The Oil Crisis: This Time the Wolf Is Here

Abstract

It was a popular belief in the 1960s that the supply of oil was abundant. As late as 1970, it was believed that the U.S. could remain essentially self-sufficient in oil. Recognizing the dangers of dependence on oil from the Eastern Hemisphere, a Presidential Task Force recommended that imports from the Eastern Hemisphere be limited to 10% of total U.S. oil consumption, a level expected to be reached in the mid-1980s. These projections were spectacularly wrong. Imports from the Eastern Hemisphere amounted to 15% of consumption in 1972, and are expected to rise to 20% in 1973. The source of these errors were: (1) overestimates of domestic capacity, and (2) the decline of natural gas supplies and its impact on oil demand. Most of the world's proven oil reserves are in Arab hands. We must recognize that previous political threats on restriction of oil have been directed against the U.S. alone, not against our allies. By 1980, we will be even more dependent on oil from the Middle East. The present price agreements are defined only thorugh 1975. Production is leveling off in the Middle East. The only alternative to shortfall before 1980 will be Saudi Arabia, and its projected production seems improbably high. The U.S. has discussed a two-pronged approach to consumer cooperation: (1) development of new forms of energy, and (2) an international authority to avoid cutthroat competition in times of shortage. In the long run, the only satisfactory position for the U.S. must be alternative sources of energy. Effective mass-transit systems could do much to limit our present profligate use of energy in the form of oil.