IT IS SLOWLY dawning on the world that the two oil shocks of the 1970s inflicted far deeper damage than any original estimates suggested. At first, economists looked on that original gigantic price increase as simply a loss of purchasing power, like a tax -- a serious setback, but transient. Currently, after a second round of increases three years ago, people have begun to perceive a range of further consequences, more ominous and probably irreversible. There has been an enormous shift of wealth away from the industries that consume energy toward those that produce it. That is related to the decline of many of the traditional basic industries, not only in this country but in Europe and even Japan. The revolution in oil prices was the original cause of the tremendous growth in foreign lending that now threatens the stability of the international banking system.
Having suffered two of these shocks, does the world have the wit and the will to foresee and avoid a third? The International Energy Agency, to which most of the industrial countries belong, has now published a new edition of its World Energy Outlook, probably the most sophisticated and complete guide in print to the possibilities ahead. It constitutes, as the lawyers say, due notice. With this book in circulation, people can't say that they have not been warned.
The IEA expects a slack market in oil for the next several years -- barring political surprises in places like the Persian Gulf. The years of slack are going to be dangerous for the industrial countries, the IEA suggests, because declining prices will make it easy for everybody to get careless again. Then, sometime around the middle of this decade, economic growth is likely to tighten markets again with a snap because -- crucial point -- the supply of oil is sharply limited.
But the IEA conveys a double message. If it is a warning, it is also a reassurance that the industrial economies have shown far greater flexibility and capacity to adjust under stress than anyone would have supposed in 1973. Energy consumed, in relation to industrial production, has dropped by more than one-fourth in the past decade. While economic output has risen, oil use has dropped. Those trends can be pushed a great deal further, and the IEA, as technical adviser to the governments it serves, offers sensible guidance for policy.
Some 30 million people are now unemployed in North America, Western Europe and Japan. That inordinate number represents the costs of mismanagement of past energy shocks. How is the industrial world now to steer through the next decade with economic growth high enough to get people back to work, but without generating still another oil crisis? It's a sort of collective intelligence test. It can't be done by whistling vaguely and looking the other way, in the manner of the Reagan administration. But the IEA makes a convincing case that it can be done by governments that bring skill and resolution to the job.