The president's determination that oil imports shall never exceed 1977 levels raises the question: how to see that they do not. He cannot just wait until imports reach 365 times 8.6 million and stop them until New Year's.
Solar, synthetics and mass transit will have impacts delayed in years, not months, and of unpredictable size. The president is going to need, at least on quick standby, measures that are prompt, predictable and substantial -- measures that work directly on the purchase of oil.
All the measures worth considering can be divided into those that rely on prices to let market channel products into their highest-value uses, and those that require comprehensive allocations by state, by product and by user, coupled with price controls. Most Americans should by now prefer the known evils of higher prices to the mischievous effects of centralized allocations.
And among the measures that work through prices, some would fix a quantity and let the market find the price, others would impose a surcharge and adjust it until the quantity is right. Selling import licenses by auction can guarantee that imports do not go over the ceiling; imposing a duty and adjusting it with experience is more flexible but may get imports on target only slowly. Debate over these alternatives ought to be mainly on the rigidity or flexibility with which the target should be met and on the likely reactions of OPEC.
But a funny thing happens when, through either duties or the sale of licenses, we try to make imports more costly to refineries. It happens through the "entitlements" scheme, the scheme that makes the cost to refineries of domestic and imported oil just about the same, despite the fact that the price paid for imports is well over $20 and for domestic oil closer to $12.50. Refineries that purchase imported crude get free "entitlements" that they sell for cash to the firms that mainly buy cheaper domestic crude, the result being that refineries pay net prices that average out about the same. So a $10 import duty or license fee would show up simply as a $4 or $5 tax on any purchase of crude oil.
Once that is recognized, we can skip for a while the search for new machinery to raise the price of oil. The president already has the machinery. It is known as "decontrol." It has exactly the same effect on refinery costs as fees or duties. Both go into the same average. The entitlements system guarantees it.
The president has told us that he wants decontrol. To slow the impact, he proposed taking two years. The recent OPEC increases enhance the effect if the president goes ahead on schedule.
Somebody may propose that decontrol be slowed, now that the impact will be greater. But the president cannot listen if he means what he said about imports. It makes no sense to charge an import fee to raise the average price while holding back on decontrol to lower it. The last thing he needs is two policies that cancel each other out!
Anything he can do with import duties he can do, up to a point, with decontrol -- up to a pretty impressive point. And decontrol gets rid of controls! If the president wanted it in April he should still want it now. If he wanted it slowly and now needs prices up faster, speed up decontrol or at least not slow it down.
Decontrol does not invite OPEC retaliation: An import fee risks suggesting that they save us the trouble by raising prices and letting the funds go to their own treasury. But decontrol, even with the publicized "windfall tax," merely means that U.S. refineries get closer to paying the OPEC price for OPEC oil.
The president has the instrument. Only when he has used it up will he need -- if more proves needed -- to find new ways to raise further the price of crude oil.
In applauding the president's resolve that imports never exceed the high levels recently experienced we should keep three sobering thoughts in mind. First, it does mean less fuel, soon if not immediately, and higher prices and some boost to inflation. Second, 8.6 million barrels a day is small only by comparison with the larger figures often projected for the late 1980s; it is still an enormous dependence on overseas supplies.
Third, and most sobering, neither holding imports to the president's ceiling nor reducing them even further will come close to eliminating the dangers in the world's increasing dependence on 20 million barrels of oil a day bottled up in a remote gulf, with a narrow mouth, in the world's most unstable region, tucked below the Soviet Union. Those dangers transcend anything that the United States can accomplish with energy policy. If there's a crisis, it's there, not in the gas lines.