Energy crisis looms over U.S. By Scott Bowles USA TODAY September 22, 2000

Faced with a natural gas shortage, soaring oil prices and unprecedented demands for electricity, Americans are bracing for the worst energy crunch in a quarter of a century.

It should hit, economists say, about the dead of winter, when temperatures and resources drop and the need for heat peaks.

Alert: The federal government is sounding the alarm.

Energy Secretary Bill Richardson said this week that oil prices were dangerously high. The White House, which has urged OPEC to increase production to avoid a global recession, is considering drawing from the countrys emergency stash of oil.

The threat is sparking near panic in some regions of the country. New England is on a buying binge of wood stoves. Pennsylvania residents are stockpiling barrels of heating oil in their homes. Sales of portable generators are brisk in California, where residents worry about rate increases and more rolling power blackouts.

No relief: Although officials dont expect this shortage to compare with the energy crisis of the mid-1970s, they agree that nearly all Americans are going to feel it in the wallet.

The cost of natural gas -- the countrys dominant heating fuel -- will rise anywhere from 25 percent to 40 percent during the winter. Crude oil prices are nearing $40 a barrel, the highest level since they reached $41 during the Persian Gulf War.

That means no relief at the gas pump, where gasoline costs an average $1.60. Heating oil will cost 30 percent more this winter than it did last year.

We arent running out of energy, the way we were in the 70s, said Allison Wilkes, an economist and consultant for California utilities. But its going to cost us a good bit more to get it this winter. Its been awhile, but were going to have to start thinking about energy conservation again.

The good news: The news isnt all dire. Members of the Organization of the Petroleum Exporting Countries agreed earlier this month to increase oil production by 800,000 barrels a day. It takes time to get oil on line and available -- experts dont expect much relief for another six to 12 months. But help is on the way.

America, in particular, stands to weather the crunch fairly well. While dwindling crude oil reserves threaten to stall the economies of India, South Korea and several European nations, many economists say the bustling U.S. economy should keep inflation down.

And the next time you curse the corner gas station for charging $1.60 a gallon, consider London and Paris, where motorists wait in line 20 minutes to pay $4 a gallon, often to find the station has run out of fuel.

Shaken markets: The country will hardly escape the crunch unscathed, said Ann-Louise Hittle, senior director of world oil at Cambridge Energy Research Associates in Massachusetts.

We dont rely on oil as much as we used to, she said. But for the oil we do use, we rely on imports more than ever. And that can leave you vulnerable.

The latest power pinch built momentum for more than a year, beginning in late 1998, when Americans were enjoying the lowest gasoline prices, adjusted for inflation, since the Depression.

The low prices came thanks to Asias economic crisis. When the region fell into a deep recession, it drastically cut oil imports and left supplies flush for the rest of the world.

Though the oil glut was welcome news to consumers, drilling companies couldnt handle the price collapse, Hittle said.

The firms, many of which produce oil and natural gas, curbed exploration in the face of dwindling profits. OPEC also agreed to cut production to 5 million barrels of oil a day until prices rose again.

They did, with unexpected swiftness.

As the Asian market recovered and the American economy boomed, demand for oil soared. With little new exploration, supply has been slow to catch up and probably wont until next spring.

Shucking out: For the American trucker, every nickel-a-gallon fuel spike means an additional $1,000 in operating costs every month. That could mean price hikes down the road on all goods shipped by truck, from produce to computers, said New York transportation stock analyst Josh Bergman.

Its impossible to say how much of the cost will get passed on to consumers, but I wouldnt bet on much relief at the grocery store this winter, he said.

Fliers shouldnt be immediately affected by the crunch, Bergman said. The industrys terrible record this summer in on-time flights has sparked a fare war that should offset fuel-price increases for the next six months.

Commuters will have no such luck. AAA says the increase in fuel prices means that two-car households will spend $410 more this year to drive than last year -- if prices dont rise any more.

Alaska? The nations governors huddled this week to discuss plans for their own states to battle rising energy costs.

Alaska Gov. Tony Knowles said interest has grown in tapping the natural gas reserves in Alaskas North Slope.

Industry observers say the answer is simpler.

The fact is, costs are going to be higher this year, regardless of where you live and what you use for energy, said economist Wilkes

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-- Martin Thompson (mthom1927@aol.com), September 22, 2000