Is a new energy crisis at hand?

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Rising oil prices prompt dubious quick-fix responses

Is a new energy crisis at hand?

At American gas pumps, prices are up more than 50% in 18 months. More ominously, projections are that heating oil prices will double this winter while natural gas prices will rise more than 25%.

In Europe, protests are spreading. Last week, in the most serious disruptions so far, British lorry drivers and farmers furious about $5-a-gallon gas blockaded refineries. Thousands of gas stations ran dry.

President Clinton's answer, which came in response to a question Friday is this: The U.S. economy can absorb oil price spikes far more easily than in the '70s, when shortages caused years of inflation and stagnation. In the short term, he proposes possibly opening the Strategic Petroleum Reserve and increasing tax incentives for energy conservation and alternative energy.

Not exactly inspiring answers. In fact, opening the reserve is just a political palliative. It contains less than a one-month supply. But the president is right about the economy, and he surely knows the deeper truth that no politician two months away from an election is likely to speak: The last 18 months' price increases are likely part of a long-term trend. And barring a recession no one wants, solutions are just as long term.

That may not be satisfying for drivers and business facing rising prices. But the source of their pain is neither profiteering oil companies nor greedy Arabs; it a rising world economy that creates vast new demand for oil just as it creates new jobs.

The good news is that only 3% of U.S. incomes are spent on oil compared with 10% 30 years ago. The economy also has grown nearly one-third more energy efficient.

And while subsidies for wishful thinking like methanol, ethanol, electric cars, wind power and solar power have wasted billions, federal and state governments have also found a better approach.

The answer -- though not a quick one -- is to set goals that encourage innovation rather than favoring one technology.

The federal government's Partnership for a New Generation of Vehicles attempts to triple gas mileage while letting automakers decide how to do so. California is backing away from its electric car mandates -- abandoning 1998 and amending 2003 requirements for ''zero-emissions vehicles.'' Instead it's pushing for lower pollution through gas-electric hybrids and methanol-powered fuel cells. Both programs set goals and let companies find ways to meet them.

Eventually, and particularly with rising prices, those efforts should produce technologies that reduce or replace gas consumption by cars, which consume 40% of the world's oil supply. Prices would tumble.

As unsatisfying as that is, it's all that can be done beyond encouraging oil producing nations to increase production enough to avoid recession -- a lesson they learned for themselves in the 1970s.

Protests or not, only time, technology and the pain of high prices will ever diminish the thirst for oil.

http://cgi.usatoday.com/usatonline/20000918/2652904s.htm

-- Martin Thompson (mthom1927@aol.com), September 18, 2000


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