Oil supply: Washington's dangerous default

For the last 50 years the general trend in the United States federal government has been to assume more of the responsibilities and functions which previously were considered to be the domain of states and the private sector. The current trend is to reduce federal involvement and return responsibilities to states and the private sector. Although I support the current trend in general, I am concerned that the federal government is defaulting in an area with strong adverse implications relative to economic and national security.

There are a few programs which cannot be fully assumed and performed by the states and/or the private sector without financial participation by the federal government. Such a critical area exists in liquid fuels (oil). The federal government has withdrawn its participation to such an extent that it is improbable the essential objectives will be achieved, thereby placing both our economic security and national security in jeopardy.

President Reagan announced that federal funds would no longer be made available for advanced development, at the pilot plant and demonstration plant levels, for a synthetic fuels industry. He declared that funding at these levels is the responsibility of the private sector. The combination of very large capital investment, high risk in a new technology, and low probability of a competitive market position for the product are greater than the private sector can withstand by itself. Consequently, the advanced synthetic fuels technologies are, one by one, being placed on the shelf to await yet another change in direction of federal energy policy.

There is not now, nor has there ever been, a crisis in the US in overall availability of energy. Total energy available from all domestic sources is sufficient to meet the needs of the country.

However, an analysis of the interchangeability of various energy forms, e. g. coal for oil, coal for natural gas, etc., reveals that oil is peculiar in that it is almost the sole energy resource for our transportation systems and is likely to remain such far into the future. At present, 43 percent of the total US energy consumption is in the form of oil, and about two-thirds of the oil is consumed in transportation. Other energy forms cannot be substituted for oil in transportation to any significant degree. In turn, adequate transportation is vital to economic security, and would be equally vital to national security if we were to come under attack by a hostile power.

The large petrochemical industry also relies principally upon oil, and most of this demand cannot be met from other sources by known technologies. Our economic well-being also strongly depends upon this industry.

Any definition of a crisis in the energy field, either present or near term, should be described as an oil or liquid fuel crisis. All other energy demands can be reasonably met with domestic supply of other energy sources with appropriate interchange between resources.

Following a rise in oil imports to 45 percent of our consumption in 1977 we have returned to an import level of about 36 percent of consumption over the past year, nearly half of which came from Arab and other Middle East countries. An interruption of Middle East oil supply today would produce a much more severe discomfort in our society and economy than that experienced in 1973. The impact would be intensified by the fact that owing to conservation measures already implemented, there is today less room for belt-tightening in oil consumption. In light of current activities in the Middle East, one should contemplate the extreme folly of being as dependent upon that region for our oil supply as we now are.

What magnitude of interruption in oil supply, in an abrupt manner, could we absorb before it would disrupt our economy to an extent greater than we can tolerate and/or seriously interfere with our ability to carry out military operations to protect vital United States' interests? The radical changes in federal energy policy have not considered this question. No genuine attempt has been undertaken by qualified people to provide an accurate, documented answer.

I believe that an adequate supply of liquid fuels is of such vital concern to the whole nation that the federal government must assume reponsibility to ensure that the need can be met. The federal government has abdicated that responsibility in the name of budget-cutting.

A study should be conducted by competent investigators to determine what level of liquid fuel self-sufficiency from domestic sources is necessary to guarantee that we cannot be ''brought to our knees'' by the combined actions of foreign powers because of oil availability. It is certain that 100 percent self-sufficiency is not required. It is also quite certain that we could not withstand an abrupt interruption of 36 percent of oil demand without disastrous consequences. Information available to me leads to the conclusion that an interruption of oil supply greater than 15 or 20 percent of total demand would create very serious security problems for us, both economic and military.

When the necessary level of self-sufficiency has been determined in a competent manner, we should move as rapidly as possible, through development of synthetic liquid fuel technologies, to attain that level of liquid fuel self-sufficiency through a combination of domestic petroleum production and synthetic liquid fuels. Investment of public funds by the federal government, at least through the demonstration plant stage, will be required to bring such a high risk, capital intensive industry to a commercial reality. It is not realistic to expect one segment of our society, such as investors in the energy industries, to assume this total risk and financial burden for the nation, especially without a reasonable prospect of a market for the product. It may be necessary to guarantee a market for the synthetic liquid fuels which must be produced at a cost greater than world petroleum prices.

It is irresponsible simply to state that we will not develop a synthetic liquid fuels capability because the cost of the product will be greater than the cost of imported petroleum. We must keep our nation secure.

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