As US Oil Output Falls, Reliance on Imports Grows

Critics charge that low oil prices today may fuel problems tomorrow

OUTSIDE, Arctic winds whip across the Northern states, but inside, millions of residents stay snug in their oil-heated homes.

There's just one problem with this cozy picture: Nearly half the petroleum used today in the United States comes from other countries. Several suppliers, including the biggest, Saudi Arabia, lie in the explosive Middle East.

America's reliance on imported oil has never been so great. Like a thirsty giant, the nation gulps even more foreign petroleum today than on the eve of the first Arab oil embargo 20 years ago. All this while output from America's own wells falls year after year.

G. Henry Schuler, director of the energy and national security program at the Center for Strategic and International Studies in Washington, calls America's current energy posture ``a sign of complacency.''

Cheap, plentiful oil shouldn't be taken for granted, Mr. Schuler warns.

At $15 a barrel, low-cost foreign oil is fueling America's current economic expansion, and holding down inflation. Even with new federal taxes, gasoline has tumbled below $1 a gallon. Home heating oil and jet fuel are plentiful. John DeCicco, an analyst with the American Council for an Energy-Efficient Economy, says that despite today's good times, ``we're getting ourselves into a long-term problem.''

As economies gradually improve in Europe, Japan, and the Pacific Rim nations, Dr. DeCicco says, demand for oil will soon start rising. Prices will move up and the US economy will feel it.

Not all experts are so cautious. Charles DiBona, president of the American Petroleum Institute, notes that proven reserves of oil worldwide have risen steadily. In 1950, only a 20-year reserve had been discovered. Now that is up to a 50-year supply.

Mr. DiBona says: ``Exploration and development over the past 40-odd years added to reserves far faster than consumption depleted them. So our total now is higher than ever in history.''

Worldwide sources of oil are also becoming more diversified, and therefore safer. From the North Sea to Nigeria to Indonesia, new supplies are coming on stream. This has removed some of the leverage held over the US and Europe by oil-rich Mideast nations.

DiBona suggests that even in that volatile region, the growing rapprochement between Israel and its neighbors has reduced tensions and made Mideast supplies more secure. Further adding to US energy security, three of America's top five sources of foreign oil - Venezuela (No. 2), Canada (No. 3), and Mexico (No. 4) - are friendly neighbors.

Yet Schuler isn't comforted. ``The current complacency [in the US] arises from our success in cleaning Saddam Hussein's clock,'' he says. ``For those who feel the major threat to Middle Eastern oil supplies is from outside aggression, they are not worried about that threat.''

ON the other hand, what if the threat to Mideast oil comes from within those nations - from internal upheaval?

Schuler observes: ``We can rush to the defense of Kuwait or Saudi Arabia if Iran or Iraq attacks. But if their own people throw out their government, we have never [intervened].''

Internal dissent has been the Achilles heel of US policy in the Mideast since the 1950s, Schuler notes. Whether it was Iraq, Iran, or Libya, close ties between the US and those governments failed to prevent internal upheaval, and drastic loss of US influence.

``The very existence of close military and personal relationships [between US and Mideast leaders] exacerbates the internal tension,'' Schuler says. ``And in every one of those instances, the successor regime adopted oil policies that were confrontational, and resulted in oil shocks.''

It's impossible to predict the next threat. But Schuler observes that if Islamists suddenly toppled, or seriously threatened, a major Mideast government, such as Egypt, oil supplies in the region would quickly be endangered.

``People can say it will never happen again,'' he says. ``I don't believe it.''

A study last year by the US Energy Information Administration sees little hope that reliance on foreign oil can be reduced. Its mid-range projection sees oil dependency climbing to 50 percent in the near future, and rising to 58 percent by 2010. If low oil prices prevail, reliance on outside oil could even reach 72 percent by 2010, the agency says.

DeCicco, an advocate of higher mileage standards for autos, says the best long-term solution for the US would be to lower use of transportation fuels.

By boosting auto efficiency, the US could reduce imports by 2 million barrels per day by 2010, cutting expected imports that year by 16 percent. It won't solve the problem entirely, DeCicco says, but it would be a major step forward.