Recurring energy-supply shortage could result in a nationwide crisis if an energy policy isn’t developed soon

CONTACT: B.J.
Almond
PHONE: (713) 348-6770
EMAIL: balmond@rice.edu

RECURRING
ENERGY-SUPPLY SHORTAGES COULD RESULT IN A NATIONWIDE CRISIS IF AN ENERGY POLICY
ISN’T DEVELOPED SOON, WARNS AN INDEPENDENT TASK FORCE REPORT OF RICE
UNIVERSITY’S BAKER INSTITUTE AND THE COUNCIL ON FOREIGN RELATIONS

There could be more
Californias in America’s future unless the U.S. government adopts a long-term,
comprehensive energy policy now, according to an independent task force report co-sponsored by the James A. Baker III
Institute for Public Policy of Rice University in Houston and the Council on
Foreign Relations.

Given the
capital-intensive nature of the energy industry, such energy woes could worsen
before they get better, the study notes. Americans should therefore brace
themselves for more California-style electricity problems and seasonal
shortfalls of natural gas and heating fuels, as well as occasional spikes in
regional gasoline prices. The experts note, however, that the situation is not a
sign that the world is running out of energy resources. Rather, the situation
finds its roots in chronic under-investment and soaring energy use.

The report, signed by 51
experts with widely different backgrounds and perspectives on the problem,
believes that President Bush has an opportunity to begin educating the public
about this reality and to start building a broad base of popular support for the
hard policy choices ahead.

The report warns that
the United States now faces the consequences of not having had an energy policy
over the last several decades. The task force concludes that “there are no
overnight solutions to the energy supply and infrastructure bottlenecks facing
the nation and the world.”

The task force, chaired
by Edward L. Morse, a widely recognized authority on energy at Hess Energy, and
assisted by Amy Myers Jaffe of the Baker Institute, noted that both Democratic
and Republican administrations have allowed energy policy to drift despite its
central importance to the domestic economy and to the nation’s security. In
particular, energy policy has underplayed energy efficiency and demand
management measures for two decades.

The report also notes
that a spike in oil prices preceded every American recession since the late
1940s and that despite the obvious pattern, successive governments did nothing
to craft a coherent and visionary national energy policy.

The task force warns
that what lies ahead now are agonizing policy tradeoffs between legitimate and
competing interests. Among those tradeoffs, the task force states, is whether
Americans are willing to compromise their hunger for cheap energy to achieve
their increasing demand for cleaner energy and a cleaner environment.

The economic boom of
recent years has only exacerbated the energy crisis. Strong growth in most
countries and new demands for energy have led to the end of previously sustained
surplus in hydrocarbon fuels.

As a result, the world
is now precariously close to using all its available global oil production
capacity. If an accident or other disruption in production occurred — whether
on the Alaskan oil pipeline, in the Mideast or elsewhere — the world might be
on the brink of the worst international oil crisis in three decades. The
situation in oil markets is compounded by shortages of other forms of readily
available, clean energy in the U.S., including natural gas and electricity in
certain localities.

“The situation is, by
analogy, like traveling in a car with broken shock absorbers at very high
speeds, such as 90 miles per hour,” the report says. “As long as the pavement on
the highway is perfectly smooth, no injury to the driver will result from the
poor decision of not spending the money to fix the car. But if the car confronts
a large bump or pothole, the injury to the driver could be quite severe…”

Oil field production capacity limitations today in the Middle East mean that
the U.S. can no longer assume that the oil-producing states will provide more
oil at will. Moreover, it is not politically desirable for the U.S. to increase
its dependence on a few foreign sources.

The task force states
that the Bush administration, while not responsible for the current problems,
needs to make some hard policy choices to secure the energy future of the United
States. A comprehensive energy policy that combines supply, demand restraint and
environmental objectives is required, the report concludes.

The Baker Institute/Council on Foreign Relations task force report
is being offered on the eve of the final deliberations of the administration’s
energy task force headed by Vice President Cheney.

Any viable energy policy
will need to cope with the following important and often conflicting foreign
policy issues:

• 
  
  U.S. policy in the
  Middle East;
  
  
• 
  
  U.S. policy toward the
  former Soviet Union and China;
  
  
• 
  
  The fight against
  international terrorism;
  
  
• 
  
  Environmental policy;
  
  
  
• 
  
  International trade
  policy, including the U.S. position on the European Union energy charter;
  
  
  
• 
  
  NAFTA;
  
  
• 
  
  Foreign aid and
  credits.

In describing the
nation’s policy choices in creating a national energy policy, the task force
report emphasizes a tough bottom line: When it comes to energy, the American
people cannot achieve both a painless present and a secure future. The report
states that if the current administration tells it like it is to the American
people, the U.S. would be taking the first step in years toward achieving a
much-needed national energy policy.

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