It was just thirty-three years ago this coming autumn that the world of energy turned upside down. If you guessed that it marks the anniversary of the first embargo of the Organization of Petroleum Exporting Countries cartel, go to the head of the class.
It’s worth reviewing how things have changed. The OPEC boycott and subsequent price hike sent the price of a barrel of Saudi Light from $3 to $5 and a gallon of gasoline that cost 30 cents that summer before suddenly cost $1.20. Today even with oil at $70 a barrel and gasoline costing more than $3 a gallon, Americans still enjoy a price advantage over our European competitors where the same volume of gasoline may range in the $5 to $7 a gallon price.
Much of the world was not much affected by the OPEC shock; it was confined to the heavily industrialized nations of Europe and the United States. China and India, for example, hardly counted as energy consumers.
Today the fastest growth in petro-energy consumption is now in what used to be developing nations. Today these modern industrial giants are exploding both in population and in demand for petro-energy products of all kinds. China which is seen as the major economic challenger to the United States in the next generation actually may be passed by India in the population sweepstakes by 2025.
In this issue of U.S. Industry Today the lead article (page 8) by Governor John Engler, CEO of the National Association of Manufacturers, explains the the manufacturing industry accounts for more than one third of our total natural gas consumption both to run its factories and as an ingredient in its products. The high cost of our imported energy today is having far-reaching consequences, he rightly says.
Not only have 100,000 jobs been lost in the chemical industry, our forest products and paper industry are just two others where mills have closed and hundreds of thousands of workers made jobless. And he is spot on when he calls on Congress to stop dithering and enact a host of energy related bills to promote exploration and development of new domestic oil and gas resources, to resume construction of nuclear power plants and to reform various environmental restraints on energy development.
In addition to the NAM list we would advance two additional policy changes that Washington can put into place that will help us break the addiction to Middle Eastern oil and develop an increased domestic supply of both oil and natural gas.
One is to update the way the government – the Securities and Exchange Commission mainly – mandate the oil companies estimate just how much petroleum reserves they have in their deposits. The current rules were set based on 1970s technology when offshore development was restricted to 600 feet of water and much of the seismological technology for accurately measuring a deposit’s provable reserves did not exit. For example, one company cited by Cambridge Energy Research Associates could only claim 261 million barrels of proved reserves under current government rules when it is quite certain it has 658 million barrels – a $20 billion difference in today’s market.
Another needed policy change can be handled out of the White House if the President will just recognize that North Africa and sub-Saharan Africa now account for nearly 20 percent of U.S. oil imports against 15.5 percent from the Middle East Three nations, Nigeria, Angola and Algeria make up the bulk of that flow and our administration needs to work to ensure both the stability and the transparency of those governments. to help us diversify our dependence on the far less stable Middle East.
The point is simple enough to grasp. There is enough of a supply of petro-energy within our grasp to continue our national prosperity. There is no need to starve at the feast. Even that Congress ought to understand.