Since the 1970s, the Western nations have faced three major threats to oil supplies. The most recent threat finds us all less vulnerable than we were in 1973, when the Organization of Petroleum Exporting Countries first imposed an oil embargo. Yet we, and particularly the United States, have not since found the will to reduce substantially our oil dependence.
Here we are in 1990 with troops deployed in the Gulf states and oil prices approaching $30 a barrel (at the height of the first embargo, prices reached $40 a barrel). The unpredictable consequences of military action and the very predictable economic consequences of higher oil prices loom large on the horizon.
What is so disturbing about our current fix is the recollection of missed opportunities. In 1975, in his State of the Union address, President Ford proposed to deal with a future embargo. He outlined a massive effort to increase domestic energy supplies of oil, gas, nuclear power and coal, in order to reduce foreign oil imports by as much as 1 million barrels daily. His proposal also focused on a broad range of conservation and emergency supply measures.
Congress listened politely and in the end did move, at snail's pace, to deregulate prices and pass a small number of other energy measures. But with the passing of the crisis, neither Congress nor public opinion could be further stirred to enact the coherent national energy policy we needed then and need more urgently now.
I remember vividly in early 1976 at the end of a particularly frustrating week of dealing with the politics of energy asking for a private meeting with the late senator Henry (Scoop) Jackson, who was chairman of the Senate Energy and Natural Resources Committee. There I was, hat in hand, asking the senator what we could do to reignite national concern about our vulnerability to oil imports. His answer was, simply: "Frank, do you know how to make another energy crisis?"
Do we have another potential energy crisis on our hands? You bet we do.
In the short term, however, the threat to our immediate needs is lessened by our action to protect the remaining oil flowing from the Middle East in addition to the supplies and sources elsewhere in the world. As a nation we are more energy efficient and conscious, using as much energy as we did a decade ago in an economy a third larger. Then there is one of the successes of the Ford program, the Strategic Petroleum Reserve of more than 600 million barrels.
But for the long term, there is continuing potential for crisis. The United States sits on enormous reserves of natural gas and coal and nearly 27 billion barrels of oil reserves. Yet domestic oil production is at its lowest level since the 1960s, while we import more than 50 percent of our oil and, at this rate, could import two-thirds by the year 2000. Nuclear power development is moribund; synthetic fuel production by and large is currently uneconomic. The crisis is not one of available resources. It is more grounded in complacency and lack of consensus needed to support a national energy program for the 21st century and to make the hard choices required to formulate an effective program. The prescription for energy security lies in clearing these hurdles:
Resist the destructive temptation to use government price or supply controls. We learned in the 1970s that price controls contribute to the producers -- not to the solution.
Unravel the crazy quilt of restrictions -- whether federal, state or local -- that stand in the way of increased oil and gas production, particularly for offshore drilling and leasing of federal lands. Investment incentives to production should be encouraged.
Strengthen our ability to fulfill expanding electricity needs. While utility regulation, particularly rate setting, remains the province of the states, at least enact federal legislation to expedite energy facility applications and prevent their nullification by local governments. The promising technologies for coal burning (with nearly 270 billion recoverable tons in the ground, coal is our largest fuel supply and most-used source of electricity by utilities) that meet today's stricter environmental standards also must be encouraged. Unless increasing demand for electricity is satisfied, we will be facing brownouts verging on blackouts with increased frequency by the end of the decade.
Come to grips with the need for a realistic policy to expand nuclear power. In his 1975 message to Congress, President Ford proposed building 200 nuclear power plants by 1985 on a standardized basis, a method used to good effect by, for instance, France. Standard design legislation would overcome many safety questions and speed construction.
Address the very real dangers of energy production and use to the environment in ways that do not cripple growth but encourage new incentives and technologies. It appears to me that there is a growing dialogue and communion of goals between environmentalists and producers that may build a consensus and support for a balanced approach for energy development. But any new national environmental moves must be examined in the light of a sensible, as well as balanced, long-term energy program. Underlying any plan to reduce our energy dependence is the reality that efforts to enhance our energy supply require long lead times -- as much as a decade in the case of oil. The program proposed by President Ford for implementation by 1985, after all, was generated in 1975. Had most of it passed, it must be said, we would not be sending troops to the Gulf in 1990.
However we resolve the critical steps toward energy security -- and tomorrow is not a day early to begin taking those steps -- there is one more salient ingredient in the mix of government, private enterprise and environmental interests directed at the problem. That ingredient is the marketplace, and the best efforts toward reaching our energy goals cannot ignore the power of pricing their value. In the end, the price of development and production will be the best regulator of supply and of conservation as well.
It is, to say the least, unclear how the current crisis in the Gulf will be settled; the universal hope is, of course, a political solution. Much clearer is the solution to energy security in the next century and beyond -- more commitment of the national will to energy independence and a swift end to our national complacency.
The writer, chairman and chief executive officer of Smith Barney, Harris Upham & Co., was the senior official for national energy policy in the Ford administration.