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Study Says Domestic Industry Could Meet Wartime Oil Needs

February 14, 1989

WASHINGTON (AP) _ Growing U.S. reliance on foreign oil is a long-range threat to national security but has not jeopardized the Pentagon’s ability to fight a major non- nuclear war, according to study released Tuesday.

As a result, no government action is needed to restrict oil imports, the Commerce Department study said.

Military wartime fuel needs could be met by a combination of domestic oil production, imports from reliable suppliers and the Strategic Petroleum Reserve, the government’s underground stockpile of 555 million barrels, the study said.

″Our analysis concludes that the United States will be able to meet direct and indirect military petroleum requirements during a major conventional war,″ the report said. It added that forced curtailment of fuel use by the general public during wartime would result in serious economic hardships.

The report assumed 1987 levels of domestic oil production, or about 8.3 million barrels a day, although output last year fell to about 8.2 million barrels daily and the Energy Department foresees an accelerating decline in the 1990s.

The report was prepared by the Commerce Department’s Bureau of Export Administration at the request of a coalition of energy industry groups, which asserted in a petition that te domestic oil industry has been so damaged by rising imports that it could not meet the military’s needs in the event of a major war.

Domestic oil production has been declining since 1986 when world oil prices collapsed from about $30 a barrel to below $10 a barrel. Prices currently are in a range of $15-$17 a barrel, which the nation’s oil producers contend is too low to prevent a further drop in production and a rise in imports.

The Energy Department in a forecast published last month said oil imports, currently about 38 percent of total oil supplies, would jump above 50 percent by 1994 and could approach 60 percent before the end of the century.

The Commerce Department report concluded that trend was a threat to national security, but that it was a long-range concern and did not mean the domestic industry was too weak to meet the military’s fuel needs.

It said the nation’s energy security had improved since 1979, when the second oil-price shock of the decade sent most industrial economies into a tailspin, but that nevertheless ″petroleum imports threaten to impair the national security.″

Jim Groninger, director of governmental affairs for the Independent Petroleum Association of America, said his group was pleased that the report recognized a threat to national security but disappointed that it saw no need for action.

Then-President Reagan on Jan. 3 endorsed the report’s conclusion that no government action was needed to restrict oil imports. The president, in written comments to Congress, made no mention of the issue of military fuel needs.

In rejecting the industry group’s claim, the Commerce Department said the group had underestimated the extent to which fuel use in the private sector could be reduced in the event of a national defense mobilization and an actual conflict.

The report said civilian use of fuel could be reduced by more than the 10 percent assumed by the industry group, although it did not give a specific estimate of its own.

The report based its conclusion about the adequacy of oil supplies for the military largely on a 1983 National Security Council study, although nearly all the statistics and projections from the NSC study were deleted from the public version of the Commerce report.

While military security has not been jeopardized by oil market trends, U.S. economic security and foreign policy flexibility have been hurt, the report said.

It cited the following problems associated with declining oil independence:

-″The foreign policy actions of our allies are affected as they respond to perceived vulnerabilities, and rivalries for ‘scarce’ supplies undermine allied security.″

-″The U.S. loses some flexibility in responding to (oil supply) disruptions, so that it becomes more difficult to reach peaceful resolutions of dispute.″

-″The dependence on potentially insecure oil supplies by our friends and allies on whom we rely for base access in military emergencies can affect their willingness to provide base access and overflight rights for U.S. military forces...″

-″The lack of flexibility could also impair allied cooperation to avoid the bidding-up of world oil prices in the aftermath of an interruption of oil supplies.″

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