The energy debacle

The energy debacle
By Thomas Oliphant
Boston Globe Columnist
August 2, 2005

WASHINGTON
.....ACCORDING TO THE US Energy Information Administration, here is what the world has to look forward to on the oil- supply-and-demand front for as far as official eyes can see: More of the same -- very tight supplies and unending pressure on already exorbitant prices.
This is the only sensible context for judging the pathetic response to an unfolding crisis -- the energy legislation that cleared Congress last week after a four-year political struggle. Its impact on the unfolding crisis will be zero, by even its supporters' admission.
According to the Energy Department, for the next 18 months, the demand by ravenous consumers, not just here but most especially in the developing world, with China in the lead, is going to keep escalating. In the United States, demand should ratchet up to 21.3 million barrels a day as the economy keep growing slowly.
But elsewhere, demand is beginning to explode. In China, it will jump to 7.8 million barrels, from just 6.5 million last year. That will power a jump in worldwide demand to 87 million barrels, from 85 million this year and only 82.8 million in 2004.
Against that demand pressure, the short-term supply news is puny. There will be a tiny and temporary rise in US oil production to about 9 million barrels a day, meaning that the dependence on imports will actually grow slightly next year. Worldwide, the Energy Department unit expects supply to expand modestly to just match the 87 million barrel demand. That is a recipe for still higher prices as well as spot shortages.
Over time, however, it gets worse, a situation completely ignored by last week's energy legislation, which is likely to be the last major word on the subject until President Bush is safely retired to Texas. The one exception is the years-long shouting match over drilling in Alaska's famous wildlife refuge. Unable to include it in the legislation without torpedoing it, the latest Republican congressional strategy is to slip it in as part of a budget bill later this year; the ploy is likely to work, but the impact on the domestic oil supply will be inconsequential, especially as production from existing reserves begins its inevitable decline.
According to the Energy Department, between now and 2025, growing at roughly a 2 percent rate annually, world demand will be up nearly 60 percent. To match that will require more than a 40 percent increase in the world's production capacity.
Not surprisingly, the projection is that the world's least responsible producing group -- OPEC -- will account for well over half of whatever production increases occur, based on reserves that are identified. In other words, just about everything that nobody likes (apart from oil company big shots and members of the Saudi royal family) is likely to get worse over the next generation.

And the legislation is worse than irrelevant to the underlying trends in the world. Traditional conservatism used to teach traditional liberalism that just because there is a problem and legislation has been enacted that uses that problem in its title, it doesn't follow that the problem has been solved, or even addressed. Today, those ideological roles are effectively reversed.

There was another way for which a congressional majority could have been assembled had there been a president willing to lead and bargain: exchanging approval for the disgusting tax breaks lobbyists persuaded Congress to approve for a willingness to support tough measures affecting both supply and demand.
That other way involved serious national goals combined with policies capable of reaching them. They would have included, over the next decade, cutting oil imports by half and increasing (to 20 percent from the current 2 percent) the portion of electricity generated from renewable sources.
The United States could have either toughened motor vehicle mileage requirements or used tax incentives to promote hybrids, or both. It could have invested serious money in renewable technologies, including hydrogen power. You could have invested seriously in two fossil fuels that can help at the supply margins -- natural gas and cleaner coal. And it could have led by example by cutting the federal government's own enormous energy bill by 20 percent over a decade.
To do stuff like this responsibly, there would have to be a reliable stream of revenue -- and it could have been tapped simply by diverting existing revenues from the royalties energy companies are already paying the government. The flow of funds would have been at least $2 billion annually, enough to carry out the alternative policy....