Abraham Says US Facing Crisis on Energy Supplies Washington, March 19 (Bloomberg) -- The U.S. is facing its worst energy crisis since the 1970s, and California's power shortages could spread to other parts of the country, including the Northeast, Energy Secretary Spencer Abraham said. ``The power crisis isn't just pinching our wallets, it's changing the way we live our lives,'' he said during an energy summit at the U.S. Chamber of Commerce, the largest business lobbying group in the country. Abraham spoke before meeting with President George W. Bush and other Cabinet officials to start work on a national energy policy to head off energy shortages that Abraham said may ``threaten our nation's economic prosperity'' and ``compromise our national security.'' Development of a White House energy policy has been given greater urgency by the crisis in California. Businesses and consumers in the state, the most populous in the U.S., were warned of a new round of rolling blackouts today as alternative energy producers stop selling power on concerns they won't be paid. The state's two biggest utilities, PG&E Corp. and Edison International, have run up more than $12 billion in debt and are on the verge of bankruptcy. ``The bad news is that the situation in California is not isolated, it is not temporary, and it won't fix itself,'' Abraham said. Opening the Refuge ``There are no short-term fixes,'' Bush said at the start of the energy policy meeting, which included Abraham, Vice President Dick Cheney, Commerce Secretary Don Evans, Treasury Secretary Paul O'Neill, Transportation Secretary Norm Mineta and economic adviser Lawrence Lindsey. Bush has said that a centerpiece of his energy policy will be opening more U.S. land, including 1.5 million acres in Alaska's Arctic National Wildlife Refuge, for oil and natural gas drilling and coal mining to decrease dependence of foreign energy sources. The policy should not rely on new tax breaks or subsidies to encourage exploration and production, Abraham said. ``It is a myth to think that special incentives are the way to generate more supply,'' he said. ``Capital is best allocated to it highest use through the workings of the free market, not the manipulation of the tax code. Government regulatory policy should not be aimed at picking winners and losers in any market, including energy. Neither should tax policy.'' Companies such as Exxon Mobil Corp., Chevron Corp. and BP Amoco Plc favor Bush's plan to open the Alaska wildlife refuge to drilling, which is part of the budget resolution that the U.S. Senate will vote on in early April. Legislation in the Works Republican Frank Murkowski of Alaska, chairman of the Senate Energy Committee, has introduced a bill to open the refuge and other U.S. lands to oil exploration. Abraham said the Bush administration will propose its own legislation in the coming months aimed at that same goal. In addition to a lack of new energy exploration, Bush said today that the U.S. needs more power plants. ``We're not building enough power-generating plants to meet demand, and we're beginning to pay the price,'' he said. The decision Saturday by members of the Organization of Petroleum Exporting Countries on to reduce daily production quotes by 1 million barrels also makes the case for increased oil exploration and drilling in the U.S., Abraham said. The OPEC reduction, the second this year, was aimed at bolstering prices as milder weather lowers demand for heating fuel and the economy slows. Abraham was in contact with OPEC members before the cut was announced, White House spokesman Ari Fleischer said. ``While this administration does not agree with OPEC's decision, that decision demonstrates the importance of increasing America's production of oil,'' Abraham said. Crude oil fell Monday to a 2 1/2 month low on expectations that weakening demand will leave refiners well-supplied, even after the latest production cut by OPEC. Bush said at his meeting of his energy task force that ``the Saudi minister made it clear that he and his friends would not allow the price of crude oil to exceed $28 a barrel.'' Demand on Rise Bush also signaled a reluctance to tap the U.S.'s Strategic Petroleum Reserve to deal with rising energy demand this summer. ``We've been through that before, and the Strategic Petroleum Reserve is meant for a national emergency when it comes to war,'' he said. Earlier, Fleischer said Bush ``has never ruled out'' tapping the reserve, though he sees it as a step to be taken in ``national security emergencies,'' and not ``as a consequence of ``supply-and-demand imbalances.'' The U.S.'s demand for oil is projected to increase by 33 percent in the next 20 years, according to estimates by the Energy Information Administration. Yet the U.S. produces 39 percent less oil than it did in 1970, losing nearly 4 million barrels a day in the process, Abraham said. Production will slip to 5.1 million barrels a day by 2020 unless energy policy is changed. In addition, Abraham said that the National Association of Manufacturers estimated that rising fuel prices between 1999-2000 cost the U.S. economy more than $115 billion, which is about the equivalent of 1 percentage point off the nation's gross domestic product.
