Key Senate energy figure sees warning flags in gasoline prices

Murkowski of Alaska
The battle for ANWR exploration isn't over.

The controversy over higher U.S. gasoline prices has returned oil supply/ demand issues to the spotlight in Congress, and Sen. Frank Murkowski (R-Alaska) wants to keep them there.

Murkowski, chairman of the Senate energy committee, said higher prices are only a spike but should be taken as a warning flag.

Although much of his committee's attention this summer will be on restructuring of the electrical power industry and nuclear waste issues, "I also intend to pursue our nation's increased dependence on imported oil from unreliable sources and attempt to draw more attention to the vulnerability of this country."

He noted the U.S. is 51% dependent on imported oil today, but that level is predicted to swell to 66% in 2000.

In the meantime, he thinks more price spikes are "very possible."

He added that is no reason to rely on imports from Iraq, which the United Nations will allow to export 700,000 b/d to buy food and medicine for its population.

"I think you're going to see, as a consequence of our inability to produce oil domestically, recognition by the (producing) sources outside the U.S. that they can raise prices because they're generating more and more control over supply."

Murkowski also is concerned that the world oil market faces "a high degree of exposure" to disruptions when 75 year old King Fahd yields power in Saudi Arabia. "Nobody can foresee just what the transfer of that power might hold."

Alaskan oil

Although President Clinton vetoed a budget bill last year that would have allowed oil exploration on Alaska's Arctic National Wildlife Refuge (ANWR) Coastal Plain, Murkowski says the battle isn't over.

The same provision has been inserted in the fiscal 1997 budget bill, which Murkowski expects Clinton also to veto.

Murkowski said the gasoline price increase underscores the need for more Alaskan production in the U.S. oil supply mix.

"We're going to bring this issue up every chance we get, but we may have to have an event that demonstrates our nation's increased vulnerability" be- fore it is passed.

He is surprised that one argument used against leasing is that it would take 8 years to bring any production on line.

"That's not what's wrong with leasing. That's what's right with it. We will need it worse then. Oil is where you find it, and we ought to be drilling in the places where we're most likely to find it."

Murkowski said some of his friends in the environmental community have told him privately they think ANWR oil can be produced in an environmentally safe manner with current technology.

But he said, "Environmental groups use this issue to raise dollars and membership. It has a certain mystique about it.

"It's surprising what a big business the environmental movement is, and their communications system is absolutely fantastic."

Murkowski recently detailed the size of environmental groups budgets in a speech on the Senate floor (OGJ, Apr. 29, p. 23).

Other issues

Murkowski strongly opposes the government selling oil from the 587 million bbl Strategic Petroleum Reserve to raise money for the federal budget. It recently sold 5.1 million bbl, is in the process of selling 12 million bbl more, and has proposed to sell another 72 million bbl in 2002 (OGJ, May 13, p. 40).

He said the president's push to sell 12 million bbl to deflate gasoline prices would have little effect because the nation consumes 18 million b/d.

"Even worse, in his budget in 2002 he's got another hit to pull the SPR down. Where is our memory? We created the SPR in 1973 because we were 36% dependent on imported oil. Here we are 51% dependent today, and we're talking about selling oil and using the SPR as a piggy bank. The consequences on our national energy security, which justified creation of the SPR, aren't even being considered."

Murkowski said the SPR oil sales will be challenged by Congress, including the Senate armed services committee.

On other issues, he said prospects for passing royalty reform legislation look good due to bipartisan support.

Senate and House committees have approved bills that set a 7 year statute of limitations on back royalty audits and collections and allow the Minerals Management Service to delegate its royalty collection functions to producing states. Neither bill has been scheduled for a floor vote, but Murkowski expects the Senate to act this month.

Murkowski supports third party sanctions against Iran and Iraq. Bills pending in both houses would ban foreign subsidiaries of U.S. firms from doing business with those countries.

"At some point in time you have to address reality. Business is business and government shouldn't interfere, but these sales through third party subsidiaries are through a loophole.

"The oil industry has a multinational mentality, but there are certain principles that have to be addressed from time to time, and we have to take a stand from time to time.

"I hate to see government interference in legitimate worldwide business practices. But when some countries get too far afield, it's the only way we can address it."

Murkowski is not enthusiastic about proposals to abolish the Department of Energy.

"I want a clarification of where some of those responsibilities are going to go, particularly in the nuclear area. It's easy to say, 'Do away with it,' but I haven't heard anybody come up with a logical explanation of what we're going to do with these responsibilities. I'm a little hesitant to throw out the baby with the bath water."

Copyright 1996 Oil & Gas Journal. All Rights Reserved.