In an effort to reduce America's increasingly alarming dependence on foreign oil, President Carter proposes to remove the federal price controls that now apply to two-thirds of all domestic petroleum output. Decontrol would push the price of this oil to the OPEC cartel price-theoretically discouraging consumption and stimulating domestic oil production.Decontrol is estimated, however, to cost consumers up to $16 billion a year in higher prices for such essentials as gasoline and home-heating oil. And that enormous sum would go directly into the coffers of the major multinational oil companies. Before we fork over these billions, we need to ask some hard questions.
For our $16 billion expenditure, how much will decontrol reduce oil imports and increase domestic production? Even the White House claims decontrol will achieve only a negligible increase in domestic oil production, some 660,000 barrels per day by 1985 out of 20 million barrels per day of total U.S. consumption, just 3 percent above current use-not much help in cutting imports. Estimates by the Congressional Budget Office are even lower. And recent history suggests there might be no rise in production at all: Between 1972 and 1978, domestic oil prices jumped a dramatic 179 percent, yet U.S. petroleum output actually declined.
Will higher prices encourage conservation? The CBO estimates that by 1985 decontrol, at best, would reduce current levels of energy consumption by only 1.7 percent-again not much of a savings for $16 billion in higher fuel bills. Energy price hikes, in fact, have had little conservation effect to date: Home heating oil prices shot up 184 percent since the embargo, yet consumption actually rose 17 percent. The painful truth-abstract economic theory to the contrary notwithstanding-is that energy is so vital a commodity that price manipulation is not a sensible way to achieve conservation. Trying to solve our energy problems by sharply escalating prices in an invitation to economic and social catastrophe.
And how fairly would these higher costs be shared? Skyrocketing energy prices have already bitten cruelly into the fixed budgets of the elderly and the poor; inadequate home heating and cooling caused the deaths of several dozen elderly persons last year alone. The average poverty family now spends $1,100 of its meager $3,300 annual income on energy; that figure will rise to over $1,400 under President Carter's decontrol plan. The White House contends the poor and elderly would get a whopping $100 of special help from the proposed windfall-profits tax, but lesser seers than Jimmy the Greek know that even this half-hearted gesture will be further eviscerated. The oil companies beat it before; their favorite senators and representatives are already wheeling up their multimillion dollar artillery to do it again.
Nor will inequities be confined to the poor and elderly; the beleaguered middle class will not only see it own energy bills jump precipitously, but will foot the national bill for decontrol's damaging side effects-more welfare, greater medical costs and more support for aging parents who can no longer make ends meet.
Finally, what about inflation? Decontrol makes a shambles-or a sham-of the anti-inflation program President Carter calls his No. 1 priority. How can the president expect the public to believe in a program that sanctions exorbitant increases in essential commodities while asking workers to limit salary increases to 7 percent?
The president's proposal for decontrol is a singularly ineffective, inequitable and inflationary approach to our energy problems. If decontrol is not the answer, what is? A combination of imaginative programs and policies that require strong leadership and disciplined public response.
First, the White House should immediately place oil and gas prices under the anti-inflation guidelines, since there is no justifiable reason for treating them differently from all other basic necessities. And Congress should extend the expiration date of controls on crude oil so that producers are signaled emphatically that the United States will no longer accede to every ransom demand.
Second, the conservation measures outlined in the president's speech-enforcing the 55-mph speed limit; redirecting excess electric generating capacity from utilities now dependent on oil to non-oil fired generators; efficiency standards for building; mandatory thermostat settings and reductions in unnecessary lighting-will yield savings greater than those alleged from decontrol, yet will cost absolutely nothing.
Finally, the government should move to assert its control over the most critical sector of our national economy, rather than abdicating this control to foreign governments and to major multinational corporations, which, after all, have no public accountability and no underlying responsibility for the public welfare.
It should limit the amount of oil we may import. This might not even require rationing-because we survived the embargo without it-but even rationing could be tolerated if the public felt the burdens were equitably shared. Oil imports should be channeled through a federal import purchasing authority so that our massive buying power can be used en bloc to bargain with the OPEC cartel. And a federal fuels corporation charged with developing all or a portion of our vast energy resources on public lands would end our exclusive reliance on the private oil companies.
The alternatives suggested would give the nation an energy policy that is effective, non-inflationary and, most important, fair to all citizens. With this program, the president can build the confidence and credibility he needs. And this program, unlike decontrol, would work.