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Fri, Nov 05, 2004 - Page 12 News List

Crude prices could shape US policies

ENERGY The US is likely to look for ways to ease supply concerns and lower soaring oil prices, which are threatening to slow economic growth


US President George W. Bush's victory comes at a time of near-record oil prices, and the issue could end up shaping his administration's energy policy over the next four years.

Crude oil prices have risen more than 70 percent since Bush came to office in January 2001, pushing gasoline and heating oil to record levels.

Supply worries

With most of the world's oil producers pumping at capacity, high prices threaten to slow economic growth in the US, weighing on business costs and adding hundreds of dollars a year to households' expenses.

To try to offset this, analysts said, the administration is expected to endorse drilling for oil in part of the Arctic National Wildlife Refuge in Alaska and to take some steps to limit demand.

But squaring these goals with the president's calls to reduce US dependency on oil from the Middle East could prove a challenge, especially for an administration headed by two former oilmen.

Energy independence

J. Robinson West, the chairman of PFC Energy, an energy adviser in Washington, noted that "one of the biggest applause lines in both campaigns came when they mentioned energy independence from the Middle East and Saudi Arabia."

"Of course, energy independence is a meaningless concept," West said, "but they will clearly try to increase oil supplies in the United States and make an effort to deal with demand."

Alternative sources

The administration, he added, could be expected in the second term to encourage the development of hybrid cars, alternative fuels like natural gas, and renewable energy to limit the country's energy dependency by slowing the growth in demand.

Daniel Yergin, the chairman of Cambridge Energy Research Associates and author of a Pulitzer Prize-winning history of oil, The Prize, noted the problems likely to be faced.

"The big challenge is the need to increase oil production over the next 20 years in very substantial volumes. We will see a focus on policies that encourage increased and diversified oil production," Yergin said.

The idea of more oil drilling in Alaska -- part of the recommendations put forward by an energy task force led by Vice President Dick Cheney in 2001 -- has been contested for years on the ground that it could harm the region's environment.

"They'll want to put the issue in front of the American public," said Lawrence Goldstein, president of the PIRA Energy Group in New York.

"But I don't think it will go through. There are still a lot of people in Congress opposed to it, and the new administration won't have the ability to break a filibuster," Goldstein said.

One policy the president is not expected to change is his opposition to releasing oil from the strategic reserve to bring down prices.

Quite the opposite, analysts said. Bush is expected to keep filling the reserve to its capacity.

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