Mideast Oil Forever?

Congressional budget-cutters threaten to end America's leadership in new energy technologies that could generate hundreds of thousands of high-wage jobs, reduce damage to the environment, and limit our costly, dangerous dependency on oil from the unstable Persian Gulf region.

Imagine a world in which the Persian Gulf controlled two thirds of the world's oil for export, with $200 billion a year in oil revenues streaming into that unstable and politically troubled region, and America was importing nearly 60 percent of its oil, resulting in a $100-billion-a-year outflow that undermined efforts to reduce our trade deficit. That's a scenario out of the 1970s which can never happen again, right? No, that's the "reference case" projection for ten years from now from the federal Energy Information Administration.

Imagine another world in which fossil-fuel use had begun a slow, steady decline; more than a third of the market for new electricity generation was supplied from renewable sources; the renewables industry had annual sales of $150 billion; and the fastest-growing new source of power was solar energy. An environmentalist's fantasy, right? No, that's one of two planning scenarios for three to four decades from now, developed by Royal Dutch/Shell Group, the world's most profitable oil company, which is widely viewed as a bench mark for strategic planning.

A decade's worth of little-heralded technological advances funded by the Department of Energy have helped to bring such a renewables revolution within our grasp. Yet budget cuts already proposed by Congress would ensure that when renewable energy becomes a source of hundreds of thousands--if not millions--of new high-wage jobs in the next century, America will have lost its leadership in the relevant technologies and will once again be importing products originally developed by U.S. scientists. Moreover, Congress's present and planned cuts in advanced transportation and fossil-fuel research and development impede efforts to maximize the nation's conventional-energy resource base.

Although little can be done to change the first scenario, Congress's actions all but guarantee that if an oil crisis comes, our national response will be reactive, uninformed, and unduly burdensome. Having abandoned the technological means to minimize the crisis, the nation will be left in the next century with little more than its usual responses to energy crises: price controls or other rigid regulations, or unplanned, ineffective attempts to deal with the effects of sharp price or supply fluctuations.

What's more, cuts in research on clean-energy technologies represent a statement by Congress--conscious on the part of some members, unintentional on the part of others--that global climate change is of little or no concern, and that domestic environmental problems, such as urban air quality and industrial waste, require nothing more than existing strategies. Yet the nation's "tools" for dealing with pollution are similar to those for dealing with an oil crisis, and new technology usually provides the most cost-effective solution. One example: A relatively small amount of money spent today to develop, test, and deploy highly reflective roofing and road material and plant shade trees could help cool the Los Angeles area by five degrees, reducing annual air-conditioning bills by more than $150 million. Since smog formation is very temperature-sensitive, such cooling would reduce smog concentrations by 10 percent, which would be comparable to removing three quarters of the cars on the road. The health-related benefits of that smog reduction would be worth $300 million a year. Applied nationally, the energy savings alone could exceed $10 billion a year by 2015.

Although news coverage of the environment has focused on congressional efforts to roll back environmental regulations, cuts in environmental-technology programs will have as significant an impact on our quality of life in the long run. And by turning a blind eye to the technological solutions to environmental problems, we limit ourselves to far-more-onerous alternatives. The environmental regulations that Congress is rolling back today may become all the more necessary in the not too distant future.

The programs being cut are not those failures of the past that are often mentioned by critics of federal energy research--for example, the synfuels program of a decade and a half ago. They are instead programs that have been delivering results for years. A report released last June by a blue-ribbon panel of independent energy analysts, led by the energy expert Daniel Yergin, the Pulitzer-winning author of The Prize, cited dozens of federally funded technological advances that "are generating billions of dollars worth of annual consumer energy savings and new business opportunities, and playing an important role in job creation." This is what will be lost.

Government and the people it represents cannot expect that the best-case scenario will play out. Rather, government should in behalf of the people try to prevent plausible worst-case scenarios or take advantage of likely trends and opportunities through long-term investments that the private sector will not make (either because they are too risky or because the reward is too far off). Both of us work for the Department of Energy, and in this article we examine some likely scenarios concerning petroleum, power generation, and pollution to help focus attention on a quiet revolution in energy markets and energy technologies which will have a profound impact on U.S. economic strength, environmental health, and national security in the next century. The impact will probably equal that of the much-ballyhooed information revolution, which receives far more attention from policymakers and the media. Yet if we don't focus on energy today, our quality of life tomorrow will be permanently diminished.

The Coming Oil Crisis

Given that the most recent war America fought was in the Persian Gulf, let's start by examining the likelihood that an oil crisis will occur in the coming decade. Forecasting is always risky, especially where oil is concerned, but consider what a variety of experienced energy hands from every point on the political spectrum have said in the past year alone. Donald Hodel, who was a Secretary of Energy under Ronald Reagan, has said that we are "sleepwalking into a disaster," and predicts a major oil crisis within a few years. Irwin Stelzer, of the American Enterprise Institute, says that the next oil shock "will make those of the 1970s seem trivial by comparison." Daniel Yergin says, "People seem to have forgotten that oil prices, like those of all commodities, are cyclical and will go up again." James Schlesinger, who was the Secretary of Energy under Jimmy Carter, has said, "By the end of this decade we are likely to see substantial price increases." In March of last year Robert Dole, the Senate majority leader, said in a speech at the Nixon Center for Peace and Freedom, "The second inescapable reality of the post-twentieth-century world is that the security of the world's oil and gas supplies will remain a vital national interest of the United States and of the other industrial powers. The Persian Gulf . . . is still a region of many uncertainties. . . . In this 'new energy order' many of the most important geopolitical decisions--ones on which a nation's sovereignty can depend--will deal with the location and routes for oil and gas pipelines. In response, our strategy, our diplomacy, and our forward military presence need readjusting." The chairman of the Federal Reserve, Alan Greenspan, not known for being an alarmist, in testimony before Congress last July raised concerns that a rising trade deficit in oil "tends to create questions about the security of our oil resources."

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