In a dramatic response to rising oil prices and the threat of worldwide shortages, the United States will ask the member nations of the International Energy Agency today to agree to reduce oil consumption by 3 percent to 5 percent, The Washington Post has learned.
The action is intended in part to try to head off another major oil price increase, which could come at a scheduled meeting of the Organization of Petroleum Exporting Countries March 26 in Geneva.
The proposed reduction is expected to trigger a seris of mandatory and volumtary conservation measures in this country. They include weekend closings of gasoline stations, restrictions on temperatures in nonresidential buildings and stricter enforcement of the 55 mile-per-hour speed limit, as early as this summer, according to U.S. officials.
Despite this, strict gasoline rationing should not be necessary, officials said.
Tha proposal to the IEA represents the administration's most significant response to the loss of more than 5 million barrels a day of Iranian oil exports and to a string of price increases announced in recent days by individual members of OPEC.
The main target of the U.S. proposal is prices.Administration officials fear OPEC might raise sharply its official price of $13.34 a barrel if industrial nations take no action to cut consumption before the March 26 meeting.
In congressional testimony yesterday, Energy Secretary James Schle-singer warned that OPEC prices easily could rise to $16 to $17 a barrel soon and predicted that the current shortage could push the price of unleaded gasoline to $1 a gallon "within a year or so."
Full details of the agreement remain to be worked out, but the United States has received assurances from most of the 19 insustrial nations in the IEA, including Japan, West Germany and Great Britain, that they will formally accept the proposal during meetings today and Friday.
Other administration officials said the economy should suffer very little if the cut in oil use is properly managed.
But the combination of higher oil prices and reduced consumption, whether on a voluntary or a manadatory basis, will tend to generate more inflation and less real economic activity.
The worry of administration economists is that without some vigorous action, oil prices would shoot up so high that a recession could hardly be avoided. Officially, the administration predicts the economy will slow later this year, but that there will not be a recession. Many private economists think otherwise.
"The sooner we do something, the less we have to do later," said one official. "The main thing is to get in top of prices."
Alice M. Rivlin, head of the Congressional Budget Office, testified yesterday that the economic fallut from Iran's oil shutdown "could further weaken the economy and increase the risk of a recession."
If the Iranian oil shutdown continued for the rest of the year, Rivlin said, CBO estimates it would result in a loss of half a percentage point in real gross national product, and could increase unemployment by about twotenths of a percentage point, resulting in the loss of about 200,000 jobs.
President Carter has nat decided precisely which mandatory measures to use ot achieve the cut in consumption, but all of those being sent to Capitol Hill this week for congressional approval except gasoline rationing probably will be needed. Altogether, oil use will have to be cut by 600,000 to 900,00 barrels a day, administration sources said.
Since the winter heating seaon is nearing an end, the most significant oil savings this summer would come from closing gasoline stations for part or all of the period from noon Friday until midnight Sunday. DOE estimates such closings could save 246.000 barrles a day, if everyone complied.
Over the course of a full year, the restrictions on nonresidential building temperatures would produce greater savings. Winter thermostat settings could be no higher than 65 degrees, and summer st.ettings no lower than 80 degrees. Hot water temperatures generally could be no more than 105 degrees. DOE estimates these restrictions would save up to 360,000 barrels of oil a day. Summer savings would be lower since most air conditioning units are electrical, and relatively less oil is used nationwide for generating electrical power than for heating buildings.
At the IEA's last meeting in January, member countries expressed the desire to develop a concerted effort to respond to the problem of the Iranian export cutoff. "No one wanted the IEA's manatory sharing plan to be used," said a Carter official.
Under a 1976 IEA agreement, members must share available oil supplies if a shortage reaches 7 percent of total consumption.
While Shlesinger and senior State Departemtn officials in renent days have been ruling out a formal triggering of the sharing agreement, they have said some sort of conservation measures might have to be adopted.
"There are differences of view among the IEA, some want prices just to go up -- getting all IEA members to agree is not easy," Schlesinger told a Senate panel.
The real question for IEA members has been what should the target be for reducing consumption. Consultation among the members suggest the 3 percent to 5 percent range, which is expected to be pinned down by Firday. Drafting all the details of the agreement colud take up to two months, sources said.
The United States apparently would prefer reductions closer to 5 percent than 3 percent.
Because other OPEC nations have stepped up their output since Iran halted exports, the worldwide drop in production is calculated at only 2 million barrels a day, out of worldwide consumption of about 50 million barrels.
However, officials are concerned that extra production might not be continued indefinitely, particularly if Iran resumes some exports, as its new government says it intends to do.
A State Department official said that the IEA conservation measures, if adopted, would take place by "late summer -- not by early fall." The official also said that the U.S. proposal enjoys "wide support" from many of the 19 member states, including West Germany.
West Germany's support for the conservation plan is critical to its adoption, and represents a "reversal" in Bonn's position, according to administration aources. Earlier, Germany's Helmut Schmidt had favored relying simply on prices to elicit a conservation response from the industrial countries.
Congress has 60 days in which to approve the standby mandatory conservation measures sent by President Carter this week. Approval seems likely.
For instance, yesterday Sen. Henry Jackson (D-Wash.), chairman of the Senate Energy and Natural Resources Committee, declared, "Carter is embarking on a sound course in proposing madatory conservation measures."
"With the exception of the gasoline rationing proposal," he told a meeting of the Environmental Industry Council here, "the sooner the mandatory proposals are put into effect the better."