Invasion Renews Debate on Role of Energy Agency

NEW YORK —  The crisis in the Persian Gulf has reopened a debate about the mission and capabilities of the U.S. Department of Energy, an agency that was born in 1977 to forge U.S. energy policy, but that some critics assert has long since lost its way.

Since Iraq invaded Kuwait on Aug. 2, the department has been criticized for its initial unwillingness to release strategic oil reserves to restrain oil price hikes. Some critics have asserted that the agency has been too relaxed overall about the crisis and that its attitude reflects its lack of commitment to a leadership role in energy policy.

Some oil experts have argued that the United States should have begun releasing oil from its 590-million-barrel strategic reserve as soon as the crisis began, to reverse the market psychology that created a spike in prices. While President Bush signaled last Wednesday that he may reverse ground on use of the reserve, the government’s failure to do so quickly has added 15 cents a gallon to gasoline prices, former Secretary of Energy James R. Schlesinger and others have argued.

“The policy response of the Department of Energy has been as inept as it could be,” said Philip K. Verleger, an economist with the Institute for International Economics in Washington. “It doesn’t seem to recognize that there is a shortage.”

Verleger asserted that the department’s stated policy was to begin using the stockpile early in a crisis to counter a price run-up. Energy officials had maintained that simply announcing plans for an oil auction would restrain any rise, he said.

Energy Department officials failed to return phone calls. But the department has contended that, because of unused worldwide production capacity, no shortage exists. “We do not see any reason for a permanent long-term price increase,” Henson Moore, the deputy energy secretary, said at a press conference on Aug. 2.

But some analysts contend that the crisis will keep prices high for many months, at least.

“If you’re going to let the market handle this, you’re looking at a $15-a-barrel increase,” Adam Sieminski, an oil economist for Washington Analysis Group, told Associated Press.

Bush signaled a possible reversal in the Administration’s policy on Thursday, saying that the United States might go along if other nations decided to dip into their reserves.

The department’s reluctance to use the oil has brought criticism from several sources on Capitol Hill, including Rep. Philip R. Sharp (D-Ind.), chairman of the House energy subcommittee.

However, congressional aides also note that the policy reflects in large part the attitude of some senior White House officials who believe that use of the reserves represents harmful meddling with free-market dynamics. Some senior Energy Department officials are known to favor releasing the oil, though some also have personally opposed it, congressional aides say.

The Energy Department was created in the Carter Administration, and Ronald Reagan promised during his 1980 presidential campaign that he would abolish it. Instead, he shifted two-thirds of its resources to building nuclear weapons.

Bush has said he wants the department in the 1990s to play a more important role in energy policy-making than it did in the 1980s. Even some political adversaries say Energy Secretary James D. Watkins and his administrators are more capable than the top Energy Department appointees during the Reagan years.

But critics contend that the agency has yet to take an aggressive role in setting national policy.

Energy Department officials have not always appeared in a flattering light since the Kuwaiti crisis began.

At a hearing on the oil crisis Tuesday before the House Energy Committee, Rep. Edward Markey (D-Mass.) asked John Easton, the assistant energy secretary, why Watkins wasn’t present to respond to questions. Watkins, it turned out, was on vacation when Iraq invaded Kuwait. He didn’t return until Wednesday night, congressional sources said.

Last Friday, Energy Department officials released statistics about unused world oil-production capacity that didn’t jibe with figures that have since been released by some oil-producing nations. For example, the agency said, Venezuela had unused capacity of 200,000 barrels a day; last week, Venezuela’s oil ministry said the figure was 500,000 barrels.

Bush called on the department in July, 1989, to prepare a “national energy policy” by this December. In response, it held 15 public hearings on energy policy.

But in June, the department disclosed that it planned to ultimately release a series of options for policy, rather than recommendations. The options would be circulated to other federal agencies, which would discuss them and recommend a policy, the department said.

Some representatives of utilities, the nuclear power industry and oil companies, who had hoped for a clear statement of national goals on energy, complained that this tactic would enable the Administration to duck hard choices on such questions as conservation, gasoline taxes and nuclear power.