The Washington Post, Friday, June 20, 2003; Page A25

Everyone agrees that the United States is far too dependent on imported oil. Liberals say we need to conserve more. Conservatives say we need to produce more.

It is the most ridiculous debate on the American political scene. We obviously need to do both. Every barrel added to domestic production and every barrel subtracted from consumption has the equivalent effect of reducing our dependence on unstable and unfriendly foreign producers.

Since the invasion of Kuwait 13 years ago, the U.S. military has been on active patrol in the world's oil patch. With American soldiers at risk securing our oil economy, liberals have to be willing to discomfit a few caribou and allow us to start pumping new oil from Alaska. If we'd listened to their arguments the last time around, we would today be without the million barrels a day we get from the North Slope.

Liberals also need to get over their allergy to the cleanest form of energy, nuclear power. The administration has proposed support for a new generation of safer nuclear reactors. You'd think environmentalists would be enthusiastic. Nuclear energy is remarkably benign: no greenhouse gases or other pollutants strewn in the air, the water and your lungs. Of course, like all energy, nuclear has its pollutant -- there is no free lunch -- but in this case you can find it, concentrate it, put it in box cars and ship it off to some Godforsaken mountain in the desert.

Yes, it will be a hazard to humans or whatever species succeeds us in 10,000 years or so. That is a pity. But we do have more immediate problems. Like today's terrorists, who are fueled by Saudi and other oil money.

Conservatives, too, will have to give up some cherished positions to encourage reductions in consumption. One of the reasons they have resisted consumption controls is our history of heavy-handed regulatory schemes. Mileage standards (CAFE, for corporate average fuel economy) on automobile fleets hugely distort the economics of the auto industry and indeed helped create the entire sport utility vehicle explosion (an unforeseen consequence of CAFE standards that treated SUVs as trucks and thus subject to less-stringent mileage requirements).

We must reduce oil consumption. The easiest way to do it is simply to artificially raise the price of oil -- i.e., tax it.

Oil is currently selling at about $30 a barrel. Slap, say, a $5 (or $10 -- the bazaar is open) tax on every imported barrel. And most important, keep the new price -- let's say $35 -- as a floor. The world market price is likely to fall as Iraqi oil comes online, as Venezuela stabilizes and as Russian and Caspian producers ramp up production.

This presents a wonderful opportunity to capture the fall in oil prices in the form of taxes. Say oil drops to $20 a barrel. Raise the import fee to $15 a barrel, so the consumer keeps paying $35 a barrel net. The windfall goes to the U.S. Treasury.

The benefits of such a scheme are enormous. Fixed and fairly expensive oil prices will induce consumers to cut oil consumption. It won't happen overnight. People are not going to junk their SUVs, but they will begin to make choices favoring greater fuel efficiency over time, as they did when oil prices rose in the 1970s.

The windfall to the Treasury can also be beneficial if the scheme is kept strictly revenue-neutral: Every penny of the import fee should be returned to the private economy in the form of (1) lower taxes (my choice: lower payroll taxes) and (2) a government check to poor folks to compensate for their higher fuel costs.

If the oil import fee is high enough, consumption will be depressed, which will further reduce the world price and further increase federal oil tax revenue (and thus reduce payroll or other taxes), creating a virtuous cycle whose most important effect is a reduction in our dependence on foreign oil.

You can play with the numbers. You can alter the tax to create the desired reduction. You can debate whether it should be slapped just on gasoline or on all imported hydrocarbon energy. (Economist Irwin Stelzer of the Hudson Institute is fleshing out this idea.)

But what is important is the principle: Increase production -- Alaskan oil and nuclear energy, for starters -- and decrease consumption by taxing imported oil.

It is a simple solution. It requires only that each side recognize the virtue of the other's argument. Which is why in today's Washington it doesn't have a snowball's chance in hell of passage.

June 19, 2003, 11:26PM By MICHAEL DAVIS Copyright 2003 Houston Chronicle

Unocal Corp. will soon decide if it will build a $500 million deep-water offshore port that would move crude oil through underwater pipelines to Texas refineries.

This could allow refiners to avoid transferring oil from supertankers to smaller ships to get it onshore, reducing the risk of spills in Galveston Bay or sensitive areas near shore.

But Unocal still has to convince refiners by showing the savings on fees.

"We've been working on the project for about two years," said Michael Wilems, vice president of the Unocal subsidiary doing the project, BOOTS LLC.

"We looked at the supertankers that were coming into the Gulf of Mexico and what we could do to relieve the cost, based on lightering fees and ports fees."

The facility would be similar to an existing one named the Louisiana Offshore Oil Port, or LOOP. Located 18 miles south of Grand Isle, La., LOOP receives oil from tankers and moves it onshore through a pipeline.

The proposed Unocal facility would have its own catchy acronym -- BOOTS -- which stands for Bulk Oil Offshore Transfer System.

Because Texas ports are not deep enough to accommodate supertankers, oil arriving from places like the Middle East and Venezuela must be lightered. Crude is transferred from the supertankers, holding up to 2 million barrels, to smaller ships that take the oil to the refineries.

Environmentalists tend to favor moving oil onshore via pipelines as opposed to a tanker.

"Shipping petroleum products by a pipeline is often the safest route as long as the pipeline is monitored and any releases are immediately detected," said Chuck Wemple, executive director of the Galveston Bay Foundation.

"Pipelines aren't perfect, but as far as loss of life or damage to the environment, they are better than tankers or barges."

BOOTS would be a deep-water port 100 miles south of Beaumont, capable of offloading tankers at rates up to 1.2 million barrels per day.

The port would be capable of receiving vessels transporting crude oil from domestic Gulf of Mexico deep-water production fields.

The offshore port would be in a depth of 100 feet, deep enough it could berth a Very Large Crude Carrier class tanker, the largest that carries oil.

Before building it, Unocal has to prove the demand is there to justify the expense. It's doing that by asking for commitments from shippers to use the facility, in a process known as an open season.

Unocal said it has received expressions of interest for 500,000 barrels per day of the facility's capacity and is seeking further commitments for 700,000 barrels per day.

The open season ends July 3, and the company will make a decision in a few weeks, based on the commitments it receives, said Wilems.

The system could be in operation by 2007, assuming the company receives sufficient commitments and the necessary permits. Unocal plans to seek project financing.

Unocal has deep-water production that will be coming on line in a few years, Wilems said, and the port could be an alternative to shuttle tankers for that oil, although the economic feasibility is being judged on third-party users initially.

The offshore port would never replace the use of tankers to move oil into the area refineries.

Oil and petroleum products are the largest imports into the Port of Houston every year.

In 2001, about 670 million barrels of oil and petroleum products came into the port.

Valero Energy Corp., the nation's largest independent refiner, has not committed to using the facility, but the company would be interested if it could lower its transportation costs, a company spokeswoman said.

BOOTS and the LOOP would not be competing for customers because they serve different areas, Wilems said.

"We are addressing a completely separate market from the LOOP," said Wilems.

"We would be serving the Texas Gulf Coast, so there would be very little competition with the LOOP."

A spokeswoman for LOOP agreed that the facility would not be competing for its customers along the Louisiana coast.

The LOOP has a design capacity of 1.4 million barrels per day but usually handles 1 million barrels per day.

"It will be more complimentary to our operations," said Barb Hestermann, a spokeswoman for LOOP. "It's going to replace lightering."

The company estimates the facility would save users up to 60 cents per barrel in transportation costs.

"A new deep-water port and related pipelines will provide a more-efficient crude oil offloading facility that would result in reduced handling requirements, port calls and transit times, thus reducing costs and risks associated with the movement of crude to Gulf Coast refineries," said Joe Blount, president of Unocal's midstream and trade unit.

John Sullivan June 17, 2003   Vehicles travel Monday along Interstate 49. As the vacation season begins, gas prices are climbing. LAFAYETTE The Advertiser—Gasoline prices have started a slow, but steady climb upwards again after falling for almost 11 straight weeks. And, this upswing is coming at the start of the summer vacation driving season, a time when demand is the heaviest on U.S. inventories. A spot check of five stations in Lafayette on Monday showed that the average price was $1.35 per gallon for regular unleaded; $1.43 for medium grade unleaded; and $1.49 for premium unleaded. “I haven’t changed my plans yet, but it could definitely affect them,” said Vicki Morgan of Broussard. “I think we will have to wait and see.” Morgan said her family usually takes a driving vacation during the summer. The rise comes on a forecast made by analysts with the federal Energy Information Agency on April 8 that motorists could expect little relief from high prices at the pumps this summer. In its report, the EIA, which is an agency of the U.S. Department of Energy, predicted that by mid-summer, the average price across the United States will be $1.56 per gallon for regular unleaded. According to its report, “The project price is 17 cents per gallon above last summer’s average, but close to average summer prices in 2000 and 2001.” The report said the high gasoline prices are being caused by high crude oil costs, low motor gasoline inventories and a growing domestic demand.” According to the agency and the American Petroleum Institute, gasoline inventories totaled 200 million barrels at the end of March, about 13 million barrels below last year’s total at the same time and 6 million barrels above the record low seen in 2001. EIA officials also cautioned that the supply and demand situation may not get better by the fall. According to its records, average domestic crude production in 2003 is expected to decrease by 66,000 barrels per day, or 1.1 percent, to a level of 5.75 million barrels of oil per day. For 2004, a 2.4 percent decrease is expected, resulting in an average yearly production rate of 5.61 million barrels of oil per day. Patrick Burke, an investment representative with the New Iberia office of Edward Jones, said the long-range forecast for oil calls for a price in the low- to mid-$20s per barrel. “Increased production from Russia and other non-OPEC areas may lead to lower oil prices, particularly if OPEC becomes unable to continue the production cuts that have been successful in supporting higher oil prices over the past three years,” Burke said. OPEC, the Organization of Petroleum Exporting Countries, has scheduled a meeting in September to discuss worldwide oil output. The 11-nation organization is made up of Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. Burke said crude oil prices averaged $25.96 in 2001, $26.12 in 2002 and, so far, $31.74 for 2003. “While we expect oil prices to stay below $30, supply concerns in Iraq, Nigeria and the lingering effects of the Venezuelan strike are keeping prices higher than expected,” Burke said. “The slowdown in world economic growth is lowering demand, and the combination of supply disruptions and uncertain growth are expected to keep prices volatile.” OPEC and demand-and-supply questions were the last thing that Gwen Sam said she was thinking about after hearing of gasoline prices beginning a slow climb upwards. “I guess I will do less traveling,” said Sam, a Lafayette resident. “It will affect me and my family. We may not travel much this year.” On the road The weekly U.S. retail gasoline prices for regular grade according to the Energy Information Agency: 5/26/03 6/2/03 6/9/03 East Coast: 1.442 1.437 1.442 West Coast: 1.699 1.677 1.657 Midwest: 1.471 1.449 1.506 Gulf Coast: 1.369 1.364 1.378 SOURCE: Energy Information Agency

Fri June 13, 2003 12:44 PM ET NEW YORK (<a href=reuters.com>Reuters) - Oil prices fell more than 5 percent on Friday after the International Energy Agency said major consumers were more comfortably supplied than it previously thought.

U.S. light crude CLc1 tumbled $1.66 to $29.85 a barrel, extending sharp losses on Thursday and pulling prices away from recent 12-week highs above $32. London August Brent crude LCOQ3 fell 99 cents to $26.23 a barrel.

Prices fell as the Paris-based IEA, energy adviser to 26 industrialized nations, said it had undershot by 79 million barrels in its previous estimate of oil stock levels.

The agency's revised estimate put oil stocks in the industrialized world for the end of April at 2.439 billion barrels,

"Stocks are still below normal and can absorb some surplus in the third quarter, but I think we have entered a stage when more supply is coming on the market and will impact prices." said Geoff Pyne, oil market consultant to Sempra Energy Trading.

The IEA said the revision did not change its view that global markets were tight. Stocks are still 157 million barrels, or 6.5 percent, below 2002.

"The market is obviously better supplied than we thought as little as two weeks ago, but stocks are still low and fundamentals are still tight, so we need to build more stocks," said Klaus Rehaag, editor of the IEA monthly oil market report.

"The increase in crude stocks may, however, signal some relief for an otherwise tighter heating oil situation later this year," he added

Oil stocks have been drawn down this year by a harsh northern winter and supply disruptions from a strike in Venezuela, ethnic strife in Nigeria and the war in Iraq.

Iraq on Thursday sold its first oil since the U.S.-led invasion nearly three months ago, but looting and sabotage at oil facilities are expected to keep Iraq's exports well below prewar levels for several months.

The delays in Iraq's postwar export resumption enabled the OPEC producer cartel to postpone fresh supply cuts at Wednesday's meeting in Qatar.

OPEC, which controls about half the world's oil exports, decided to meet again in just seven weeks, on July 31, in case the return of Iraqi shipments undermines high prices.

OPEC sets a $22-$28 target range for its basket of seven grades of crude oil. The basket was last valued at $27.48.

<a href=www.fayettevillenc.com>Fayetteville Online Published on: 2003-06-13 By Al Greenwood Staff writer

Summer drivers will probably pay more money at the pump this travel season because oil prices continue to increase.

The average price of a barrel of oil reached $30.72 on June 2, according to the Energy Information Administration. On Thursday, the price closed at $31.73. Before June, the last time the price of oil was above $30 per barrel was April 21, when it reached $30.76.

In Fayetteville, the average price of a gallon of gasoline was $1.39 on Thursday, according to AAA Carolinas. That's lower than $1.42, the average price for last month. But Thursday's figure is still 6 cents higher than last year's average.

On average, gasoline prices take two to five weeks to follow the trend of oil prices, said Ron Planting, an economist at the American Petroleum Institute, a trade group in Washington.

Chet Sechrest said he already has noticed the increase. He was filling up his 1991 Jeep Cherokee on Thursday at the Family Fare station at 2036 Gillespie St. A gallon of regular unleaded gasoline was selling for $1.419.

"There is no reason for an increase in gas prices," he said.

International market

World events would seem to support his claim. The strikes in oil-rich Venezuela have ended. Drilling has started in Azerbaijan, an oil-exporting country between Russia and Turkey. Oil production has resumed in Iraq.

Yet Sechrest is paying more for gasoline than last week, he said.

In the Southeast, the average price of a regular gallon of gas has risen from $1.570 on June 2 to $1.586 on Monday, according to the Energy Information Administration.

"I was hoping it would go down, to tell you the truth, but I don't like the increase," said Dennis Williams of Fayetteville. He was filling up his company truck at the Quick Stop at 1302 Robeson St. A gallon of regular unleaded gasoline was $1.419.

Williams owns D&D Refinishing, a company that restores furniture. His business requires a lot of driving, Williams said. To lower his travel expenses, he said, he tries to group appointments in the same region.

Gasoline prices typically increase during the summer because more people are driving, said Michael Walden, an economics professor at N.C. State University.

Prices also have increased because forecasters overestimated the amount of oil that Iraq would be exporting after the war.

If oil prices remain at $30 a barrel, it will not slow down the economy, Walden said. But it will slow down Sechrest.

He said he is riding his bike more often to save money.

Staff writer Al Greenwood can be reached greenwooda@fayettevillenc.com or at 486-3567.