Bush pushes energy policy, warning of looming crisis

Production increase favored to avoid woes like California's


WASHINGTON - In the first major push for his ambitious energy policy, President Bush warned yesterday that America is heading toward a fuel crisis that has no "short-term fixes" and could spread California's power woes to the rest of the country.

The White House warning, which some experts disputed, was aimed at building support for the Bush administration's energy policy, which seeks to boost domestic production of oil, natural gas and coal.

"The energy crunch we're in is a supply-and-demand issue. We need to reduce demand and increase supply," Bush said after a White House meeting yesterday with the advisers who are putting the finishing touches on his energy proposal. Bush is expected to release the proposal within a few weeks.

Bush's comments - while not painting a rosy picture - provided a less-dire prediction than that of his chief energy adviser, Spencer Abraham, who hours earlier told a a group of business leaders that the nation "faces a major energy supply crisis over the next two decades."

The gloomy energy forecast came as California residents dealt with rolling power blackouts across the state for the first time since January. And the Organization of Petroleum Exporting Countries (OPEC) agreed over the weekend to reduce oil production by 1 million barrels a day.

"The bad news is that the situation in California is not isolated, it is not temporary and it will not fix itself," Abraham said at an "energy summit" sponsored by the U.S. Chamber of Commerce. He noted that almost every region of the country is expected to have a power shortage this summer, in large part because demand will outstrip the ability to produce and deliver.

The administration's emphasis on the negative is similar to its approach to economic issues. For weeks, Bush and his aides have highlighted economic problems as part of their campaign to build support for the president's proposed federal budget and his planned $1.6 trillion tax cut.

By focusing on potential energy problems, administration officials hope to make the case for an energy policy that includes oil exploration in the Arctic National Wildlife Refuge of Alaska.

Although Bush said his policy would focus on both conservation and increased supply, the former Texas oilman left little doubt which side of the ledger takes top priority. Bush said any spike in gasoline prices this summer would stem from inadequate investment in energy production, not the actions of OPEC.

"We haven't built a refinery in 25 years in America. We're not generating enough gasoline to meet demands," he said. "We're not exploring for enough natural gas to meet demand. We're not building enough power-generating plants to meet demand."

Executives from the energy industry agreed with the administration's message, environmentalists said it short-changes conservation and independent experts said it misdefines the problem.

U.S. Chamber of Commerce President Tom Donohue said the United States is in a "deep hole" about energy and added "that hole is deeper than I thought and the ladder [to get out] is shorter than I hoped."

Daniel Yergin, chairman of the consulting firm Cambridge Energy Research Associates, said supplies of critical U.S. fuels - electricity, oil and natural gas - are so close to levels of demand that the entire system is "vulnerable to accidents and unexpected events."

Even so, some academic experts dispute the administration's talk of a national energy crisis.

"I don't know that there is a long-term energy problem, to tell the truth," said Paul Joskow, director of the Center for Energy and Environmental Policy at the Massachusetts Institute of Technology's Sloan School of Management.

High natural gas and oil prices are just functions of a fluctuating free market, Joskow said. He expects that they will stabilize before Bush's plan yields results.

Severin Borenstein, director of the University of California Energy Institute in Berkeley, agreed. "I think there is very little the Bush administration can do about the price of gas. ... I don't think there's a long-term problem. I think the price of energy might go up, but it's been incredibly cheap for the last 20 years."

The Bush administration's continued citation of California's electrical crisis, which resulted largely from bungled deregulation, to justify a supply-side energy policy "is sort of misleading," Borenstein said.

Environmentalists contend that Bush's developing energy policy puts too much emphasis on increasing supply and not enough on reducing the demand for energy through conservation.

Energy industry leaders cautioned that any proposed solution won't boost energy supplies soon.

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