facilities in order to give customers what they desire most, convenience, which is the operative word that continues to drive the evolution of service stations and how consumers buy gasoline.

With a protracted presidential election finally over, the US oil and gas industry faces a difficult task. It has to rebuild infrastructure. It has to convince an apparently doubtful public of the need to rebuild infrastructure. And it has to do so with limited help from the White House.

The election of Texas Gov. George W. Bush is better for the oil and gas business than the alternative. Vice-Pres. Al Gore had strange and impractical ideas about energy, the environment, and economics-all of them hostile to oil.

For the industry, a Gore presidency, even one with no mandate, would have been a fight. So the industry dodged a threat last week when a divided US Supreme Court halted hand recounts of ballots that might have reversed Bush's win in Florida and given the presidency to Gore.

No industry champion

But Bush can't afford to act as the industry's champion. The oil-field background that informs him on energy issues works against him in energy politics. Even if he had won by a landslide, links to an unpopular business would have muffled him on issues involving oil and gas. The narrow and disputed margin by which he won office deepens the hazard.

The industry can reasonably hope for relaxation of the extremism that came to characterize the Clinton administration's regulation of oil and gas, especially at the Environmental Protection Agency. Beyond that, the incoming Bush administration will tread lightly if at all on energy.

The country, however, can't afford the status quo. High oil, gas, and electricity prices now angering energy consumers sound a warning. The energy industry has an infrastructure problem. Current prices reflect more than supply-demand imbalances of the commodities themselves. The market has run into deficiencies in capacities to produce, process, and distribute hydrocarbons.

To correct those deficiencies, the energy industry needs to hire more people, build more rigs, drill more wells, lay more pipelines, construct more power generators, and somehow expand refining capacity. It also needs to encourage governments to finish deregulating electricity markets despite resistance developing in reaction to California's power shortage.

It was an infrastructure problem-contraction of the drilling and producing industry while prices were abysmal 2 years ago-that made the gas market short at the start of the heating season. And it was an infrastructure problem-refining capacity chronically below demand for oil products-that makes inventories of heating oil low and prices high despite rising crude supply.

Unless there's a serious and mostly unexpected recession, energy markets, including those for oil and gas, will grow. The oil industry needs to grow-physically grow-as well.

A large question is whether federal and state governments will allow the industry to do what it must. Drilling remains off-limits on promising federal land, such as in the US West. Permitting is increasingly complicated for pipelines and power-generating facilities. Grassroots refinery construction is out of the question.

In too many areas, concern for environmental protection has become resistance against activity essential to the supply of energy. Power-short California, where prices of electricity and natural gas have zoomed recently, is an exaggerated example.

The US needs to accommodate the physical growth that must occur in the oil, gas, and electric power industries if energy demand at projected levels is to be met. The alternative is to continue to proscribe operations central to energy supply, let prices remain high, and allow demand to contract. The laws of physics say that means less work. The laws of economics say it means less prosperity.

National debate

Reconciliation is in order: between energy needs and environmental aspirations and between those who say the interests can't be compromised and those who insist they must. The task calls for a national debate and political leadership. Timing could not be worse.

Bush takes office knowing that half of the nation supported an opponent on an environmental crusade against oil. Half the nation is looking for excuses to discredit him. Half the nation will turn anything he says on energy into a political issue.

Yet someone must make the case for energy growth. Human welfare is at stake. If oil and gas companies wait for Bush to make the arguments, they'll be disappointed. They'll have to do it themselves.