Election Ignores US Dependence On Foreign Oil

IN this election year's broad discussion about the nation's economy, one of the most pivotal issues has been virtually ignored: foreign-oil dependence and the need for a national-energy policy.

Energy issues received a scant 13-line mention in the official Democratic platform. The GOP's counterpart, a 123-page document released at the Republican National Convention last month, devoted just three pages of generalities to the topic.

Industry analyst Charles Ebinger, a senior fellow at the Center for Strategic and International Studies, says "it's ironic" that just two years after the United States armed forces fought a war against Iraq that was "principally" over oil, both Republican and Democratic policymakers have avoided making tough choices.

"The Administration hasn't addressed the primary question of whether we face a national-security threat due to our dependence on oil imports or whether we are putting our economy at risk," he says. Democratic strategists "haven't made energy policy an issue, except with opposition to the gas tax and a vague mention of support for renewable energy sources."

Some critics assailed sending US troops to the Gulf as a reflection of the US failure to come up with a cogent energy policy that substantially reduces foreign-oil dependence. But President Bush repeatedly drew the link between energy and economics. American jobs, he said, would be jeopardized if the Persian Gulf's cheap and ready oil sources fell into Saddam Hussein's control.

Michael Boskin, chairman of the White House Council of Economic Advisors, recently told reporters that had it not been for the Gulf war, Saddam Hussein would have control of two-thirds of the world's oil and the industrialized world - largely reliant on Middle Eastern oil - would be in an economic tailspin.

But for many years - with the exception of a brief time during the Gulf crisis - world crude-oil supplies have been abundant. Low oil prices have been sustained by large-scale producers who want the price low enough so they can reap substantial revenues but not high enough to encourage alternative sources.

Not only is the country increasingly dependent on foreign oil, but US oil firms are more engaged in foreign exploration than in domestic exploration.

William O'Keefe, chief operating officer of the American Petroleum Institute, says the federal government's policies of "discouraging domestic exploration" have contributed to an 80 percent drop in the number of Americans employed in oil exploration and production and a 30 percent drop in refinery workers.

"The federal government has said `We don't want a domestic petroleum industry,' " Mr. O'Keefe says, "so US companies are taking their money abroad."

In 1982, US oil firms devoted 60 percent of their resources to domestic exploration and 40 percent to prospecting overseas. Today, that ratio is nearly reversed. Of all the US economy's sectors, the oil industry has undergone the most dramatic shift. Suffering more job losses than the imperiled American auto and steel industry combined, the oil industry is in a depression, O'Keefe says.

"We are the world's preeminent oil industry in terms of technology, safety, and performance," he says, "but the significant drop in crude-oil prices during the 1980s, the federal government's undercutting of the energy industry's development, and costly environmental regulations have had a devastating affect."

Energy policy "will definitely be different if Bill Clinton is elected president in November," asserts Adam Sieminski, a financial analyst at the NatWest Investment Banking Group in Washington.

Mr. Sieminski doubts that Governor Clinton will hold to any of what Sieminski says are the four major long-term goals that have driven US energy policy: low energy prices, minimum government intrusion, diversified supply mix, and a competitive global position for US companies. Clinton supports more environmental regulation, which could mean higher pipeline and tanker costs; he opposes off-shore drilling and favors cleaner natural gas.

O'Keefe says that prospects for the petroleum industry should be dovetailed with the US recovery from recession. "We'll consume more energy as the economy grows. By the end of the decade, we should see up to a 2 percent increase in energy consumption - oil, natural gas, and coal. But if we don't increase domestic production, then we'll see imports climb from our current 50 percent to near 70 percent."

The North American Free Trade Agreement may offer the US a way to lower reliance on Middle Eastern producers and increase development opportunities for US firms in Mexico.

But the agreement will likely enhance US dependence on Mexico, another chief foreign supplier. Last year, one-quarter of US oil imports came from Canada and Mexico, up from 21 percent in 1990.

Bush puts much stock in NAFTA, which is now pending legislators' approval in the US, Canada, and Mexico. US Department of Energy Secretary James Watkins says the accord will create a "more secure future for North American energy markets."

Mr. Ebinger says DOE's focus is more than Mexico can deliver and only stalls the energy debate at home.