Executive Summary Section 1 A Call to Action Section 2 Demand and Supply Section 3 Panel Recommendations Section 4 Critique of Project Independence Report Summary A Call to Action In the Fall of 1973, petroleum liquids were being produced in the U.S. at the rate of 10.8 million barrels per day-in the Fall of 1974, the rate of production had declined to 10.3 million barrels per day-down 5 percent. In the Summer of 1973, U.S. miners were producing coal at a rate of about 580 million tons annually-in the Summer of 1974, the rate of coal production in this Country was still about 580 million tons-no change. In the Fall of 1973, natural gas was being produced domestically at a rate of 22 trillion cubic feet per year-a year later, the production rate was about one trillion cubic feet per year less-down 5 percent. In 1973, nuclear power generated over 1 percent of the Nation's energy-in 1974, about 1-1/4 percent-up 20 percent. But during 1974 more than half of the planned nuclear generating capacity addition was deferred and some canceled. Excluding the period of the embargo, 1973 U.S. imports of crude oil and oil products averaged 5.8 million barrels per day-again excluding the embargo period, the 1974 imports averaged 6.6 million barrels daily, increasing U.S. dependence on foreign energy-up 14 percent. The U.S. today is paying about $25 billion annually for foreign energy; without prompt action the cost of imports, assuming today's world oil prices in 1985, could rise as high as $52 billion per year. The statistics tell the story. During the first year following the sudden cutoff of oil from the Middle East, little, if any, tangible progress was evident toward a lessening of our dependence on foreign energy. The optimistic prediction of former President Nixon of independence from foreign sources of petroleum by 1980 now has been abandoned. The U.S. is more vulnerable to an embargo today than it was in the Fall of 1973. Although Federal and State Governments, industry and the American people have undertaken 1 some actions designed to conserve and to increase energy supplies, the sense of urgency aroused throughout the Nation by the oil embargo has diminished with the lifting of the ban and a seemingly ample supply of gasoline. There is a danger of being lulled into a sense of complacency because the current economic recession has reduced energy demand. Such a reduction in energy demand is to be expected to accompany a slowdown in the economy. Decisions must be made today and actions taken now, to ensure the Nation's future economic growth with adequate supplies of domestic energy To do otherwise invites disaster. Demand and Supply The Panel has developed an estimate of supply and demand for 1985, as shown in the table on p. 3. A review of the data in this table shows that complete independence from imports by 1985 is unlikely. However, the relative dependence on foreign sources of energy will be declining by that time, if appropriate measures are undertaken immediately. The table also shows domestic oil and natural gas production increasing slowly. returning to 1972 levels. It shows coal production and nuclear energy both increasing rapidly. Demand is shown as restrained by price effects and by conservation. Long lead times are required to increase supplies of energy, to develop new energy sources, to implement fuel substitutions, and to change patterns of demand growth. This means that the Nation's percentage of dependence on imports will continue to rise for the remainder of this decade. Therein lies the danger of delaying action. Caution must be taken in effecting reductions in energy demand. Historically, downturns in economic activity have been accompanied by downturns in energy consumption. The reduction in energy consumption caused by the supply curtailment during the recent embargo resulted in a significant downturn in GNP.' This apparent link between primary energy consumption and real GNP will be difficult to break in the short run, and demand reduction actions should be undertaken which cause the least disruption to the economy. Over the long run, however, increases in energy prices, substantial applications of technology and capital investment, and changes in energy use practices may result in a reduction in energy consumption relative to real GNP. The Panel emphasizes that the status of declining dependence on foreign energy sources will exist by 1985 only if a strong, coordinated, allencompassing national energy supply and conservation program is implemented immediately. Such a program is outlined in the Panel's recommendations. Panel Recommendations To achieve the supply and demand balance that the Panel believes prudent and attainable, immediate positive steps must be taken. Not only must the Nation increase the domestic supply of and reduce the demand for energy; but also, it must transfer much of its future energy growth requirements from petroleum and natural gas to coal (through direct burning, gasification and liquefaction) and to nuclear energy. To these ends, the Panel believes that: • The main underlying principle is the maintenance of a strong, competitive market. The competitive market needs time to absorb and adjust to the significantly higher cost of energy. Due to the urgency of the situation, certain actions may be required, in the short term, to accelerate the supply and demand responses. Mandatory actions, however, must be carefully screened for their effect on the economy. The role of the Government is to act as a catalyst and provide a climate for the private sector to achieve the required goals. Elements of this climate include a well-informed public, a clear definition of national energy policies, a commitment to those policies, a stable domestic economy, and the promotion of the ready flow of energy at stable prices in international commerce. |