THE OIL CRISIS: 10 YEARS AFTER; America may have cut its thirst for oil, but energy independence is still a long way off
WASHINGTON — Ten years ago this week, the world of 30 cent-a-gallon gasoline vanished forever. It was great while it lasted. Gas stations had price wars and gave away glassware. You could fill a VW Bug for pocket change. Families thought nothing of driving station wagons that by today's standards seem as large and thirsty as aircraft carriers.
But on Oct. 17, 1973, the Organization of Petroleum Exporting Countries (OPEC) flexed its muscles for the first time, and raised the price of its oil 70 percent. Three days later, Arab members of the cartel announced an oil embargo against the United States, in retaliation for US support of Israel during the Arab-Israeli war then under way. By February, frustrated American motorists were forming gas lines before dawn.
Today that huge station wagon has likely been replaced by an economy car.The attic probably has a new blanket of insulation. Overall, US oil consumption has dropped about 18 percent over the last decade. But America, experts say, is still a long way from energy independence.
"There's been a marvelous long-term kind of adjustment," says George Horwich, a Purdue economist writing a book on energy preparedness. "But it would be decades before we would be invulnerable to cutoff of foreign oil supplies. That's not the issue. The question is what are we going to do to ward off another shock?" Dark days of early 1974
After the dark days of early 1974, when 25,000 service stations ran dry and many motorists followed tank trucks like ducklings scrambling after their mother , US petroleum use for a while continued to rise. It peaked in 1978, when the economy was slurping up 18.3 million barrels of oil a day.
Then in 1979, the Shah of Iran was toppled, sending another oil shock rippling out of the Mideast. The US suddenly lost its voracious appetitie for petroleum. Last year America used 15 million barrels of crude each day, about the same amount as it consumed in 1971.
The sluggish state of the economy accounted for part of that decline, analysts say. But anyone who's driven a car during the past decade knows a major reason for our diminished use of ol: higher prices. Since '73 the cost of a barrel of oil has gone from $3 to $30. Along the way, gasoline prices have become a way of measuring time, as in, "It was back when gas was 80 cents a gallon. . ."
"For the first time since the discovery of petroleum and natural gas, the American people are aware of the worth of energy," notes Joseph Gustaferro, a senior energy analyst for the US Commerce Department, in a recent report.
Ever-larger energy bills have made Americans conscious of the benefits of conservation. Heating a home to 72 degrees in winter is now considered an act of extravagance. Wood stoves have become so popular they produce more energy than nuclear plants, according to one estimate, and are a major source of pollution in some Northern areas.
Utilities are refitting oil-powered generating plants to burn coal. Industry is scrambling to install more energy-efficient ways of doing things: GM, for instance, now uses lasers to weld steering assemblies, a method that cuts energy consumption for the process by 99 percent.
Perhaps the most important change wrought by the oil crisis has been its shattering of the US love affair with gas guzzlers, since Americans use more petroleum for transportation than for any other purpose. Despite the recnet swing back to bigger cars, the average auto on US roads now gets about 15.6 miles per gallon (mpg), as opposed to 13.1 mpg in 1973, according to the US Department of Energy. Average use of oil declines
Overall, the average American's use of oil is now steadily declining -- a trend that analysts expect to continue. In 1982, each US citizen used 22.9 barrels of petroleum. By the year 2000 the Commerce Department estimates that conservation and fuel-switching will cut per-capita consumption to 16.9 barrels.
We have come a long way in the last decade. But there is still a long way to go before the US public can be sure those dreaded gas lines will never reappear.
"People are generally complacent about energy," admits Energy Secretary Donald P. Hodel, who estimtes it will be another 20 years before the US achieves energy independence.
The basic problem is that the US is today almost as dependent on imported oil as it was in 1973, when America bought 35 percent of its oil from foreign suppliers. Today the figure is about 30 percent, and imports are rising as the economy continues to recover from the recent recession.
The US doesn't rely on the politically volatile Mideast for oil as much as it used to. Mexico, Canada, and the United Kingdom are today America's biggest suppliers of petroleum products; Saudi Arabia ranks 10th. The share of the US oil market held by Arab members of OPEC has slipped to less than 3 percent.
"We are more flexible today, more able to jump from one supplier to another," says Edward Kutler, assistant director of energy studies at the American Enterprise Institute.
But the Arab oil kingdoms supplies a fifth of the world's oil last year, according to the International Energy Agency, and sit on vast reserves. Events in the Mideast could have a drastic effect on international oil markets, and thus on the US.
"At best, we are only even with where we were 10 years ago," insists Henry Schuler, energy programs director at Georgetown University's Center for Strategic and International Studies.
What Mr. Schuler and other analysts are concerned about most is a disruption in Persian Gulf oil supplies caused by local political upheavel.
Over the last decade, Schuler says, the Mideast has become less and less stable. Egypt's leadership isn't as strong as it used to be, he claims; cracks have appeared in the Saudi regime.
Worse still, the Iran-Iraq war rages on, threatening to immolate the whole region. Iranian Foreign Minister Ali Akbar Velavati has warned that his nation would seal off the Strait of Hormuz, blocking vital oil, traffic, if any outside nation sent arms to Iraq. Despite the warning, France has supplied Super Etendard fighters and Exocet missiles to Iran's enemy.
If Iran makes good on its tough talk and plugs the Gulf, Western economies could plunge into a dramatic economic decline. A Congressional Research Service (CRS) study, released last month, estimates that a one-year disruption of Mideast oil deliveries during 1982 would have caused the price of oil to at least double. The US gross national product would have shrunk between 4 and 9 percent.
"People are kidding themselves if they think a major oil supply interruption wouldn't cause hardship. You'd have real-life misery," says a Democratic congressional energy specialist.
The Reagan administration asserts an oil disruption in the near future wouldn't do much damage to the economy, since there's still a surplus of petroleum on world markets. If Iran tries to blockade the Strait of Hormuz, the effect on oil prices is "anybody's guess at this point," says Energy Secretary Hodel.
But he adds, "We've very much better off than we were even a few years ago" in terms of our ability to weather an oil shock.
Indeed, the US has done much over the last decade to mitigate the effects of another sharp break in oil imports.For one thing, the US and other members of the International Energy Agency (an organization of energy importing nations) have agreed to share, rather than grab for all they can get, if world oil supplies are disrupted.
And for the last six years the US has been storing oil in the Strategic Petroleum Reserve (SPR) for use in an emergency. As of Aug. 31, SPR storage facilities held more than 350 million barrels of oil -- the equivalent of 73 days worth of peetroleum imports at 1982 rates of consumption. How full is full?
The SPR will be considered full when it holds 750 million barrels, a level the Energy Department predicts will be reached in the early 1990s.
It's unclear what sort of crisis would merit use of the stockpile, or how the oil would be distributed. Administration officials say a spelled-out course of action would discourage private-sector contingency planning; this year's SPR annual report says only that the federal government will rely primarily on the market to price and distribute SPR oil during a supply disruption.
"But what do you define as an emergency?" asks Georgetown's Schuler. "It could be a terribly contentious issue. In lifeboats, one group of people wants to immediately drink all the water; another wants to save until the last possible moment."
The SPR's problems are minor, however, compared with those facing the Synthetic Fuels Corporation (SFC).
Formed by Congress in 1980, the corporation is charged with stimulating the production of at least 2 million barrels a day of synthetic fuels by 1990. Its tools are loans, loan guarantees, and price guarantees for private-sector synfuel plants. Legislators gave the SFC $15 billion to start with; by 1992, it could receive up to $88 billion in federal funds.
But so far SFC has found the road to synfuels development rife with stoplights and "detour" signs. For one thing, oil prices have not risen as fast as exected, causing many private companies to rethink synfuel projects. Last year, for instance, Exxon abandoned a shale-oil project in Parachute, Colo., that had already cost the company $700 million.
Many of the proposals the SFC has received have therefore been of less than topnotch quality.Robert Roach, of the Environmental Policy Institute says, the corporation "has become a target for not-so-sophisticated, get-rich-quick schemes."
And the SFC has been dogged by charges of high living (it is exempt from federal pay regulations) and management turmoil. The corporation's first president, Victor schroeder, resigned last month after the board of directors became dissatisfied with his performance and stripped him of all operating powers.
The SFC has thus been slow to spend its money. It didn't bakc its first project until last July, when a small Texaco-Southern California Edison coal gasification plant was granted $120 million in price guarantees. Still, the bulk of its $15 billion remains uncommitted, burning a hole in SFC's pocket and drawing longing looks from some on Capitol Hill. At least four bills that would eliminate or restrict the SFC have been introduced in Congress.
The SFC s expected to easily survive -- it has good friends in high places, such as Sen. James A. McClure (R) of Idaho, chairman of the Senate Energy and Natural Resources Committee.
The corporation's troubles raise the larger question of how far the government should go to encourage the development of new fuel supplies.
The administration praises the free market, and says the government's role should be as small as possible. The White House has completed the decontrol of oil prices begun under President Carter, cut federal funds for developing solar and other renewable resources, and advocates decontrol of natural gas.
Critics say the administration's energy policy is really "no support for energy sources we don't like." Solar programs, they note, have been hit much harder than nuclear-power development projects such as the Clinch River Breeder Reactor.
In any case, analysts warn that we can't just trust that new energy sources will suddenly appear on the horizon, like cavalry, to rescue us from oil import dependence. The Congressional Research Service says our imports of Persian Gulf petroleum will actually increase during the 1990s, despite declining overall oiil consumption, because production of domestic wells is sagging.
"If Western nations react to the currently more favorable situation by relaxing efforts to conserve energy, encourage development of alternative energy sources, and build petroleum reserves," concludes the CRS oil import study, "the future could find the West once again vulnerable to the effects of a disruption of Persian Gulf oil supplies."