A Bleak Energy Forecast

Passengers from the cruise ship Empress of the North are offloaded onto the Coast Guard Cutter Liberty and volunteer civilian vessels after running aground near Hanus Reef in Lynn Canal, near Juneau, Alaska, USCG photo
Energy experts forecast a bleak summer for people in California, New York, and anyone who buys gasoline.

A panel of experts told a Senate committee Wednesday that the nation's consumers should expect higher oil prices this summer, and that could increase prospects for inflation.

In testimony before the Senate Committee on Energy and Natural Resources, the head of forecasting for the Energy Department, Mary Hutzler, said the price of gasoline this summer is likely to average a $1.47 per gallon. And Hutzler predicted continuing natural gas shortages will contribute to California's problems.

Another energy expert predicted California will have a difficult time with energy shortages during the summer.

In fact, James Placke of Cambridge Energy Research Associates warned California may not return to "anything approaching normal" until the year 2003.

Placke also predicted that New York City and the surrounding counties are likely to face power shortages this summer.

That's the latest in what looks like a bleak week for the nation's energy situation.

On Monday, President Bush set the stage for a battle with environmentalists over oil drilling on public lands, reports CBS News White House Correspondent Bill Plante.

As a presidential task force on energy issues chaired by Vice President Dick Cheney convened to give Mr. Bush an interim report on California's power problems, the energy secretary compared the current squeeze to the energy crisis of the 1970s.

"Here we are, faced with the most serious energy shortage since the days of oil embargoes and gas lines," the secretary, Spencer Abraham, said. "This nation's last three recessions have all been tied to rising energy prices, and there is strong evidence that the latest crisis is already having a negative effect."

Gas Money
Oil and gas interests were among George W. Bush's most generous backers in the presidential election, giving nearly $2 million, according to the Center for Responsive Politics. And the automotive industry pumped $1.25 million into the Bush campaign coffers.

As a sector, energy gave more than $400,000 to the unsuccessful senate campaign of Energy Secretary Spencer Abraham.

B>CBS News White House Correspondent Mark Knoller reports that Mr. Bush himself began referring the situation as an "energy crisis" last week.

At Monday's meeting, the president said, "It is clear from first analysis that demand for energy in the United States is increasing much more so than production is. And as a result, we're finding in certain parts of the country we're short on energy."

Energy issues surfaced on the campaign trail last summer and fall and have emerged repeatedly so far in the administration of Mr. Bush, a former oilman, and Cheney, who resigned as head of an oil services firm last year.

In the Bush administration's first days, it issued emergency orders compelling energy suppliers to continue selling electricity to California's cash-strapped utilities and used a Korean War-era law to force natural gas suppliers to do the same.

Citing the Golden State's power woes, the president's announced last week that, in an apparent reversal of a campaign promise, he had decided against regulating carbon dioxide as a pollutant.

The administration also recently relaxed pollution rules on gasoline sales in the Midwest, where drivers faced high prices last summer.

Now, the debate that looms is over whether to permit oil exploration in Alaska's 19 million-acre Arctic National Wildlife Refuge.

When the refuge was set aside 20 years ago, the coastal plain was left open for possible oil exploration.

Drilling supporters claim only 2,000 acres of the vast preserve would be open to drilling; that very few people actually visit the refuge; and that billions of barrels of oil and trillions of cubic feet of natural gas may lurk under the tundra.

Abraham Monday said exploration would involve only 2,000 acres out of the reserve and would not affect wildlife.

"Caribou mating and oil exploration can peacefully coexist," he said.

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Opponents conend even a small drilling operation in the refuge could have a major impact on the delicate ecosystem that calls it home. According to the National Resources Defense Council (NRDC), the refuge hosts more pregnant polar bears that anywhere else in Alaska and serves as a nesting site for several species of birds.

And they dispute industry claims that up to 16 billion barrels of oil might be found. A 1998 government survey found that between 3.4 and 10.2 billion barrels of oil might be technically recoverable, and that there is a 95 percent probability that only 2 billion barrels could be recovered and sold at $24 a barrel. The U.S. consumes somewhere between 14 and 20 million barrels of oil a day.

During the campaign, Mr. Bush said he supported allowing exploration in the reserve.

He made that proposal during a summer when drivers faced the highest gas prices in years — blamed on a combination of OPEC production cuts, gas-guzzling SUVs and increased travel fueled by the booming economy.

Citing concerns about the impact of gas prices on the economy, President Clinton tapped the nation's Strategic Petroleum Reserve for the first time ever in peacetime.

This winter, the high costs of heating oil and natural gas brought new worries.

OPEC this weekend cut production by 1 million barrels a day , hoping to keep gas prices stable despite falling demand to cooling economic growth.

The Energy Department said Monday that both crude-oil inventories and gasoline stocks are 6 percent to 7 percent lower that what they traditionally have been this time of year, which could lead to price spikes for motorists this summer.