|using too much oil.
We have come full circle. Even I was more than
a little shocked when I dug back through my files to a 1973 newsletter,
titled, "The Energy Binge Is Over." Six
years ago, we were discussing almost the same situation -- a shortage was
looming (it came faster than expected with the Arab oil embargo) and I
did not conceal my concern. One paragraph from the 1973 report rang more
true than expected:
|"If we accept unbridled consumer demand for energy
as a fact of life, we can count on buying $14 billion worth of Mideast
oil by 1975
and some $30 billion a year by 1980. What will these kinds
of purchases do to the dollar and where will we find the American exports,
to pay for them?"
As things developed, my estimates turned out to
be too conservative. Today, we're already buying $40 billion worth
of foreign oil, and 1980 isn't even here yet.
In the meantime, we haven't found the exports
to pay for all that oil, we have increased our consumption and we
all know what has happened to the dollar -- we are plagued with serious
* * *
If our current oil shortage is not a hoax and
not the result of a conspiracy by the oil companies or by government (or
both), what then is the reason?
As I mentioned earlier, too little oil is the
fundamental reason, although this time around there were other factors
First, our dependence on foreign oil put us at
the mercy of not one or two or three countries, but a string of a dozen
or more. While we hear most about Saudi Arabia and other Middle East nations,
we also rely on countries like Venezuela, Nigeria and Iran for our daily
shipments of oil.
Our increasingly heavy demand already has stretched
this international pipeline to the limit. When one piece falls out of place,
as happened in Iran, we feel the impact hard.
Second, the other oil-producing countries failed
to pick up the slack left by production cutbacks in the wake of the Iranian
Third, there were some confusing signals to the
oil companies from our own government, some oil company misjudgments and
production cutbacks, a dangerous depletion of crude oil reserves and some
shifts in production priorities at refineries.
The system, already strained and overloaded, couldn't
stand the juggling. There were too many demands on too little oil. Something
had to give. We have built a delicate dependence that has become our Achilles
* * *
Where does all of this leave our energy future?
As someone once said, "I'm afraid the future ain't what it used to be."
Nuclear power, for example, once was viewed as
our energy savior. When our oil began to run out, uranium would pick up
much of the slack; we had found the source of eternal -- and eternally
cheap -- energy.
Today, that promise is clouded. The events at
Three Mile Island have caused us to reassess nuclear power, primarily from
a safety standpoint. But before these new safety questions arose, nuclear
already faced other problems: one is the economics of nuclear power plant
Nuclear power plants are incredibly expensive
pieces of equipment requiring enormous amounts of capital. Al-
|ready, some utility companies and
some financial experts are wondering if nuclear is worth the price, if
it really is the economical way to go.
And we still have made no progress toward solving
the nuclear waste problem. No state wants nuclear waste dumped within its
borders, we can't shoot it into space and recycling is a whole separate
This doesn't mean we should rush out tomorrow
and close down our existing nuclear power plants. I'm afraid we can't do
that. What it does mean is that nuclear power now seems likely to play
a transitional role in the 80s at least. It will provide some of our power
in the years ahead, and it can give us the time we need to vigorously research
and develop alternative power sources. But it surely will never be able
to replace much of our oil, as we once believed.
Expect no favors from the Organization of Petroleum
Exporting Countries (OPEC). The smiling sheiks of the Mideast have already
told us to expect no stabilization of oil prices until we cut consumption.
Period. OPEC is now in a position to do heavy damage to our economy without
resorting to an embargo. They can cause inflation, put people out of work
-- simply by refusing to sell us additional increased supplies.
(Saudi Arabia has agreed to boost production by 1 million barrels a day,
but the Saudis cautioned that this boost would only be for "a specific
period." This, too, may give us more breathing time, but it won't solve
the problem, for our history shows that we have done pretty well at matching
consumption to supply.)
From the OPEC point of view, it makes good economic
sense not to increase production, but to hold it down and hold prices up.
OPEC has a lucrative operation and plans to make it last as long as possible.
What of our own domestic production? As I mentioned
earlier, we have three times as many drilling rigs working full-time as
we had in 1971, and yet our production of oil has declined, from 9.4 million
barrels a day eight years ago to about 8.7 million barrels a day, today.
And for every 20 barrels of oil we have burned,
we have put 11 in reserve. It's sort of a turn on the old line about getting
too much of a good thing -- except in this case, we can't get enough of
a good thing. And we can't keep that up forever.
* * *
If a country is measured by how it reacts to adversity,
then our energy problems seem to have triggered a secondary and perhaps
more serious crisis -- a crisis of our national character. This secondary
crisis finds many of us divided, cynical and suspicious. It's troubling,
because it isn't like us and it runs completely counter to our past.
On Dec. 8, 1941, no one argued that some oil companies
were really hiding our fleet and that it really was afloat. We knew it
lay at the bottom of Pearl Harbor and we had to go to work.
One of the more remarkable stories of World War
II was how Americans came to grips with a lack of raw rubber.
As the Japanese gradually gained control of the
Pacific in the early days of the war, U.S. rubber imports came to a halt.
The Allied war effort was seriously imperiled. A global conflict could
not be waged without the vital raw material.
But there was no casting about for blame. The
government created a crash program to find a synthetic rubber formula,
and in a matter of months, we had one. Our tire companies went to work
at top speed.
That technological breakthrough was an important
turning point. Without it, the duration and even the outcome of the war
might have been different.