Shutdown illustrates US oil
dependence By Emad Mekay
WASHINGTON - Despite rhetoric from
Washington that the United States must wean itself
from dependence on oil, the shutdown of a BP
oilfield in Alaska has shown how far the country
remains from that goal and the lack of a consensus
on how best to achieve it.
BP Exploration
Alaska announced on Monday that it had begun a
phased shutdown of the Prudhoe Bay oilfield, the
largest in the US, after the discovery of
unexpectedly severe corrosion and a small spill
from a transit line. BP operates about 36
kilometers of oil-transit pipeline at Prudhoe Bay.
The shutdown will reduce Alaska North
Slope oil production by an estimated 400,000
barrels per day, or about 8% of US production.
Already hit by turmoil in the Middle East and
Nigeria, and with
concerns over Venezuela, world
oil futures shot up by about US$2 to $77 a barrel
for crude oil. Gasoline prices in the US have
already begun to rise as much as 5 cents a gallon
(1.3 cents a liter) in some cities.
The US
Energy Department is now preparing to tap into the
country's strategic petroleum reserves to deal
with the shutdown.
Conservatives have
insisted that the solution to future disruptions
is to pursue new drilling and exploration,
including in the protected Arctic National
Wildlife Refuge.
"This problem, like the
hurricanes last fall, underscores the pressing
need to expand domestic oil and gas production,"
Republican Senator Pete Domenici said in a
statement. "We are living too close to the supply
margins and have been for too long. While both
houses [of Congress] are working to expand
production, we expect the private sector to
sharply step up its investment in its own critical
infrastructure."
But some say the real
debate should center on the need to adopt
available technology and mandate a significant
increase in fuel-economy standards for cars,
trucks and utility vehicles. They also propose
cutting the record profits of oil companies and
channeling the savings to consumers or to
investments in alternative energy sources.
According to the Union of Concerned
Scientists (UCS), the US will spend at least an
additional $24 million a day on oil imports as a
result of the price spike, with $10 million going
to the Organization of the Petroleum Exporting
Countries, a cartel the US increasingly views with
suspicion.
The UCS estimates that if
fuel-economy standards were tightened to make all
US cars and trucks on the road get one extra mile
(1.6 kilometers) per US gallon, the country would
not even need the 400,000 barrels per day BP has
halted.
"The US would spend $50 million a
day less on gasoline priced at $3 a gallon," or 79
cents a liter, said David Friedman, research
director of UCS. "Over the course of a year, that
would be $18 billion that could be spent
strengthening our economy and creating jobs across
the country."
Consumer groups say the BP
incident shows the incoherence of US energy
policy, which they argue penalizes consumers and
rewards oil companies. Oil giants ExxonMobil,
Shell and Chevron all reported record profits this
year.
BP alone announced two weeks ago
that its second-quarter earnings rose 30% to a
record $7.32 billion.
"As gasoline prices
and oil-industry profits hit record-high levels,
so too has public frustration and concern," said
Ann Wright, senior policy analyst for the
Consumers Union. "The oil companies continue to be
the largest benefactors of our nation's energy
policy - not the American public."
The
group says oil companies will make more money this
year than they did from 1995 to 1999. Comparing
oil-industry profits to Standard and Poor's
Industrial Index, the industry will have $120
billion in excess profits in the 2001-06 period.
"Cash flow has increased so fast that the
industry simply cannot absorb it," said Mark
Cooper, director of research at the Consumer
Federation of America. "Cash flow has exceeded net
new investment by $120 billion, yet Congress
continues to lavish favors on the industry."
An energy bill signed by President George
W Bush last year provided billions of dollars in
new tax breaks, royalty-free drilling rights, and
special regulatory exemptions for the oil
industry.
On Tuesday, Congressman Edward
Markey, a Democrat who is also a senior member of
the House Energy and Commerce and House Resources
committees, said he wanted to know why BP did not
spend its profits to maintain its pipelines.
"We learned yesterday that BP hasn't even
spent its bulging profits on basic pipeline
maintenance, forcing a complete shutdown of their
Prudhoe Bay operations due to a massive buildup of
sludge in BP pipelines that have not been cleaned
for as long as 15 years," he said.
Some
groups have proposed cutting into the industry's
huge profits by raising oil-drilling fees. The
funds would then be invested in expanded use of
existing technologies, the development of improved
and new technologies, and bringing alternative
fuel and energy technologies to the market faster.
