US Energy Bill Won't End Dependence on Foreign Oil
Date: 22-Apr-05
Country: USA
Author: Bernie Woodall
"I don't think consumer countries will become less dependent on imports, be it the United States or China or others. Clearly, the import dependency will increase," said Antoine Halff, analyst with The Eurasia Group in New York.
"On one hand, you have continued growth in demand while on the other hand you have depletion of mature fields in most consumer nations," he added.
A surge in oil prices this year has squeezed consumers' budgets, contributed to a growing US trade imbalance and raised inflation worries. Oil prices hit a record near $60 a barrel earlier this month as traders eyed surging global demand and tight spare output capacity.
The United States currently imports about two-thirds of the crude oil it uses.
The House on Thursday solidly approved an $8 billion energy bill, brushing aside Democratic criticism that the legislation is a giveaway to big energy companies while motorists face record-high gasoline prices.
The Republican-written bill, which passed 249-183, would encourage future production of domestic oil, natural gas, coal, nuclear and other energy sources. It would also boost output of ethanol, a corn-based gasoline additive, and allow oil drilling in Alaska's Arctic National Wildlife Refuge.
Katherine Spector, head of energy research at JP Morgan Securities in New York, was blunt when asked if the bill would sap dependence on foreign oil.
"Not at all," she said.
US petroleum demand is expected to grow by a projected 37 percent by 2025, the US Energy Information Administration (EIA) said, growing at an average annual rate of 1.5 percent.
US oil production, meanwhile, has fallen nearly 50 percent since oil prices collapsed in 1985 and averaged about 5.4 million bpd in 2004 -- a 50-year low. The EIA expects that new oil finds in the Gulf of Mexico could stem those declines in the short-term.
A STEP FORWARD?
Other analysts agreed that no energy bill can wipe away US dependence on foreign energy, but added the measure would be better than not having an energy policy at all.
"It's a step in the right direction," said Peter Beutel, Cameron Hanover analyst, based in Connecticut.
"It's a good thing to have an energy policy. This administration is the first since Jimmy Carter's to even try to get an energy policy in place," Beutel said.
Beutel said the bill would be more effective if it included ways to reduce voracious demand.
"Our American cars need to get more miles per gallon. I would like to see the two sides reach across the aisle. And I believe in American technology and ingenuity enough to have a Manhattan Project-style approach to solve this energy quandary," Beutel said, referring to the World War II project that led to the development of the atomic bomb in 1945.
Timothy Evans, analyst with IFR Energy Services in New York, said the energy bill showed limited potential.
"The impact of this energy bill is going to be rather subtle, only rounding off some of the sharper edges off our energy future," Evans said.
"Opening more areas to drilling, for example, may help to offset the natural decline in US production over the next five to 10 years. Natural gas output may get a boost.
"On the oil side, though, we really don't have a large enough resource base to make a big dent in our reliance on imported oil," he said.
"On the demand side, the failure to include stronger conservation measures limits the impact. Some of the investment in technology could make more of a difference, but only over a much longer time span," Evans said.
The Senate plans next month to finish writing its version of the energy bill. If that bill is passed, it and the House version must be reconciled into a final package.
