significant reductions in emissions of sulfur oxides from the stacks of most coal-burning processes. At that time most coal used had a high sulfur content; so the new emission standards accelerated sharply the shift from coal to oil and gas. So long as supplies of oil imports seemed to be ensured, there was little cause for concern about domestic self-sufficiency. United States companies owned controlling interests in the firms producing and delivering foreign oil, and there seemed to be no practical limits on foreign production capacity. That much of the refining was done abroad and products were imported was no cause for concern so long as a continuous flow of fuel was reasonably ensured. Failure to use cheap foreign oil would have caused an unnecessary rise in the cost of energy at home and slower progress toward meeting desired environmental standards. The result has been an increasing dependence on oil imports. THE PRESENT SITUATION Suddenly a new set of conditions exists. A major portion of foreign oil supplies has been interrupted, and there are no readily available alternate sources for the quantity required. Consequently the United States faces major economic dislocations and unwelcome changes in the way its people live, work, and play. Energy policy makers must choose among some undesirable alternatives to adjust to these new conditions. To absorb the sudden reduction in oil imports, the United States will pay a high price in some combination of dollars, environmental impacts, and social dislocations. The exact amounts of each required to balance energy supply and demand are determined by the state of energy production and use technology and by the behavior patterns of the producers and consumers of energy. The nature of the present emergency is clear; its dimensions are less so. HOW FAR TO SELF-SUFFICIENCY? The specifics of the energy supply and demand situation as of 1970 are displayed in Figure 3-5. Forecasts of the demand for energy and the contribution of the various fuel sources to meet that demand are based largely on projections of trends dictated mostly by economic considerations. A consensus of estimates of the 1980 energy situation past trends continued is shown in Figure 3-6. That consensus projected oil imports of 10 million barrels/day and gas imports equivalent to almost 2 million more barrels/day of oil. Clearly the energy situation in 1980 will have to differ by the equivalent of some 12 million barrels/day of oil from previous estimates if the Nation is to be self-sufficient by then. In the face of current and projected shortages, the price of energy relative to that of other commodities will rise sharply. This rise will generate economic incentives both to conserve energy and to increase domestic supplies. The extent of these changes depends on: How fast the price rises. How long it maintains given levels. What consumers and producers expect to happen to future prices. Their responses over time to the pattern of actual and expected price increases. None of these quantities is known. One thing is clear beyond question: the Nation must exert every effort toward reducing the rate of growth in energy demand and increasing domestic energy supplies. The projected shortage of approximately 12 million barrels/day of oil equivalent by 1980 (Figure 3-6) did not incorporate the effects of the sharp rise in the price of energy expected in the near future. Because the rise in energy cost will, of itself, restrain the growth of energy demand to some extent, the self-sufficiency target for increased production by 1980 will be something less than 12 million barrels/day of oil equivalent. How much less is not known with any confidence; one high-priority energy research and development objective must be to develop better methods for predicting that quantity. Projections of the effect of price increases on moderating energy demand were developed as follows. If the real cost of energy doubles throughout the economy by 1980, an optimistic prediction would be to expect a 10% reduction in total energy demand in response to a doubling of the relative price of energy. This means that domestic supplies would still have to increase by the equivalent of something like 7.3 million barrels/day of oil if administrative rationing measures are to be avoided. An even more optimistic prediction-that a doubling of the relative price of energy would reduce the demand by 15%-would still require an increase in domestic production of about 5 million barrels/day of oil equivalent. Clearly a major part of the burden of attaining self-sufficiency without controls must fall on increased supplies. For the United States to attain energy self-sufficiency by 1980, even if present energy costs are doubled, domestic supplies will have to increase by the equivalent of 5 to 7 million barrels/day of oil. But the requirement to regain self-sufficiency does not stem from the present oil embargo alone. Figure 3-7 shows the expected long-range development of the Nation's energy future before the requirement to regain and sustain domestic self-sufficiency. Although estimates this far in the future are imprecise, this figure does show the relative magnitudes of the major transformations that were projected for the energy system. The huge bulge in projected imports is the most striking characteristic. The balance-of-payment implications of this level of imports in the face of competing claims from other users and restricted production rates by producing countries are reason enough in themselves to begin now to move toward self-sufficiency. The present crisis has simply accelerated the time of a general awareness of the problem; it may well turn out to have been a blessing in disguise. Figure 3-7 also helps convey the magnitude of the job to be done in sustaining domestic self-sufficiency for any period after it is attained by 1980. Figure 3-8, a modification of Figure 3-7, displays an estimate of the changes that will have to be made by 1980 in domestic energy production and consumption to regain self-sufficiency by 1980. It shows the dramatic increase in domestic fossil-fuel production that will be required, even assuming a 10% decline in the previously projected levels of energy demand. Such a fundamental change over the next seven years will be possible only with a vigorous energy research and development program and an equally vigorous production program that supports the early and widespread application of technological advances throughout the economy. The clear message in Figures 3-7 and 3-8 is that major transformations of the energy system are going to be required and the Nation must get started on them now. |