http://cincinnati.bcentral.com/cincinnati/stories/2001/01/22/daily41.html

14:45 EST Thursday

Country in early stages of energy crisis, Ashland CEO says

Lucy May Courier Staff Reporter

For some time, Ashland Inc. Chairman and CEO Paul Chellgren has been warning that the United States was approaching an energy crisis.

Now, he says, the country is in the early stages of that crisis, and it won't be easy to fix. That's because this energy crisis isn't just a lack of supply of crude oil. It's linked to natural gas and electricity supplies, too, he said.

"Generally, this country is short on supply of a number of forms of energy,'' Chellgren said at a news conference after the Covington-based company's annual meeting Jan. 25. "The system is tight."

Chellgren said part of the problem is that the supply of energy is down because energy companies haven't made the kinds of profits in years past to justify increases in that supply. To solve the problem, the country will have to look at supply and demand, as well as government regulations that make it more difficult for energy companies to do business, he said.

For example, in its final days, the Clinton administration announced the decision to reduce sulfur levels in gasoline by 90 percent and to reduce sulfur levels in diesel fuel by 97 percent, Chellgren noted. He said industry leaders argue such reductions will be enormously expensive and will reduce the availability of gasoline.

"The industry feels that is an error,'' he said. "The costs and benefits haven't been fully explored."

While Ashland is no longer in the business of producing oil or gas, the company still has a major stake in refining because of its partial ownership of Marathon Ashland Petroleum, known as MAP. Rising fuel costs have increased profit margins for MAP, Ashland's biggest business unit.

But Chellgren noted that Ashland's downstream businesses are MAP's biggest customers, and those higher costs get passed along to those divisions that make chemicals, plastics and asphalt.

Chellgren sits on a national task force studying the problem with the aim of recommending energy policies to the Bush administration.

He likened higher energy costs to a tax increase, saying, "It's a cost to the economy in total." But the rolling black-outs in California and the energy crunches being experienced in other parts of the country are making politicians and the public more aware of the problem, he said.

"This problem lends itself to analysis and action,'' Chellgren said. "It doesn't lend itself to just producing more crude oil. It's much more complex and pervasive than that."

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-- Swissrose (cellier@azstarnet.com), January 27, 2001