Conoco Inc. analysts unenthusiastically applaud pending U.S. energy policy legislation as a half step in the right direction.
They reviewed the nation's energy policy options as part of the company's "World Energy Outlook Through 2000."
The paper concluded that most of the world's growth in oil demand will be met by supplies from the Middle East, which is likely to remain volatile. And because the U.S. cannot reduce its dependence on imports, ft should manage that dependence wisely.
Also, because two thirds of U.S. oil demand is used for transportation, the Conoco paper said Congress should promote energy conservation with a 50 cents/gal gasoline tax increase.
It said the U.S. should diversify its fuel slate and promote use of existing cleaner burning fuels.
The paper said., "To encourage international investment in the near term, the government should provide greater flexibility to domestic energy companies in crediting foreign taxes against their U.S. tax liability.
"To encourage investment in the long term, the U.S. should launch an effort to expand tax and, other incentive options that would encourage U.S. investment in the international arena."
And it said the government should encourage diversification of crude oil supply sources through greater access to promising federal acreage, such as the Outer Continental Shelf and the Coastal Plain east of Prudhoe Bay field.
WHAT'S WRONG
John Sauer, Conoco's chief energy economist, said the energy bills have many positive points but mistakenly "have an underlying assumption that oil supplies will care of themselves" when in fact, gains from conservation and efficiency will be outstripped by growth in demand."
Gary Marfin, Conoco's senior energy policy specialist, agreed: "The issue of how to manage crude oil imports is visibly absent from the energy debate, and policy makers are dancing around the margins of that problem.
"Two politically unpopular energy policy components are absent from the bills: taxes to discourage use of fuel products and means to increase domestic oil production."
He said the U.S. government should compare its efforts with those of other governments to diversify their sources of crude around the world.
Sauer said the U.S. may be placing too much hope on developing alternative fuels, which consumers may resist because they are too inconvenient.
"I suspect they're going to develop on a very small, slow scale. We're apt to overestimate the rate at which alternative fuels will become a viable competitor to gasoline."
He said the first approach should be to develop better gasoline because that fuel "packs more bounce to the ounce" than any other available fuel.
Sauer called limiting OCS exploration to an energy bill "a blatant example of tying one hand behind your back."
He said the government should be thinking about preventing further employment declines in the U.S. oil industry to ensure that it remains competitive on a world basis.
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