[Congressional Record Volume 142, Number 50 (Thursday, April 18, 1996)]
[Senate]
[Pages S3622-S3623]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     U.S. FOREIGN OIL CONSUMPTION? HERE'S TODAY'S WEEKLY BOX SCORE

  Mr. HELMS. Mr. President, the American Petroleum Institute reports 
that, for the week ending April 12, the U.S. imported 7,635,000 barrels 
of oil each day--1,155,000 barrels more than the 6,480,000 barrels 
imported during the same period a year ago.

[[Page S3623]]

  Americans now rely on foreign oil for more than 50 percent of their 
needs, and there are no signs that this upward trend will abate. Before 
the Persian Gulf war, the United States obtained about 45 percent of 
its oil supply from foreign countries. During the Arab oil embargo in 
the 1970's, foreign oil accounted for only 35 percent of America's oil 
supply.
  Anybody else interested in restoring domestic production of oil--by 
U.S. producers using American workers? Politicians better ponder the 
economic calamity that will occur in America if and when foreign 
producers shut off our supply, or double the already enormous cost of 
imported oil flowing into the U.S.--now 7,635,000 barrels a day.
   Mr. President, Joseph J. Romm and Charles B. Curtis wrote in the 
April 1996 Atlantic Monthly an extensive analysis of the impending 
crisis due to U.S. dependence on foreign oil. The article, ``Mideast 
Oil Forever?'' is very thorough and detailed--and I commend it to 
Senators and staff. At the very least, I hope Senators will read 
several paragraphs from this article under the subheading ``The Coming 
Oil Crisis.'' Mr. President, I ask unanimous consent that the text be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                 [From the Atlantic Monthly, Apr. 1996]

                          Mideast Oil Forever?


                         the coming oil crisis

       Given that the most recent war America fought was in the 
     Persian Gulf, let's start by examining the likelihood that an 
     oil crisis will occur in the coming decade. Forecasting is 
     always risky, especially where oil is concerned, but consider 
     what a variety of experienced energy hands from every point 
     on the political spectrum have said in the past year alone. 
     Donald Hodel, who was a Secretary of Energy under Ronald 
     Reagan, has said that we are ``sleepwalking into a 
     disaster,'' and predicts a major oil crisis within a few 
     years. Irwin Stelzer, of the American Enterprise Institute, 
     says that the next oil shock ``will make those of the 1970s 
     seem trivial by comparison.'' Daniel Yergin says, ``People 
     seem to have forgotten that oil prices, like those of all 
     commodities, are cyclical and will go up again.'' James 
     Schlesinger, who was the Secretary of Energy under Jimmy 
     Carter, has said, ``By the end of this decade we are likely 
     to see substantial price increases.'' In March of last year 
     Robert Dole, the Senate majority leader, said in a speech at 
     the Nixon Center for Peace and Freedom, ``The second 
     inescapable reality of the post-twentieth-century world is 
     that the security of the world's oil and gas supplies will 
     remain a vital national interest of the United States and of 
     the other industrial powers. The Persian Gulf . . . is still 
     a region of many uncertainties. . . . In this `new energy 
     order' many of the most important geopolitical decisions--
     ones on which a nation's sovereignty an depend--will deal 
     with the location and routes for oil and gas pipelines. In 
     response, our strategy, our diplomacy, and our forward 
     military presence need readjusting.'' The chairman of the 
     Federal Reserve, Alan Greenspan, not known for being an 
     alarmist, in testimony before Congress last July raised 
     concerns that a rising trade deficit in oil ``tends to create 
     questions about the security of our oil resources.''
       Concerns about a coming oil crisis have surfaced in the 
     financial markets as well. Last October, in an article titled 
     ``Your Last Big Play in Oil,'' Fortune magazine listed 
     several billionaires and ``big mutual fund managers'' who 
     were betting heavily that oil prices would rise 
     significantly. The magazine went on to suggest an investment 
     portfolio of ``companies that are best positioned to profit 
     from the coming boom.''
       Fundamental trends in oil demand and supply underlie this 
     emerging consensus. First, the world will probably need 
     another 20 million barrels of oil a day by the year 2010, 
     according to the Energy Information Administration (EIA). The 
     International Energy Agency projects an even greater growth 
     in demand, following the inexorable tide of population 
     growth, urbanization, and industrialization.
       Second, the world's population is expected to increase by 
     50 percent by 2020, with more than half those additional 
     people born in Asia and Latin America. And as farm workers 
     move to the city, much more energy and oil will be needed. 
     The fundamentals of urbanization--commuting, transporting raw 
     materials, constructing infrastructure, powering commercial 
     buildings--all consume large amounts of oil and electricity. 
     At the same time, fewer farms will have to feed more people, 
     and so the use of mechanization, transportation, and 
     fertilizer will increase, entailing the consumption of still 
     more energy and oil. An analysis by one of the Department of 
     Energy's national laboratories found that a doubling of the 
     proportion of China's and India's populations that lives in 
     cities could increase per capita energy consumption by 45 
     percent--even if industrialization and income per capita 
     remained unchanged.
       Finally, industrialization has an even greater impact on 
     energy use. As countries develop industries, they use more 
     energy per unit of gross national product and per worker. 
     Crucial industries for development are also the most energy-
     intensive: primary metals; stone, clay, and glass; pulp and 
     paper; petroleum refining; and chemicals. In the United 
     States these industries account for more than 80 percent of 
     manufacturing energy consumption (and more than 80 percent of 
     industrial waste).
       As Fortune has noted, if the per capital energy consumption 
     of China and India rises to that of South Korea, and the 
     Chinese and Indian populations increase at currently 
     projected rates, ``these two countries alone will need a 
     total of 119 million barrels of oil a day. That's almost 
     double the world's entire demand today.''
       Barring a major and long-lasting worldwide economic 
     depression, global energy demand will be rising inexorably 
     for the foreseeable future. The Persian Gulf, with two-thirds 
     of the world's oil reserves, is expected to supply the vast 
     majority of that increased demand--as much as 80 percent, 
     according to the EIA. Within ten to fifteen years the Persian 
     Gulf's share of the world export market may surpass its 
     highest level to date, 67 percent, which was attained in 
     1974. The EIA predicts that in the face of increased demand, 
     oil prices will rise slowly to $24 a barrel (1994 dollars) in 
     2010. If, instead, they remain low, the Gulf's share of the 
     world export market may rise as high as 75 percent in 2010.
       Although non-OPEC nations did increase production by almost 
     15 percent from 1980 to 1990, they increased proven reserves 
     of oil by only 10 percent. The net result is that the 
     remaining years of production for non-OPEC reserves has 
     actually fallen from eighteen years to seventeen years. On 
     the other hand, while OPEC increased production by 20 percent 
     in the 1980s, it increased its proven reserves by 75 percent. 
     As a result, OPEC's reserves-to-production ratio doubled to 
     ninety years.
       The growing dependence on imported oil in general and 
     Persian Gulf oil in particular has several potentially 
     serious implications for the nation's economic and national 
     security. First, the United States is expected to be 
     importing nearly 60 percent of its oil by ten years from now, 
     with roughly a third of that oil coming from the Persian 
     Gulf. Our trade deficit in oil is expected to double, to $100 
     billion a year, by that time--a large and continual drag on 
     our economic health. To the extent that the Gulf's recapture 
     of the dominant share of the global oil market will make 
     price increases more likely, the U.S. economy is at risk. 
     Although oil imports as a percent of gross domestic product 
     have decreased significantly in the past decade, our economic 
     vulnerability to rapid increases in the price of oil 
     persists. Since 1970 sharp increases in the price of oil have 
     always been followed by economic recessions in the United 
     States.
       Second, the Persian Gulf nations' oil revenues are likely 
     to almost triple, from $90 billion a year today to $250 
     billion a year in 2010--a huge geopolitical power shift of 
     great concern, especially since some analysts predict 
     increasing internal and regional pressure on Saudi Arabia to 
     alter its pro-Western stance. This represents a $1.5 trillion 
     increase in wealth for Persian Gulf producers over the next 
     decade and a half. That money could buy a tremendous amount 
     of weaponry, influence, and mischief in a chronically 
     unstable region. And the breakup of the Soviet Union, coupled 
     with Russia's difficulty in earning hard currency, means that 
     for the next decade and beyond, pressure will build to make 
     Russia's most advanced military hardware and technical 
     expertise available to well-heeled buyers.
       The final piece in the geopolitical puzzle is that during 
     the oil crisis of the 1970s the countries competing with us 
     for oil were our NATO allies, but during the next oil crisis 
     a new, important complication will arise; the competition for 
     oil will increasingly come from the rapidly growing countries 
     of Asia. Indeed, in the early 1970s East Asia consumed well 
     under half as much oil as the United States, but by the time 
     of the next crisis East Asian nations will probably be 
     consuming more oil than we do.

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