The oil crisis 10 years later: effect in US is no longer harsh
Cambridge — Most Americans probably believe they have been hit hard in the pocketbook by the OPEC price boosts of the 1970s. After all, crude oil is some seven times as expensive as it was in 1972.
According to Thomas Stoker, however, an economist at the Sloan School of Management of the Massachusetts Institute of Technology, the average family in the United States has made up for its higher fuel costs with lower prices (in real, noninflated terms) for food, clothing, and other items.
In fact, it's quite likely this average family is better off by perhaps $200 (in 1972 value dollars).
That was one of the surprises that came out of a seminar that MIT's Center for Energy Policy Research put on last week to review what has been learned about energy a decade after the Organization of Petroleum Exporting Countries first raised the price of crude in 1973. At that time, President Nixon spoke of an ''energy crisis'' and announced a series of energy-conserving actions, such as a reduced highway speed limit and lowered temperatures for home and office. Since then there have been other startling changes:
* There are adequate fuel resources in oil, coal, and natural gas to last this century without enormous reliance on synthetic or other difficult-to-get fuels. The energy crisis, as one scholar put it, ''has disappeared.''
* In this country, at least, no synthetic-fuel project, such as turning coal into oil or extracting fuel from oil shale, is commercially viable at today's oil prices. New projects depend on government subsidy.
* Nuclear power, which was to be the nation's fancy energy carriage, has turned into a pumpkin.
Of course, Mr. Stoker's finding about the effect of OPEC price increases on American families doesn't mean they wouldn't have been better off if the price of fuel oil, gasoline, and so on had not risen so drastically. After all, one estimate is that some 2 percent of gross national product, the nation's total output of goods and services, was in effect transferred to the OPEC countries when they raised prices.
National statistics indicate that in real terms, the disposable income of American families - what they have left after paying taxes - decreased a little between 1970 and 1980. But the number of ''families'' that consist of one individual rose rapidly in that decade. So, on a per capita basis, it is likely that Americans were better off at the end of that decade.
To reach his conclusion, Mr. Stoker looks at a family of three, with the head of the family aged 35 to 44, whose total yearly expenditures were $10,000 in constant 1972 dollars throughout the decade. In other words, this theoretical family's spending kept up with inflation, as measured by the consumer price index (CPI). The CPI, however, measures a constant market basket. Consumers actually vary their spending patterns as prices change, tending to buy less of more expensive items (say fuel) and more of other products or services whose price has fallen or risen less. Taking this into account in looking at actual spending, the typical family came out about financially even during the 1970s, and in 1980 a drop in food prices helped this family modestly (by $210).
Mr. Stoker massages the statistics rather vigorously, looking at different income groups, varying family size, different age groups, varying regions, whites and nonwhites, urban and rural, and finds that all are slightly ahead of the financial game - despite OPEC.
But those families whose incomes did not keep up with inflation, such as retirees on fixed income, would have been hurt badly during the decade.
Looking at a different energy topic, another Sloan School economist, Ernst R. Berndt, and an associate of MIT's Energy Laboratory, David O. Wood, calculate that the boost of energy prices in the '70s resulted in the economic depreciation of the capital stock in US manufacturing by about 13 percent.
When the price of gasoline prices soared in 1973-74, the used-car price of gas guzzlers dropped substantially. Similarly, the two explain, equipment that was made on the basis of relatively cheap energy declined in value.
Manufacturers are still adjusting the ratio between the input of capital and of labor to their operations to take account of the higher cost of energy. In effect, Mr. Berndt and Mr. Wood maintain, US manufacturing was set back eight to 10 years in getting the optimal mix.
If those surprises aren't enough, here's one more: Households were able to cut back their consumption of energy far more than economists had anticipated (see table). Many a utility executive might well quote the Scottish poet Robert Burns: ''The best laid schemes o' mice and men/Gang aft a-gley.'' How homeowners have cut back on energy use (annual growth rate)
1960-72 1972-81 Electricity 8.6% 3.1% Gas 4.7% 0.1% Oil 2.6% -7.0%