November 16, 1977

Energy Events Favor Reasonable Solutions

Events last week bought us a little more time to straighten out the energy mess - a reprieve that hopefully will save Congress from the folly of hasty, uninformed decisions that likely would worsen the situation.

The Organization of Petroleum Exporting Countries (OPEC), meeting in Saudi Arabia to raise oil prices, lost its nerve and recessed without announcing an increase.  Output of new oil wells off the coasts of Mexico and Great Britain is so much greater than expected that those countries are rapidly becoming self sufficient.

The Alaskan pipeline has reached full flow and is taking the pressure off U.S. imports, though we still buy nearly half our needs from the world monopoly.

This improvement enabled President Jimmy Carter to veto construction of the Clinch River Tenn., breeder reactor which would produce more nuclear fuel than it would use.  This was a bit of showmanship inasmuch as funds for construction are included in a general appropriations measure the president has said he will sign.

Nevertheless, the rhetoric has become less strident, and Congress is calming down.  Carter's latest fireside chat on energy was low key to the point of boredom.  He didn't use the phrases "rip-off" and "profiteering" once.  Surely a more reasoned and useful energy bill will be put together in a relaxed atmosphere without artificial deadlines.

The House and Senate Conference Committee now meeting to iron out differences in two divergent bills can delve deeper into the complex, interacting influences of energy, economics, politics, environment and foreign policy.  Perhaps conference members will better sort out facts from wishes.

Fact number one that should be firmly established is that conservation can not come close to solving our energy problems.

The U.S. problem is not runaway consumption, but falling production.  In the four-year post-embargo period ending last year our energy use went up only 3 percent.  During the same period, however, oil imports jumped 51 percent to make up for declining domestic oil and gas production.

If we halted energy use dead in its tracks, improvement in our energy situation would not be noticeable.  We would have to cut our energy demand in half to "get even," a goal that is utterly impossible.

It is a disservice to the problem to place the energy burden on conservation.  Clearly the emphasis has to be put on exploration for new sources of oil and gas, and on alternative energy sources.

Geologists assure us we have tapped about half the petroleum derivatives in the ground.  It can, and will, be brought out when the price for oil and gas is allowed to meet the costs of obtaining the abundant but hard-to-get remainder.  In the meantime we must step up research on fusion, thermal and solar technology.

This brings Carter and Congress up to the nub of the problem.  The consumer is going to be hit with $75 billion a year in new costs for energy.

Shall this huge sum of money go to the energy companies for expansion, and maybe some extra profit; or shall it go to the government for spending on federal salaries and services?

No one, apparently, wants to see the oil and gas companies make a buck even though it is from profit - and only profit - that expansion can come.  In total dollars, the energy companies make billions of dollars simply because they are large in size and cost.

Last year the 21 largest companies earned dividends of 5.2 percent for their stockholders.  In comparison, the chemical industry made 6.6 percent return, autos 4.4 percent and pharmaceuticals 9 percent.

If we are afraid to let our most important industry make a profit, we can control that with an "excess profit" tax much more effectively than we can by strangling the companies to death with arbitrarily low prices.

Some members of Congress have been wont to call the oil company profits "obscene."  For real obscenity, however, take a look at the costs of running the newly created Department of Energy.

Combined oil company profits last year amounted to $11.4 billion, certainly a huge sum of money.

The first-year budget for the Department of Energy is $10.6 billion plus $7 million in start-up expenses.  A staff of 20,000 new bureaucrats is being hired to do what ever bureaucrats do once they get their hands on a segment of our economy.  The budget amounts to a half million dollars per employee!  And they won't produce a drop of oil.

It is too much to be hoped that Carter and Congress will back off from this new layer of red tape.  Yet we will spend more to prevent private profit than we will save consumers.  The logic is dizzying.

With the additional time available to Congress for study and consideration, taxpayers-consumers can demand a modest first step toward energy sufficiency.  There is nothing magic about an omnibus law that attempts to solve everything in one fell swoop.

Let's deregulate oil and gas - with an excess profits tax if necessary - then find out how this fundamental change affects us before we go on to additional untried schemes.

Author: Lindsey Williams