Energy strategy revisited

Federico Peña, U.S. Secretary of Energy, appears determined to steer his country backward on energy policy.

At least twice this month, he hinged promises for "a comprehensive energy strategy" to a bogey of shrinking relevance: dependence on oil from the Persian Gulf. Before the Senate committee on energy and natural resources, he cited the three disruptions to oil markets that have occurred in the past 25 years. And at the Independent Petroleum Association of America's midyear meeting, he fretted about both growing U.S. reliance on imported oil and the prospect that much future supply will come from the Persian Gulf.

"This is a threat to our national and energy security," he declared, "and it is clearly unacceptable."

Inattention to change

The oil and gas industry must not let itself be seduced by such once-resonant utterances, even if they do lead to righteous cheer for domestic production. They reflect inattention to oil market changes that necessitate new approaches to security.

U.S. dependence on imported oil is a simple fact of economics and nature. So is the large contribution of Persian Gulf producers to oil in current and future trade. This was a proper source of worry when Persian Gulf and other exporters didn't own their oil reserves and therefore based production decisions on politics instead of economics.

That's not the case now. The economic motivation of Persian Gulf producers to sell oil is as strong as the U.S. need to buy oil from abroad. Such a snug fit of economic interests in a flexible system of trade provides more security of oil supply than any conceivable act of government. Yes, there will be disruptions. But their effects won't last if governments stay out of the way. The inevitability of disruption certainly doesn't justify preemptive mischief.

A policy predicated on market and political conditions of the 1970s just won't work in the late 1990s. Too much has changed, especially the role of trade. For the leading U.S. energy regulator to ignore 25 years of market evolution and call trade with Persian Gulf producers unacceptable is alarming.

As trade partners, in fact, Persian Gulf producers are more reliable than the U.S. The Clinton administration and Congress have become careless with their use of trade sanctions as levers of foreign policy. From such a government, charges of unreliability in trade are hypocritical. And from a country whose security is indeed linked to energy supply and whose supply must come in significant measure from abroad, cavalier treatment of trade and trade partners is self-defeating.

Weak assertions about energy security yield anemic commitments to domestic supply. Welcome as they are, the Department of Energy's efforts to boost domestic production of oil and gas have been more tactical than strategic. Programs focusing on royalty relief, marginal wells, and the development and transfer of technology do help producers and do sustain or add to production. In most cases, however, resulting volumes of hydrocarbons are not large.

A strategically meaningful increase in domestic oil and gas production requires access to natural resources now off-limits for political reasons. That means leasing the Arctic National Wildlife Refuge Coastal Plain, accelerating and expanding coverage of the Outer Continental Shelf lease sale schedule, and reversing arbitrary lock-ups of federal land, such as President Clinton's election-year wilderness designation for the Canyons of the Escalante area of Utah.

Defending security

Can Peña make those things happen? Can any energy secretary in the administration of Bill Clinton and Al Gore? No way. Because of what it would ignore and refuse to consider, any energy strategy that emerges in the next 3 years would do more harm than good. Peña should drop the initiative and, in the hectic-enough course of administering DOE, defend energy security by protecting markets from political interference.