The Department of Energy yesterday outlined a short-term program of increased domestic oil production and conservation that it said could make up for most of the U.S. oil imports lost when Iraq invaded Kuwait earlier this month.
But the prospects for a much more significant substitute for the Iraqi and Kuwaiti oil supplies taken off world oil markets remained unclear, at least for the near future, as the Organization of Petroleum Exporting Countries continued to grapple with the internal politics of raising oil production to cover the missing oil. Some analysts, however, said they expected a production increase to begin soon.
Oil markets, buffeted by rumors, speculation and sometimes contradictory reports about the supply situation, went on a roller-coaster ride yesterday before closing almost unchanged. "It was all over the lot. Talk about confusing," said one trader. "We had a million different things going on today."
The measures announced by Energy Secretary James D. Watkins yesterday were a hodgepodge of domestic oil production enhancements and conservation schemes, ranging from commitments from the operators of oil fields on Alaska's North Slope to increase production by 50,000 barrels a day almost immediately and by another 90,000 barrels a day early next year, to a plea to Americans to make sure their automobile tire pressure levels are at recommended levels, which Watkins said could save 100,000 barrels of oil a day.
Other efforts would include adjusting natural gas pipeline regulations to make it easier for industries to switch from oil to more plentiful natural gas -- an effort to mediate a dispute between Chevron Corp. and California officials over the opening of the developed-but-not-operating Point Arguello offshore oil field near Santa Barbara -- and efforts to promote the use of car pools.
Taken together, the measures would account for about 550,000 barrels of oil production and savings a day by early next year, enough to cover most of the 730,000 barrels a day of U.S. oil imports lost when Kuwaiti production was cut off following the Iraqi invasion and an embargo was placed on Iraqi oil earlier this month.
"We're trying to do something that we can do right now," Watkins said. "This is a time when we ought to be doing things at home to minimize the impact of the things that have taken place."
He said the Energy Department hoped to announced other measures in coming months, but that at this time it had no intention to propose production- or conservation-enhancing programs that would require congressional legislation.
While Watkins was enthusiastic about the department's ideas for boosting domestic oil production and conservation, he and other DOE officials were tight-lipped about the efforts to get OPEC to increase its oil output. Watkins would only reiterate President Bush's statement Tuesday that the administration was expecting several OPEC members to increase production.
Experts say increased production by OPEC members such as Saudi Arabia and Venezuela could replace virtually all of the 4.5 million barrels a day lost from Iraq and Kuwait, but OPEC has become mired in bickering over the increases.
While the Saudis and Venezuelans have been proponents of the plan, other OPEC nations that have no excess production, and thus would not benefit from the increase, are opposing an increase as a way to keep crude oil prices high.
Despite a great deal of posturing on all sides, there appeared to be little movement on the surface yesterday. But oil industry executives and analysts said negotiations appeared to be continuing among the OPEC members, and one authoritative analyst said he thought a deal might be near for a majority of OPEC's 13 members to approve a production increase.
"We believe they have seven votes" for approval, said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation, a New York think-tank partly funded by the industry. "In this case, OPEC will be ruled by a majority."
If so, he said, OPEC would not approve overall production levels, as it usually does, but rather "each country will make up its own mind as to what production will be." No special OPEC meeting has yet been scheduled, but Venezuelan President Carlos Andres Perez said yesterday the cartel hoped to make decisions by the end of the week. He said Iraq would be allowed to participate in an emergency OPEC meeting.
The speculation about a production increase was briefly shaken yesterday when it was reported that Saudi Arabia was telling several of its biggest customers that it would be reducing shipments to them next month so that it can supply oil to new customers, chiefly those who had been depending on Kuwait.
But analysts said the reports were misleading, because the Saudis' promised shipment levels were meaningless until the country decides on how much its overall production will be. Most likely, these experts said, the Saudis will spread their supplies to a wider base of customers, but increase production to cover the new allocations.
The speculation over what OPEC and Saudi Arabia were doing, along with some technical factors, had oil prices gyrating yesterday for much of the day, but the price of a benchmark barrel of crude oil ended the day on the New York Mercantile Exchange with a 4-cent increase, at $26.46. Petroleum product prices also were mixed, and Atlantic Richfield Co. said it would continue its freeze on gasoline price rises.
Traders and analysts said it remained to be seen where production levels -- and thus prices -- would end up over the medium to long term.
"We think this is an evolving situation," Goldstein said.