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ChevronTexaco CEO Calls for Strong Energy Policy

ChevronTexaco Corp. CEO Dave O'Reilly said Tuesday that with the era of "cheap oil and even cheaper natural gas clearly ending," the United States has to enact a strong energy policy to ensure its security and its economic future.

Speaking in Houston Tuesday at the Cambridge Energy Research Associates conference, O'Reilly admitted that until recently he did not think a new domestic energy policy was needed. However, "in light of changing circumstances, I now feel the administration must refocus our nation's energy policy to meet the new energy equation."

However, O'Reilly noted that the public has to be educated on why a sound energy policy is imperative. "We need to make our policy tradeoffs clear," he said. In the United States, energy independence has "no grounding in reality." Aligning a solid energy policy with other government policies is "central to our national interest...environmental, economic, trade and national security."

For instance, "common sense would suggest that we develop natural gas supplies as quickly as economically feasible," he said. However, current government rules limit access to gas development in several places across the country, including the Rockies, Alaska and offshore Florida and California.

"If a preference for natural gas is going to be our de facto policy for the generation of electricity, then our national policy should encourage and enable the development of natural gas," O'Reilly said.

As an example, he pointed to Japan, which today has a diversified energy supply. Oil, which accounted for 75% of the country's fuel sources in 1973, has fallen to less than 50% of required supplies, while the use of natural gas has increased eightfold and nuclear power has grown from 1% to 12%.

As U.S. energy demands grow, the country "must adopt an energy policy that recognizes global interdependence -- not one that strives for energy 'independence,'" O'Reilly said.

Among other things, O'Reilly stressed that a new U.S. energy policy should include goals toward improving the use of coal and nuclear power, renewables such as wind and solar, and energy efficiency. Along with the fuel sources, he said the policies have to be aligned to "encourage the development of new energy sources in the arena of trade and diplomacy."

He pointed to Mexico, which imports gas from the United States despite its ample reserves. If U.S. policy supported Mexico's development, that policy would in turn help the United States in securing more gas in the future, he said.

O'Reilly also noted that a lot money is now going into liquefied natural gas projects, which may not be ready to fill the growing gas demand gap. Another technology, gas-to-liquids, is "in its early days," but the transformation of low-cost gas into high-quality liquids is "a huge business opportunity," O'Reilly said.

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