Energy: still a hard road ahead
The energy crisis is not over.
The United States has made great progress. It has cut its imports of crude oil. It has learned to use energy more efficiently. It will take more years of effort, however, before Americans can relax about their nation's energy situation.
These facts may surprise many Americans. Recent articles have focused on the international ''oil glut'' and the real progress we have been making domestically. Even venerable Harper's magazine graced a recent cover with the flat assertion that ''The Energy Crisis Is Over!'' This isn't the case, unfortunately, and the recollection of a few key facts reveals a situation that is little short of desperate.
Americans were stunned by the ''oil shock'' that came on the heels of the October 1973 war between Israel and its neighbors. Few outside of the energy industry realized that the US had met its own energy needs with its own energy resources until 1969 - the first year that it produced more oil than it discovered. It has been producing and consuming more than it has been discovering ever since.
When the Arab oil embargo began in October 1973, we were importing about 3.6 million barrels of oil per day and producing about 9.6 million barrels per day of our own oil. This oil cost less than $3 per barrel and the total annual bill for our imports was less than $9 billion.
Both the amount of oil we imported and the price per barrel rose in the years following the embargo. Average daily oil imports rose from 3.6 million barrels per day in October 1973 to an all-time peak of 7.1 million barrels per day in July 1977. At the same time, the price of imported oil rose from roughly $3 per barrel in 1973 to about $15 in 1978, $22 in 1979 and to between $37 and $38 per barrel in mid-1981. Domestic production continued to decline while consumption increased. Americans just didn't seem able or willing to cut oil consumption, and imports were the only handy source of additional supply available.
The import bubble broke after the Shah of Iran fell and Iran's daily crude output fell from almost six million barrels per day to somewhere between one and two million barrels per day. Even though the amount of oil denied American consumers during the 1979 oil shock was less than was the case in 1973, something about the doubling of world oil prices (they had quadrupled during the 1973 embargo) and the humiliating hostage crisis drove home to Americans the point that our thirst for oil made us vulnerable to the passions and hostilities of some very volatile points of the world.
The 1979 oil shock may be viewed by tomorrow's historians as the point where America finally faced its energy problems and began to wean itself from the opiate of imported oil.Since then, almost all of the energy news has been good:
* The US has cut consumption of crude oil and refined oil products from a peak of almost 19 million barrels per day in 1979 to a little over 16 million barrels per day by mid-1981.
* It has cut crude oil imports from a peak of 6.6 million barrels per day to about 4.2 million barrels in mid-1981.
* During the summer of 1981, oil imports dropped below four million barrels for three months. This is the first time that imports dropped below the four-million-barrel mark since just after the end of the Arab embargo.
Americans are optimistic by nature, and it is probably only natural that some of them would conclude that the energy crisis is a thing of the past. It isn't. Dependence on imports will be with us for a long time.
No knowledgeable observer could have predicted that oil import levels would have fallen this far or this soon. Even President Carter's 1977 National Energy Plan only anticipated bringing oil imports down to six million barrels per day by 1985. We've already exceeded that goal by 50 percent and four years. Before we start celebrating, however, we need to keep several more important facts in mind:
(1) A year doth not a new era make. Imports are down but economic activity is down and we can anticipate increased oil demand as economic recovery takes place.
(2) Even at 4.2 million barrels per day, we are still importing over a half-million barrels per day more than we were importing at the outset of the Arab embargo. Thus, we are still highly vulnerable to new oil shocks. A cutoff of one million barrels per day would, according to the Congressional Budget Office, cut our gross national product by $80 billion, catalyze skyrocketing unemployment, and ignite a 20 percent increase in the rate of inflation.
(3) At current, relatively low import levels, our oil imports will cost more than $70 billion per year, a sum about equal to this year's federal deficit. Some of this money comes back to us as purchases or investments. Much of it doesn't. All of it is a tax on the future of every American man, woman, and child.
All Americans can take pride in their successful efforts to cut oil import dependence. Declaring the energy crisis over at this point, however, would be like demobilizing America's armed forces the morning after the Battle of Midway. We have a long and difficult journey ahead of us. We now know that we have what it takes to make the trip.