US could adjust to 'oil shock' pretty well, say experts

Despite the nation's current ''oil glut mentality,'' most United States energy experts predict future energy shocks such as the ones in 1973 and '79. This raises a natural question: How would the US economy respond?

US Sen. Charles H. Percy (R) of Illinois put the question to the Office of Technology Assessment, the research arm of Congress. He got his answer this week as OTA released the results of its study in a report titled ''US Vulnerability to an Oil Import Curtailment.''

OTA researchers looked at the nonmilitary measures that could be taken to replace large amounts of oil within five years following another major disruption. They report that the US has the capability to replace even a massive shortfall of 3.6 million barrels a day (roughly the impact on the nation of a cutoff or destruction of the Middle East oil production) with other energy technologies within five years.

But it would be a pretty rough five years. They estimate that oil costs would double or triple to $50-70 per barrel and the nation would have to divert $30 billion to $40 billion per year to develop these replacement technologies. High inflation is inevitable, but just how bad is uncalculable. They project a loss in the gross national product (GNP) peaking at 7 to 10 percent.

The congressional researchers foresee increasing energy efficiency (particularly in automobiles), natural gas, coal and wood as ultimately taking up most of the slack left by a disruption. Oddly, they calculate that an abrupt cutoff would be better for the country than a gradual one. Average GNP and employment losses, and the ultimate rise in oil prices, all are seen as being smaller after an abrupt supply drop.

The technologies required could be rapidly developed and deployed by the private sector, the study concludes, but it also foresees a need for contingency planning on the part of federal and state governments. Basically, OTA advocates establishment of a better system for monitoring the rate at which the private sector invests in oil-replacement technologies and establishment of contingency incentives that would be invoked if the private-sector investment lagged behind the requisite pace.

This analysis is based on a hypothetical oil crisis occurring relatively soon. Over time, the report points out, the nature of US vulnerability gradually changes. Space heating, most manufacturing processes, and electricity generation are expected to become less and less vulnerable to an oil cutoff.

On the other hand, the prospects for transportation, chemical manufacturing, agriculture, mining, and construction look gradually worse. Essentially, the shift to other energy sources and increased energy efficiency of the rest of the economy means fewer ways to free up oil for those uses where no alternative exists.

Even if automobile fuel efficiency is vigorously improved and even if most stationary uses of oil are eliminated, the US is likely to still be importing large amounts of oil in the year 2000, the study says. Reductions in oil consumption will be offset by declining US oil production anticipated in the 1990s.

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.