Oil shortage may spur use of reserves Critical point near, energy officials say

September 14, 1990|By Stephen E. Nordlinger | Stephen E. Nordlinger,Washington Bureau of The Sun

WASHINGTON -- Energy officials said yesterday that oil supplies would reach a critical point over the next few days that could trigger the use of emergency reserves.

Although they held out hope the tapping of reserves could be avoided, the officials appealed to the public to adopt strict conservation measures -- including reducing car speeds, buying lower octane gasoline and cutting the use of electricity -- to help avoid drawing on the emergency supply of 590 million barrels.

The administration also began yesterday a nationwide radio campaign to encourage conservation.

A decision on whether to use the emergency supplies in the United States and in other nations will be made at a meeting of the Paris-based International Energy Agency Sept. 26, Energy Secretary James D. Watkins and his deputy, W. Henson Moore, said in testimony before the Senate Energy and Natural Resources Committee.

"This is a cherished reserve that has a finite life, and we don't want to use it too early," Mr. Watkins said. "But if we're not making progress [in reducing the shortfall], we probably will have to move."

The Iraqi invasion of Kuwait Aug. 2 lowered oil output by 4.3 million barrels a day, and the promised increased supplies from Saudi Arabia and other OPEC countries have yet to provide substantial relief. The global shortfall is expected to be 3.5 million barrels this month and 2 million barrels in October, the energy officials reported.

Mr. Moore emphasized that any U.S. use of its emergency supplies would have to be coordinated with Japan, West zTC Germany and other countries so that they also tapped their reserves. The U.S. Strategic Petroleum Reserve in Texas and Louisiana holds about half of the world's government-controlled emergency reserves.

"We don't want anyone to ride on our coattails," Mr. Moore said. Both Japan and West Germany already have been criticized heavily by members of Congress for not contributing more to maintain U.S. forces in Saudi Arabia.

In a sign that the White House was placing increased importance on the reserves, Mr. Moore said the administration was reversing course and endorsing a House-Senate bill that would raise the capacity of the reserves from 750 million barrels by the end of 1991 to 1 billion barrels. The House passed the bill yesterday, 391-0. Last night the Senate followed suit on a voice vote.

Mr. Moore also said the administration backed the bill's provision authorizing sales from the reserves to test pumping and other equipment and to test the quality of the stored oil. The tests, he said, might involve several hundred thousand barrels a day.

Industry analysts said short-term sales of the oil could be the forerunner of wider use of the reserves. Democrats on the Senate panel have been pressing the administration to sell oil from the reserves to moderate oil prices.

"The reserve was created to counter the economic consequences of an [oil] disruption," said Sen. Bill Bradley, D.-N.J. "It is a tool, and it should be used."

Since the Iraqi invasion, oil prices have soared from $21 a barrel to more than $30, a drain on consumer purchasing power that many economists think will lead to a recession. But Mr. Moore emphasized yesterday that the law governing the reserves provides for using them to prevent a supply disruption rather than to lower prices.

"The reserves are not to be used because of temporary price fluctuations," he said, "only to avoid a major adverse impact on the economy."

But pressed by Mr. Bradley, Mr. Moore acknowledged that tapping the reserves "could have an effect on prices."

Concerning public anger over the increase in gasoline prices, Mr. Watkins said that "we don't see any gross unfairness" in pricing practices by the oil industry. What we are seeing is the normal market response."

Gasoline prices initially shot up more than crude oil prices after the Iraqi invasion, he said, but now are lagging increases in oil prices.

Mr. Watkins opposed pending Senate legislation that would deal with "price gouging" on grounds that a "tremendous bureaucracy" would need to be created.

The Energy Department outlined yesterday a wide range of suggested conservation measures but did not approve of a congressional proposal to increase the fuel efficiency of cars.

Mr. Watkins and Transportation Secretary Samuel K. Skinner sent a letter to Senate Majority Leader George J. Mitchell, D.-Maine, warning they would recommend President Bush veto a bill, sponsored by Sen. Richard Bryan, D.-Nev., that would require automakers to improve the average fuel economy of new cars to 40 miles a gallon by 2001.

As debate on the bill opened on the Senate floor yesterday, Mr. Bryan said the measure would reduce oil demand by 2.8 million barrels a day by the turn of the century.

But the two Energy Department officials said the bill would cause "significant weight and size" reductions in cars and light trucks, leading to a "noticeable adverse impact" on safety.

Expanding on conservation proposals announced last month, Mr. Watkins said 530,000 barrels a day, or 22.26 million gallons of oil, could be saved by more efficient use of cars and other energy-saving measures.

He said the federal government is to buy 65 "flexible" vehicles that can run on gasoline or ethanol, which is made from grains, or on methanol, commonly known as wood alcohol. Existing vehicles also may be converted to use alternative fuels, he said.

In addition, Mr. Watkins said, oil output could be raised by 375,000 barrels a day -- or 15.75 million gallons -- by raising production in existing fields in Alaska and opening offshore production near Santa Barbara, Calif.

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