Monday March 19 2:06 PM ET Abraham: Energy Costs Pose Recession Risk

By Tom Doggett

WASHINGTON (Reuters) - Energy Secretary Spencer Abraham (news - web sites) on Monday said high energy prices were having a negative effect on the U.S. economy and linked the rising costs to the possibility of a recession.

``This nation's last three recessions have all been tied to rising energy prices -- and there is strong evidence that the latest crisis is already having a negative effect,'' Abraham said in a speech to the U.S. Chamber of Commerce (news - web sites).

``Rising energy costs are hitting every family's checkbook, primarily affecting those who can afford it least,'' he said.

Abraham made his comments during a speech outlining the major energy supply problems facing the United States.

He and other top Bush administration officials, members of a White House energy task force, were scheduled to meet later on Monday to discuss a broad national plan to boost domestic oil and gas drilling, invest in so-called ``clean coal'' technology, reduce foreign oil imports and promote energy conservation.

The United States consumes about 20 million barrels of crude oil and refined petroleum products each day. Currently, about 54 percent of the U.S. oil supply is imported.

The National Association of Manufacturers (news - web sites) estimated that soaring fuel prices between 1999 and 2000 cost the U.S. economy more than $115 billion, Abraham said. That was roughly equivalent to a drop of one full percentage point off the nation's gross domestic product.

Abraham told the business group that California's electricity crisis was not an isolated incident, and that the entire nation faces an energy crisis.

``The failure to meet this challenge will threaten our nation's economic prosperity, compromise our national security and literally alter the way we live our lives,'' Abraham said.

The former Michigan senator blamed the Clinton administration for failing to address the nation's energy needs during eight years of economic prosperity. The Democrats, Abraham said, ``sat on the sidelines as our nation's energy needs mounted.''

During the 1990s, the Clinton administration ignored the rapidly expanding energy needs of the future, he added.

``Their energy strategy boiled down to: you can't find it, you can't transport it, and even if you get it, we don't want you to use it. Through neglect or complacency or ideology, this approach has led us to the crisis faced today,'' he said.

Bush, a former Texas oilman, would introduce legislation based on recommendations from the White House task force later this spring.

Other key points in his speech included the following:

+ Regulatory restrictions have limited the ability of U.S. refineries to expand capacity to meet demand during the past 25 years. Refiners also face difficulties because of the government's requirement that more than 15 types of gasoline be produced to meet regional pollution needs.

+ An estimated 40 percent of potential U.S. natural gas resources are on federal lands that are closed to exploration or have restrictions of other kinds.

+ U.S. electricity demand will grow by 45 percent over the next 20 years, particularly due to the rise of the high-tech economy, according to Energy Department estimates. That means about 90 new power plants must be built annually to keep up with demand.

+ Coal and nuclear plants will continue to play a major role in providing electricity. ``The administration will not regulate coal out of existence and we will not support measures that will threaten electricity supplies and significantly raise electricity prices,'' Abraham said.

+ Electricity shortages could affect New York City, Long Island and the Midwest and Northern Plains states this summer.

+ Opening the coastal plain of the Arctic National Wildlife Refuge in Alaska to oil drilling would affect only 2,000 acres, or an area about the size of Dulles International Airport. The entire refuge has 19 million acres. ``Based on December 2000 figures, it would free us from about 54 years of oil imports from Saddam Hussein (news - web sites) and Iraq,'' Abraham said. http://dailynews.yahoo.com/h/nm/20010319/bs/energy_recession_dc_1.html

-- Carl Jenkins (somewherepress@aol.com), March 19, 2001