Copyright 2001 The New York Times Company The New
York Times
July 16, 2001, Monday, Late Edition - Final Correction Appended
SECTION: Section
A; Page 1; Column 6; National Desk
LENGTH: 1306 words
HEADLINE:
DROP IN FUEL PRICE MAY WEAKEN PUSH FOR ENERGY PLANS
BYLINE: By JOSEPH KAHN
DATELINE: WASHINGTON, July 15
BODY: As the Bush administration begins a
campaign-style push to drum up support for its energy plan this week, the sense
of crisis that had propelled the plan forward has receded while energy shortages
ease and fuel prices fall, at least for now.
Gasoline
prices have been going down for six weeks straight and now average $1.47 a
gallon, compared with $1.71 a gallon during the week of May 14, when the
administration unveiled its energy strategy, according to the Department of
Energy. Natural gas prices have dropped even faster and now average less than a
third of the peak levels they reached early this year. In both cases, high
prices spurred fresh production.
In California, where
record electricity prices and local blackouts captured national attention for
months, wholesale power prices have fallen to the lowest levels in more than a
year. Analysts credit new power supplies, a state-led conservation effort and
federal price controls for averting what many had feared would be a catastrophic
summer of scarcity.
Administration officials said their
energy strategy was intended to address long-term shortages, not short-term
market fluctuations. But the surge of gasoline, natural gas and electricity
supplies appears to undercut the administration's contention, as stated at the
beginning of its energy strategy report, that "America in the year 2001 faces
the most serious energy shortage since the oil embargoes of the 1970's."
The White House had once counted on a sense of emergency
to persuade Congress to allow drilling on more protected lands and to change or
abandon some regulations seen as impeding energy production.
Lower prices have diminished the sense of crisis and forced the
administration to retreat from some priorities on Capitol Hill. The only
energy-related proposals that have garnered broad bipartisan support are those
that push energy conservation, a subject that critics say got short shrift in
the president's energy plan.
"If we were having
blackouts every day you can be sure the president would be out there insisting
that we drill in the Arctic or else," said David Freeman, who is coordinating
California's response to its electricity shortages for Gov. Gray Davis, a
Democrat. "The fact that we've managed to keep the lights on and bring prices
way down doesn't help his case much."
The president's
case has also been hurt by polls showing that many people view his energy
policies as favoring big oil companies at the expense of the environment. Some
Republicans said a backlash against the energy plan had diminished the influence
of Vice President Dick Cheney, its main architect.
Mr.
Bush is still turning to Mr. Cheney, and to members of the cabinet, to stir up
public and Congressional enthusiasm for drilling and other measures as the House
takes up energy legislation this week.
On Monday, Mr.
Cheney is moderating a town hall meeting on energy in Pittsburgh. Energy
Secretary Spencer Abraham is in Chicago, Interior Secretary Gale A. Norton is in
South Dakota, Commerce Secretary Donald L. Evans is in Charlotte, N.C., and
Transportation Secretary Norman Y. Mineta is in Cleveland. Christie Whitman, the
administrator of the Environmental Protection Agency, is in Connecticut.
Yet even House Republicans say prospects for the most
contested measures have faded with the price scare. For instance, Representative
Sherwood Boehlert, a New York Republican, said there was no chance Congress
would approve drilling in the Arctic National Wildlife Refuge.
"A.N.W.R. is to energy policy as vouchers are to education policy," Mr.
Boehlert said. "It's going nowhere."
Mr. Boehlert said
Mr. Cheney had rebounded from criticism that the administration's energy plan
paid only lip service to conservation, energy efficiency and renewable
energy.
"That was a misstep," he said. "But since then,
there's been a concerted effort by the administration to get other points of
view."
Mr. Cheney's aides insist that any
miscalculations by the vice president were in tone and not in substance, and
that at any rate he is now back on course.
"The main
point is that we've been here six months, and not only have we produced a
comprehensive energy plan, but specific initiatives are being marked up in
Congress," said Mary Matalin, Mr. Cheney's chief political adviser.
The White House got a rare legislative victory on energy
last week when the Senate rejected a measure to block new drilling activity in
the Gulf of Mexico. But that vote came after the administration scaled back its
own plan to drill in the eastern gulf, caving in to criticism from many Florida
politicians, including Gov. Jeb Bush, the president's brother.
The administration has fared less well in other votes. The Senate voted
last week against opening lands designated national monuments for coal, oil and
gas exploration. The House passed a measure that would ban drilling under the
Great Lakes.
And though the administration says it is
awaiting a scientific analysis before deciding whether to set higher fuel economy standards for cars and light trucks, a pivotal House
panel voted last week to mandate that sport utility vehicles and minivans
perform more efficiently.
As the administration seeks
to cobble together an energy package in Congress, it is not likely to have the
backdrop of ever-rising energy prices to help close the sale.
When the White House began preparing its energy plan last winter, Mr.
Bush, Mr. Cheney and other top officials, many of whom have had extensive
experience in the energy industry, repeatedly sounded the alarm. They said price
spikes were the result of chronic underinvestment linked to regulatory
impediments.
But independent analysts now argue that
the scare may have had more to do with ordinary business decisions by energy
companies. Facing record low prices in the late 1990's, companies did not invest
much in new oil and gas exploration or gasoline and electricity production,
creating shortages. Higher prices since then have had the reverse effect on
investment, supply and prices.
The Energy Information
Administration of the Department of Energy, for example, notes that gasoline
prices have fallen sharply during the summer driving season because of a
"dramatic response in gasoline production" last spring, when prices were high.
At that time, Mr. Abraham, the energy secretary, warned that prices could hit $3
a gallon this summer because refineries could not produce enough gasoline.
Natural gas markets also seemed deeply troubled a few
months back. With the number of rigs drilling gas wells at 550 in early 2000,
supplies were thin and prices sky-high. But the industry responded without
federal intervention. Now, 1,050 rigs are drilling for natural gas without any
new lands opened for exploration. Prices have collapsed.
"We doubled the rig count in less than 18 months, which is phenomenal,"
said Darryl Smette, senior vice president for marketing at Devon Energy of
Oklahoma.
In a widely publicized speech, Mr. Cheney
used California, which has prided itself on its low per capita consumption of
electricity, to illustrate his contention that conservation cannot be the basis
of a sound energy policy.
The administration also
steadfastly opposed any federal price controls for wholesale electricity markets
in California, arguing that such interference would only distort the market and
do little to relieve the state's woes.
California
officials now say tht prices have plunged this summer because of a conservation
drive that brought electricity consumption down 11 percent compared with last
year. They say several new power plants helped increase supply. And they credit
federal price controls, which an independent federal agency imposed after
resisting the measure for months, with helping to contain prices as well.
http://www.nytimes.com
CORRECTION-DATE: July 19, 2001, Thursday
CORRECTION: A front-page article on Monday about the
impact of falling fuel prices on the Bush administration's energy plan misstated
comments by Energy Secretary Spencer Abraham about gasoline prices. Mr. Abraham
testified to Congress that news reports about inflated prices could become a
"self-fulfilling prophecy" and raise prices to $3 a gallon in the summer, but he
did not warn that prices could go that high, and he said his information did not
support predictions of so steep an increase.
GRAPHIC: Chart: "UPDATE: Falling
Energy Prices" National average prices for gasoline and natural gas
have been declining recently.
REGULAR GASOLINE
Graph showing the average price of gasoline per
gallon, from January 2000 to May 2001.
NATURAL
GAS
Graph showing the average price of natural
gas per million B.T.U.'s, from January 2000 to May 2001*.
* May-July 2001 figures are estimates. (Source: Energy
Information Administration)(pg. A10)
Document 644 of 803. 