As the Bush administration's energy policy task force, under Vice President Richard B. Cheney's direction, prepared its much anticipated recommendations, it was not surprising several other studies emerged. Most were blatant attempts by special interest groups to advance proposals that would benefit their industries and businesses directly. Possibly the one significant exception was Strategic Energy Policy Challenges for the 21st Century, an independent task force's report cosponsored by the James A. Baker III Institute for Public Policy at Rice University in Houston and the Council on Foreign Relations in Washington. Chaired by Edward L. Morse, executive advisor at Hess Energy Trading Co. LLC in New York, and directed by Amy Mysers Jaffe, a senior energy advisor at the Baker Institute, this report had input from 51 of the country's leading energy policy observers. Participants ranged from oil industry leaders such as Chevron Corp. chairman Dave O'Reilly and Shell Oil Co. president Steven L. Miller, to Edwin B. Rothschild, former energy policy director at Citizen Action in Washington, and Joseph P. Kennedy II, chairman and president of Citizens Energy Corp. in Boston. The leading national environmental organizations did not participate. The study nevertheless concludes that simply developing additional energy supplies won't be sufficient. "To be effective and politically acceptable, solutions also must focus on demand-side efficiency and must address the environmental and foreign policy concerns that frame so much of the American public's attitude toward energy development and uses," it says in its executive summary. "Indeed, if quick fixes on the supply side alone brought prices back down in the absence of effective efforts to promote energy efficiency, they actually might prolong the problem the U.S. now faces in the energy arena by bringing even greater reliance on imports." The report considers "the extraordinarily rapid erosion of spare capacities at critical segments of energy chains" to be the most significant change in the last decade. It notes that in 1985, when crude oil prices collapsed to less than $10 per barrel, OPEC had an estimated 15 million barrels per day of shut-in production capacity. That was about 50% of the cartel's theoretical capacity (Iran and Iraq were at war with each other at the time) and 25% of worldwide demand. By 1990, when Iraq invaded Kuwait, worldwide spare production capacity was 5- to 5.5 million barrels per day-about 20% of OPEC's capacity and 8% of worldwide demand. "This year, before OPEC's seasonal cuts, spare capacity was a negligible 2% of global demand," the report says. Meanwhile, strong economies have made demand surge worldwide while low energy prices have removed the incentive to conserve. "Nowhere is this more apparent than in the U.S. automobile sector, with the growth in demand for light trucks [i.e. pickups, SUVs and minivans] that burn more gasoline than smaller vehicles," the report declares. It concedes that U.S. transportation efficiency has increased, with average miles per gallon for standard automobiles climbing from 15.1 in 1983 to about 21.5 in 1999. But the average fuel economy for light trucks on the road is only 17.4 mpg. While Ford Motor Co. and General Motors Corp. have pledged to improve fuel economy for certain SUVs by 25% by 2005, the report suggests that U.S. oil consumption could drop substantially with across-the-board implementation of higher mileage standards for light trucks. "If fuel effieicny of light trucks matched that of cars, U.S. fuel savings would equal about 910,000 barrels of oil per day. If the fuel efficiency of only SUVs matched that of cars, the fuel savings would be 225,000 barrels per day. That's just one example of the result of disregard of demand measures, where demand management could well be the most efficient way to 'develop' more oil supplies in the United States," the report says. Lest it appear that this group has embraced conservation and improving efficiency as the only solution to this country's energy problems, the report also criticizes the growing domestic tendency to put more acreage off-limits to exploration and development. "Twenty years ago, nearly 75% of federal lands were available for private lease to oil and gas exploration companies. Since then, the share has fallen to about 17%," it says. A significant portion of that 17% is not available to drill for all practical purposes, it adds. The report repeatedly emphasizes the need to coordinate energy, environmental and political policies more closely. It also recognizes that doing so will be a formidable, but worthwhile, challenge. -Nick Snow
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