A GOOD RULE of thumb in judging economic policy holds that when the corporate heirs and assigns of John D. Rockefeller oppose any position, it is likely to benefit the public interest.
So for the uninstructed, a useful guage of President Carter's oil program is the response of the great oil companies. Happily, their message is as clear and concerted as their pricing and output policies.
At the biggest of the big, chairman Clifton C. Garvin of Exxon (nee Jersey Standard) deplored "unjustified attacks" on his concern and its fellows. By no mean coincidence, chairman John E. Swearingen of Indiana Standard complained of "Mr. Carter's continued berating of the oil companies." Public relations men no doubt dissuaded them from a more frontal assault.
The better instructed will have observed that the new program - for all the obscurity in its presentation - appears to mark a serious and important shift in the president's approach. His emphasis has now turned smartly from curbing demand - turning off lights, turning down air conditioners and the like - to expanding supply outside the reach of the OPEC cartel and its oil company agents. This turn to non-cartelized supply - to the capture of the vast amounts of oil in shale rock, tar sands, heavy oil and other superabundant resources - represents a measure of economic and political wisdom that has been remarkably absent heretofore.
Not for the first time, most of the press missed the point and seized on the proposed barriers to imported crude as the centerpiece of Carter's plan. In fact, this is a tired piece of sociological lag. The industry persuaded Eisenhower to do this sort of thing more than 20 years ago in the name of national defense. The quotas, of course, simply protected and raised the price of domestic oil, much like those now in force for textiles and other politically persuasive industries do..
By themselves, oil quotes will simply encourage Arab nations with few people and much oil to reduce further their own production, confident that the value of oil can enjoy only a one-way ride - up. When an oil 'glut' threatened to crack the OPEC price in 1977-78, it was Saudi Arabia and its neighbors that painlessly cut back output to shore up price. It was this slash and not the fortuitous events in Iran that triggered the latest round of increases and the attendant gas lines.
The heart of the problem, then, is how to encourage the Saudis, their neighbors, and the collaborating companies who receive the bulk of the output to believe that oil under the sand is not foreordained to rise forever, that it might be worthwhile to bring it up sooner rather than later.
While the getting is good
The answer, buried in Carter's laundry list, is to convince them that a serious program has been launched to enlarge supply outside their joint control.
Carter's scheme - giving $88 billion to a government Energy Corporation to tap the vast shale and tar sands resources - appears. to fit the prescription. Even in an age of inflation, $88 billion over 10 years is not a trifling sum. Sheik Yamani, who after all went to the Harvard Business School and so can talk on equal terms with Chairman Garvin and the other three companies in the menage a quatre enjoying Saudi oil, will get the point.
They must now consider that a program of this magnitude outside their reach - if it is seriously pursued - will not only produce more oil but at prices below the level they hope to see it rise to. (Nobody really knows the costs of these projects because they have not yet been attempted on a bbigg enoughh scale by disinterested parties. The fact that the potential cost of shale oil is always quoted at a few dollars a barrel above the existing price of crude - regardless of where that price lies - is ground for suspicion at least.)
The threat of even a relatively modest amount of new, non-cartelized oil will spur thought in Riyadh and Rockefeller Plaza. As everybody knows, demand for oil is price-inelastic over a wide range. That is, the price can rise five times but demand will barely fall. The comforting feature in this is that inelasticity works two ways: A small increase in supply can force a substantial cut in price. It was just this that worried OPEC in 1977, and so the nations not in need of huge cash returns from oil adjusted supply accordingly - downward.
The deliberations of Yamani and Aramco, the corporate name for the menage , could alter their valuation of oil in the ground. Years before a barrel of shale is extracted, production and even price policies of OPEC might change drastically. Fears of an increased, uncontrolled supply from resources that dwarf even the fabled crude of Araby could turn the price curve down and the supply curve up. The boys might decide it is better to get it while the getting is good.
To be sure, much could happen before the Carter program is realized. The oil companies do not lack for friends on Capitol Hill, as the weakened windfall profits bill demonstrates. The Energy Security Corporation could well become their creature, an Energy Department instead of a TVA. The companies, especially Indiana Standard, have already demonstrated their conspicuous lack of success in extracting shale oil. They have little or no interest in expanding supply outside their reach. Indeed, they own some portion of non-traditional oil sources, and have been peculiarly unsuccessful in exploiting them.
There is no special magic in entrusting a government with the exploitation of oil. The Norweigans do it well, the British less so and the Mexicans very well indeed - surviving an attempt by the great companies to throttle them in the '30s by nationalizing their fields. But at least to begin with, the Energy Security Corporation will not have a vested interest in failure, and that is something. It must be watched closely, however, lest - like the Mexicans, Norwegians and British - it develops an oil company mentality over time and comes to believe that the best price is a higher price.
Despite these caveats, it is clear that an important turn in thinking has been made in the White House. The economics of scarcity is making room for the economics of abundance, at least in speeches. This is an event that only shareholders in the great companies need regret. CAPTION: Picture, A coal gasification pilot plant.