Pondering the Tasks Ahead

True or false: the energy crisis was a blessing in disguise. Most Americans would immediately say false. By tripling oil prices and cutting production for a while, the Arab nations created severe new international balance of payments problems, disrupted business, backed up long lines at gasoline pumps and caused countless other hardships. But at an energy conference held by Time Inc. in Williamsburg, Va., speakers from Government, industry and environmental groups also saw a brighter side to the five-month oil embargo. They believe that it awakened Americans to long-festering energy troubles and started them thinking about solutions.

Treasury Secretary William Simon defined the way out of the crisis in two words: Project Independence. Within the next decade, he told the conference, the U.S. must increase the supply of domestic energy while decreasing the growth in demand for it. That will be anything but easy. One panel of experts* emphasized the long lead times and billions of dollars of capital needed to develop oil-shale deposits, clean up coal, build more nuclear power plants and bring alternative energy sources such as geothermal power into operation. Indeed, reaching self-sufficiency in a decade is probably impossible.

Two things must be done while the technicians strive for that goal. The oil companies, said John K. McKinley, president of Texaco, have "to do the job of supplying the country with some 78% of its total energy in the form of oil and gas." Even more important, Americans must apply themselves to the vital task of cutting demand by conserving energy.

Much depends on commerce and industry, which consumes about 70% of the energy used by the U.S. John C. Sawhill, head of the Federal Energy Administration, said that his office has asked all big businesses to cut down on their use of energy, by such moves as improving industrial processes, recycling heat or lowering lighting levels. Such efforts could reduce industrial energy consumption by 10% to 15% --the equivalent of 1,100,000 bbl. of oil per day.

New Ethic. Another area where conservation is worth special effort is the private car, which now consumes 14% of all U.S. energy and 31 % of its petroleum.

The FEA hopes that high gasoline prices will make motorists keep auto engines tuned up, forgo unnecessary trips and form car pools. If each driver cut his gas consumption by 15%, the overall saving would be about 680,000 bbl. per day, or 10% of total demand.

But will the public respond? Democratic Senator Jennings Randolph of West Virginia had his doubts. On a recent road trip, he said, he found that no fewer than 63% of all drivers were exceeding the still-in-effect 55 m.p.h. national speed limit. Added Senator Henry M. Jackson, Democrat of Washington: "There is no direct evidence to support the contention that by raising the price you are going to ration the amount of gasoline that will be available." On the other hand, Congress and the Nixon Administration are extremely reluctant to impose such mandatory conservation measures as gasoline rationing or new taxes on energy-intensive machines. Simon put it bluntly: "Conservation should be voluntary. People should have a freedom of choice."

The key is to foster a new "conservation ethic," Sawhill said. The FEA is now advocating ways to reduce energy consumption during the summer. It is urging homeowners to run their air conditioners only on "really hot days," and then only enough to cool dwellings to 78DEG. To keep indoors tolerable, Americans should shade sunny rooms and wait until the cool hours of early morning or late evening to switch on appliances that throw offbeat (dishwashers, clothes dryers). In addition, the FEA advises, house holders should use the next few months to improve their homes' insulation. Al though all this will have a minor effect on total energy consumption, it will make people aware of the need to save fuel and thus help to establish thrifty conservation habits.

To Suzanne Keller, professor of sociology at Princeton, conservation can only succeed if Americans realize that the energy crisis is not "put on, contrived or false." They have drawn no such conclusion yet, she said, even though the oil embargo touched off a series of far-reaching social effects. Americans, suddenly deprived of gasoline, were also short of the "security blanket" provided by the auto and all the "freedom, status and glamour" that it represents. During the embargo, Keller said, police records show that there were more "violent family encounters as people spent more time involuntarily at home."

Significantly, the embargo also "caused considerable frustration and dismay, almost akin to a feeling of betrayal." Without abundant energy, the American way of life seemed lost. The answer, Keller continued, is "to develop a new philosophy of life--nothing short of that--as we are forced to shift our priorities from accumulation to preservation." Facing up to energy shortages, she hoped, "may encourage a sense of togetherness and community that everyone seems to be seeking."

Other topics discussed at the Williamsburg conference:

SCAPEGOATS. One result of the embargo has been a search for villains. The Federal Government has been accused of bureaucratic bungling, and environmentalists of obstructionism. But by far the most blame has been heaped on the oil companies, largely because of their record profits. Urbanologist Irving Kristol of New York University noted one reason: the corporation "is just about the only institution in American society without a constituency. Most institutions have someone who will rally around them when they get into trouble. Corporations have not." Even most of the companies' stockholders are uninterested, Kristol said. "They are speculators. They don't give a damn about the company, only about the price of stock "

NEGOTIATING WITH OPEC. The structure of the oil industry has changed radically in the Middle East, as the members of the Organization of Petroleum Exporting Countries (OPEC) press for larger and larger shares of the big oil companies' operations on their territory and unilaterally set high prices for oil. "There are no lasting arrangements any more," said Oil Economist Walter J. Levy. "The oil companies have no alternative but to acquiesce to changes imposed upon them."

The problem is that OPEC has become a monopoly, said Henri Simonet, vice president of the Commission of the European Communities (Common Market). "There are only two ways of having a price picture that is tolerable to the world as a whole," he declared. The industrialized nations must become self-sufficient in energy--which is unlikely.

Or they must form a cartel of consuming nations that would negotiate prices with the producers' cartel. "I think that can be efficient," said Simonet.

THE OPEC VIEW. Jamshid Amuzegar, Iran's Minister of Interior, explained that the Persian Gulf countries have for years watched the prices of wheat and manufactured goods soar.

Meantime, he said, oil prices were held "artificially low" by the oil companies.

Thus the boosts in posted prices for crude oil--from $3.01 per bbl. last October to $11.65 now--were long overdue. Moreover, Amuzegar said, the producing nations want to cooperate in world development, the oil embargo notwithstanding, because "we are all in the same boat."

Amuzegar nonetheless clearly resented some of his neighbors. "Everybody considers Iran to be the villain in raising prices," he said. But "it is the Arabs" who are forcing up prices with their takeovers of foreign oil companies and buy-back arrangements. Last week, for example, Kuwait's government approved an agreement to acquire 60% of the British Petroleum-Gulf Oil Corp. joint venture in that nation, and Saudi Arabia plans to renegotiate its agreements with the Arabian American Oil Co. Iran, a Moslem but non-Arab country, which nationalized its oil industry years ago, "does not engage in that," Amuzegar said. Still, Iran is an interested observer in such negotiations. Kuwait is now trying to boost the price of the oil it will sell back to BP and Gulf from $7.65 to $10.85--or 93% of the posted price. If that happens, Amuzegar stated, "we are entitled to the same thing.

But please do not blame us."

ENVIRONMENT. Many of the speakers from Government and industry insisted that some environmental laws should be amended to make them less tough on industry. Particular targets were the Clean Air Act of 1970 and the Senate version of an anti-strip-mining bill that is still before Congress. Laurence I. Moss, then-president of the Sierra Club, argued that as better scientific data is gathered, the standard might well be stiffened. Moss also advocated including the costs of anti-pollution equipment in the price of energy. In fact, he said, the price of power should reflect all costs--from those caused by pollution damage (to crops or health) to those now subsidized by special tax breaks (for depletion or foreign credits).

Energy prices would rise, and the poor would need some assistance. But, Moss said, such full-cost pricing would also allow the free market to allocate scarce resources properly and efficiently. It would lead to more use of mass transit, more efficient industrial processes and more conservation of energy.

*Thornton F. Bradshaw, president of Atlantic Richfield Co.; Ian MacGregor, chairman of American Metal Climax, Inc.; John W. Simpson, president of Westinghouse Electric's Power Systems Co.; Alfred J. Eggers Jr., assistant director for research applications of the National Science Foundation; and Lee C. White, chairman, Energy Policy Task Force, Consumer Federation of America.

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