'Quiet' efforts credited for stability in oil rates

By Timothy Burn THE WASHINGTON TIMES

     Energy Secretary Spencer Abraham said yesterday that the Bush administration's "quiet diplomacy" kept global oil prices from skyrocketing during the war with Iraq.

     "We have emerged from that period in really much more stable and strong condition than other energy crises in the last 30 years," Mr. Abraham said in an interview with editors and reporters at The Washington Times.

     Mr. Abraham was referring to the events of the past six months, a period in which world oil prices were battered by several factors, including the threat of a U.S.-led invasion of Iraq, a nationwide strike in Venezuela that temporarily halted oil exports, a cold winter in the United States and labor unrest in Nigeria.

     Though crude oil prices rose steadily during the three months leading up to the start of fighting in Iraq, peaking at about $38 per barrel in March, prices quickly retreated below $30 as the war began. Crude closed at $26.98 on the New York Mercantile Exchange yesterday.

     "I don't think that happened by accident," Mr. Abraham said. "It happened without having to tap the [Strategic Petroleum Reserve]. It was a success, a triumph for the quiet diplomacy approach we have taken."

     Many of the world's major producers, even those that opposed the Iraq invasion, such as Russia, promised to ensure stable oil supplies during the war. Their goal was to prevent the kind of price volatility that followed other crises in the Middle East, such as the oil embargo by the Organization of the Petroleum Exporting Countries (OPEC) in 1973 that caused world oil prices to quadruple and drag down the U.S. economy.

     According to the Department of Energy, Saudi oil production, which stood at 8.8 million barrels per day in February, rose to 9.6 million barrels per day by last month, when major combat operations in Iraq ended.

     Global oil prices settled in late March once it became clear that the Iraqi military had not sabotaged its oil fields, a possibility that weighed heavily on oil markets because Iraqis had set fire to hundreds of Kuwaiti oil wells during the 1991 Persian Gulf war. Additionally, Venezuela's oil production began increasing in February after the nationwide general strike collapsed.

     The Bush administration, while it has made energy a top priority, has sought to pursue diversifying the nation's foreign sources of oil and boosting world supply through back channels and away from the media, a tactic Mr. Abraham calls "quiet diplomacy."

     By contrast, Clinton administration Energy Secretary Bill Richardson, now the governor of New Mexico, was noted for making highly publicized trips to oil-producing nations to persuade them to boost production and, thereby, hold down world oil prices.

     The Bush administration "has been much more quiet in their pronouncements," said John Felmy, chief economist with the American Petroleum Institute, an industry think tank. "So far, it looks as though the current administration has been much more successful in terms of seeing additional supplies come out."

     Mr. Abraham returned last week from a quick trip to the Middle East, where he visited with oil ministers and other high-ranking officials from Saudi Arabia and Qatar. The goal was to thank the Saudis, the world's leading oil producers, and other OPEC members, for boosting oil production in the weeks leading up to the war.

     Mr. Abraham yesterday also said the Bush administration has not given up on its goal of opening the Arctic National Wildlife Refuge in Alaska to oil drilling. Though ANWR drilling is only part of the administration's nearly $50 billion energy plan, it has caused the most debate and its future is uncertain.

     "It is baffling to me that at a time when we once again face ... crisis in the energy world that we wouldn't want to produce a little bit more here at home," Mr. Abraham said.

     The Senate began debate this week on overhauling the national energy policy. Sen. Pete V. Domenici, New Mexico Republican and chairman of the Senate Energy and Natural Resources Committee, hopes to pass an energy bill this year, after a similar effort failed last year.

     Though the Bush administration is led by two former oilmen, Mr. Bush and Vice President Dick Cheney, a past chairman of oil-services company Halliburton, Mr. Abraham noted that the president's energy priorities go well beyond petroleum. They include the following:      •"Freedom Car," a plan to spend $1.7 billion over five years to encourage the research and development of a hydrogen fuel-cell-powered car and support systems.      •"Future Gen," a 10-year plan to build the world's first totally clean coal gasification power station, which would produce electricity as well as hydrogen, and reduce the release of carbon dioxide, believed to be a source of global warming.      • "Gen Four," a program to develop a new generation of meltdown-proof nuclear reactors.      • Re-authorization of the Price-Anderson Act, which provides government-backed insurance for nuclear power plants.      • Promoting the development of clean-coal technology. Mr. Abraham plans to hold a summit in June with several countries to find ways to use coal in a "benign fashion."