March 17, 1979

Oil Shortage Artificial

There is no shortage of oil or gas.

If gasoline hits a dollar a gallon, or we freeze in the dark next winter, it will be caused by politics - not by a dwindling natural resource.

Natural gas is a by-product of oil production, and Mexico is burning it in giant flares just to operate its new wells.  A pipeline to bring the excess gas to Texas stops short of the border - a monument to bureaucratic meddling.

The Iranian revolt shut off five percent of our crude oil, but half of this was replaced by Saudi Arabia.  The net loss, therefore, is less than three percent.  This tiny fraction is enough to kick prices up another notch and threaten rationing.

One shudders to contemplate the consequences of a significant cut back.

Energy Secretary James Schlesinger tells us there is only a 30-year supply of petro products in the ground.  Managing this scarcity requires 20,000 new public employees and a budget of $11 billion.

U.S. oil industry experts contend there is a thousand year or more of oil and gas in the ground.  They say the precious commodity will be brought to the surface when prices allowed will cover the costs of exploring, drilling and pumping.

Schlesinger's latest estimate of natural gas is up from his prediction of just a year ago.  The earlier horror scenario of a ten-year supply was based on a U.S. Geological Survey study in 1974 relating resources available at the price then of 52 cents per thousand cubic feet.

The current well-head ceiling price of $1.45 produces a slightly rosier outlook: President Jimmy Carter suggests $1.75.

Energy companies say that at an uncontrolled price of $2.25 it would be possible to extract another hundred years of gas.  At somewhere between $2.50 and $3.00 the industry could tap methane deposits that would last up to two thousand years!  What to believe?

The hassle with Mexico developed over a price of $2.60 per thousand feet agreed to by private purchasers.  Schlesinger objected because Canada's contract price to the U.S. is $2.16.  The Mexican deal might upset the controlled price.

It is hard to understand how no gas at $1.45 is better than plenty of gas at $2.60.

Forgotten in the worldwide energy debate is a report prepared by the United Nations two years ago following a seminar of oil scientists in Austria.

Dr.  Joseph Barneal of Israel, formerly the U.N.'s director of natural resources, declares that "estimates of recoverable oil which are published cover perhaps one percent of nature-made oil in place."  He believes the other 99 percent can be recovered via the law of supply and demand.

Bernardo Grossling of the U.S. Geological Survey, also a seminar participant, doubts that heavily exploited oil reserves in this country have much long-range potential.  He says the rest, of the world, however, has vast reservoirs of untapped petroleum.

The Moscow Academy of Sciences representatives, Nesterov and Salmanov, estimate several centuries worth of oil, and unlimited gas supplies dissolved in the oceans.

Outside of Carter and Schlesinger it is hard to find anyone who believes there is a genuine shortage of either oil or gas.

Cheap oil and gas that jumps out of the ground when you poke it with a sharp stick is a thing of the past in the United States.  Perhaps Asian or African countries will discover such a bonanza in the future.  If so, we can be sure they will milk the market as does Mexico and the Organization of Petroleum Exporting Countries.

Those who try to make time stand still - such as Senator Howard Metzenbaum, the vociferous oil industry critic - delude themselves and the public.

We are paying already the realistic price to foreign oil and gas producers.  Our taxes subsidize the difference between the political fairy tale of low prices and the OPEC gouge of full market.

Middle East sheiks are buying up America with our own ransom.  And we can not touch them with controls, or laws, or taxes, or regulations.

Many feel we should give the same incentives to American producers whose combined profits last year were less than the cost of the Department of Energy.  Then we could recover the costs through increased corporate income and excess profits taxes.

At the same time we would create more jobs for Americans, save the costs of a useless layer of government and regain our independence of foreign blackmailers.

Nearly half our oil is imported from Arabian Sea countries.  Iran may be only the first Mideast domino.  We are about to get involved in the Yemen mini-war.  Anti-American feelings are strong throughout the area.  Collapse of oil production there would bring us to our knees.  Wars are fought over lesser provocations.

An artificial shortage of petro energy resulting from artificial prices is a luxury the free world no longer can afford.

Author: Lindsey Williams