Who Shut the Heat Off?

Schools closed in Denver, factories clanked to a halt in Des Moines, air-quality laws were waived in Boston--all because of a critical shortage of clean fuel oil. As the impact of the U.S. energy crisis became more severe last week, the search for scapegoats became more strident. Earl L. Butz, Secretary of Agriculture, wasted no time in singling out the villains: "The first people to have their power shut off should be those who blocked the Alaska pipeline." Butz was blaming environmentalists.

The Mobil Oil Corp. agreed. It took large ads in major U.S. newspapers charging that "lawsuits and regulations stemming from exaggerated environmental fears" stymied construction of new refineries. Mobil also largely blamed environmentalists for stalling exploration for new offshore oil reserves and the fuel crisis in general.

Environmental activists are indeed responsible for blocking some oil-industry efforts, but the fuel shortage is not that easily explained. Even if construction of the Alaska pipeline had started in 1970, the project would not yet be finished. Similarly, one environmental lawsuit stalled the Interior Department's plans to lease drilling rights off the Gulf Coast, for a total of nine months. But it takes about three years for finds in an established field to come into full production, hardly time enough to avert this winter's shortages.

It is true enough that no new refineries have been built in the eastern U.S. since 1959, and that those proposed in Maine and Delaware were turned down mainly because the states feared oil spills from supertankers and pollution from the refineries. But the major reason for the lack of new U.S. refineries is economic. New facilities have been attracted to the Caribbean islands by special incentives, low labor and construction costs and U.S. laws favor production of heavy industrial oil.

Extra Gasoline. Nonetheless, the widespread demand for a cleaner environment has surely played a role in the fuel crunch. The Clean Air Amendments of 1970, which Congress passed overwhelmingly, require that new cars come equipped with complicated anti-pollution devices. As a result, new autos get significantly less mileage per gallon of gasoline. With more and more cars on the roads, the oil refiners have had to produce an extra 300,000 bbl. of gasoline per day--thereby diverting production from fuel oil. In addition, many states and cities have enacted their own tough laws to clean up the air. To comply, electric utilities and industries have switched from dirty coal to low-sulfur oil or natural gas. The switch has put new demands on clean-fuel supplies.

The fact is that the blame for the shortage is widespread. Indeed, General George A. Lincoln, director of the Office of Emergency Preparedness (now being dismantled because of President Nixon's budget cuts), believes that a confluence of extraordinary circumstances has caused the immediate crunch: the unexpected need for transport to move grain to ports for shipment to the U.S.S.R., the wet autumn which has required artificial drying of millions of tons of grain, the unseasonably cold weather in the Midwestern and Plains states. "You cannot expect the Government systems to be prepared for all this without creaking," says Lincoln.

Beyond that, he notes, prices were frozen in August 1971, when fuel-oil prices were at a seasonal low and gasoline prices at a seasonal high. This "lowered incentives" to produce fuel oil, says Ray Wright, marketing director of the American Petroleum Institute, since it was a time when demand for gasoline was unexpectedly high. The supply imbalance that resulted became apparent last November: fuel reserves were about 31 million bbl. below the levels of 1971.

Alarmed, Washington asked the refineries to boost fuel-oil production. But, Lincoln says, they "continued their gasoline binge and did not push to replace inventories as expected." The industry replies that it is now producing as much fuel oil as possible.

S. David Freeman, former energy adviser to President Nixon and now head of a Ford Foundation study on energy, puts the blame squarely on the White House. "This winter's so-called 'energy crisis' was manufactured right here in Washington," Freeman says. In his eyes, the real problem stems from the Administration's refusal to remove foreign-oil quotas, which were designed to protect domestic producers in 1959. Though the President's own Cabinet task force recommended lifting the quotas in 1970, Nixon did not act. The oil industry and oil-producing states like Texas and California strongly opposed any relaxation of quotas, arguing that the U.S. balance of payments position and national security would be endangered by heavy dependence on Middle Eastern and other oil-exporting countries. Moreover, the public seemed apathetic about the issue at the time, and, says Freeman, "in an election year hard decisions tend not to be made."

They cannot be avoided much longer. President Nixon has already suspended oil quotas on light heating fuel until April. After that? There is no shortage of suggestions. Environmentalists urge dropping the quotas entirely, which means, ironically, that they might have to modify their opposition to both supertankers and new refineries. The oil industry generally recommends that the quotas be kept and domestic production boosted, mainly by hiking oil prices and encouraging more exploration. Many key Congressmen are beginning to favor a new, flexible quota system to allow increased imports when necessary; in addition, Washington Senator Henry M. Jackson last week said he would introduce a bill to require the Government to devise national fuel-rationing plans that would go into effect "in critical periods of shortage." The President's own answer will come in his special "Energy Message" to Congress later this winter. None of the solutions are likely to blame environmentalism as a cause of the fuel shortage. What the quest for scapegoats has done is to show how extraordinarily complex the business of meeting the nation's energy needs really is.

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