When Good Politics is Bad Policy

GEORGE Bush had a problem last week. Recession seemed imminent, his re-election bid lurks just around the corner, and the Federal Reserve refused to stimulate the lagging economy by easing up on interest rates.

Then he saw a solution--a panicky, dangerously short-sighted solution that ignores grim realities about America's economic vulnerability.

The problem started when Federal Reserve chair Alan Greenspan told a Congressional subcommittee that the Fed would not lower interest rates until inflation is stabilized. Right now, stabilizing inflation necessarily means getting the price of oil to fall.

Enter the Strategic Petroleum Reserve (SPR), an emergency supply of oil intended to enable the U.S. to survive and wage war during an interruption of the oil supply. This little kitty contains 590 million barrels of crude oil stored in 65 salt caverns in Louisiana and Texas.

Bush figured he could flood the market with cheap oil from the SPR and depress prices that have skyrocketed in the wake of the embargo against Iraq and Kuwait. Ten days ago, he authorized the Department of Energy to auction off five million barrels over the next six weeks.

Despite the announcement, prices didn't budge. Five days later, prices took a tumble, but analysts attributed the drop to hopes for a negotiated settlement to the Gulf Crisis, not to the sale of SPR oil.

Bush's reliance on the SPR to the exclusion of other policy alternatives (such as conservation) is a short-term solution to a problem that requires a long-term commitment. If Bush thinks that the SPR alone can pull the U.S. through the current energy crisis, he is in for an unpleasant surprise.

The major problem with Bush's strategy is that is can't work for long. According to Amory B. Lovins, the co-director of the Rocky Mountain Institute (RMI), a Colorado think-tank devoted to energy policy and national security, the SPR simply does not contain enough oil to supply normal consumption.

The oil transport system currently delivers 13 million barrels per day to and from U.S. refineries. At peak output, the SPR can pump only about 3.5 million barrels per day, and that only for three months. Then it's gone. Without stringent conservation measures--ideological anathema to Bush and his predecessor--the SPR won't last very long. What does Bush intend to do when the U.S. has used up the SPR? Won't prices creep up again (assuming they fall in the first place)?

Worse yet, the SPR, unlike similar European reserves, contains 65 percent high-sulfur "sour" crude, which requires more sophisticated refining. With the takeover of Kuwait, the U.S. lost one of its primary refining centers. This means American refineries will have to take up the slack.

Unfortunately, most American refiners can only process low-sulfur "sweet" crudes. The bottom line for consumers? They will face higher prices, just what this rigamarole was supposed to prevent. The big refiners will ratchet up prices to pay for the extra refining, and the smaller refiners will raise prices to offset the loss of business.

WE SHOULD not learn to rely on the SPR to get us through crises, because the SPR is not very reliable itself. According to a report prepared for the Pentagon by RMI, a group of terrorists could spend one night in Louisiana knocking out pipelines which would destroy the ability to supply three-quarters of all the oil and gas used by the eastern United States.

And this damage is not easily repaired. According to Lovins, American pipelines rely on unique, no-spareparts components which take Japanese firms an average of two years to manufacture. The U.S. does not have any of these items "in storage." And because some of these parts require a constant flow of oil to operate, stopping the flow at one point can break down an entire pipeline.

It wouldn't be impossible for Iraqi terrorists to execute such a disaster. Yes, the chances are slim, but only last August the Pentagon prohibited journalists from reporting the names or where-abouts of American soldiers in the Gulf. That policy has since been changed, but many reporters suspected that Pentagon officials feared terrorist reprisals on families in this country.

Tapping the SPR is allowing President Bush to avoid the creation of a substantive national energy policy. The SPR, which is a very useful tool, should play a part in that policy. But the SPR is not the ultimate answer for our real energy problem--our gluttonous consumption of oil.

Using the SPR to achieve lower pump prices may turn out to be a short-term palliative. And it may even get George Bush through the next election unscathed. But it is not a lasting solution to anything. A lasting solution will require a willingness to look to the future and make sacrifices in the present.

But since when has Bush been willing to do either?

John A. Cloud '93, despite his conservationist rhetoric, routinely drives with underinflated tires and dirty air filters.