Into the Energy Abyss

RONALD REAGAN won't like Energy and Security one bit. Harvard's new study of how the United States should cope with energy emergencies calls for the U.S. to overhaul all its energy policies-and many of the book's first 5000 copies were quickly dispatched last month to Washington policymakers empowered to do just that.

But Energy and Security's demand-side economics and long-term strategies for forestalling crises won't square with the president-elect's laissiz-faire philosophy and gunboat diplomacy. You can bet his staff will whisk the study out the White House doors in less time than it takes to say, "I paid for this microphone."

That's unfortunate, because Energy and Security deserves very serious consideration. Its 14 contributors-all energy and foreign policy experts-assail current energy policies as unwise and even counterproductive and see dire results for national security and world peace if the U.S. fails to revamp its strategies.

"Nearly two-fifths of the oil consumed by the free world's economy is vulnerable to terrorism, accident, warfare, or extortion," Joseph S. Nye-professor of Public Policy and a co-editor of the study, argues on the book's first page. "The sudden loss of Persian Gulf oil for a year could stagger the world's economy, disrupt it, devastate it, like no event since the Great Depression of the 1930's." It is a prediction he and his fellow contributors back up with some very scary statistics.

If, for example, the West were to lose Saudi Arabian oil for a year, U.S. GNP would drop $272 billion, while inflation would skyrocket by 20 percent and unemployment would jump by 2 per cent. And if a war, natural disaster, or sabotage were to cut off all Persian Gulf oil, the GNPs of the U.S. Europe, and Japan would plummet by 13,22, and 25 per cent, respectively. These catastrophes could cause a wholesale shifting of alliances as Western nations pleaded, or fought, for oil-and, the authors claim, could prompt a global war as nations scrambled for diminished oil supplies. Not a pleasant picture.

Yet they correctly stress that such a frightening scenario is more likely today than ever. Between the two energy scares of 1973 and 1979, America's dependence on oil imports actually climbed 25 per cent. And though imports have boomed, more than two of every five Americans still believe the U.S. is energy self-sufficient, according to a Gallup poll last winter.

Nor, they argue, should the U.S. count on emergency supplies from Canada or Mexico. Canada is itself increasingly dependent on Persian Gulf oil, and Mexico's energy resources remain largely untapped. Her leaders seem unwilling to dole out oil to the superpower to the north, whose reputation in Mexico for ruthless imperialism lingers still. As contributor Kevin J. Middlebrook '72 notes, "The high political sensitivity of this issue would make it difficult for Mexico to sustain any long-term commitment." So until widespread use of synthetic fuels becomes a reality-unlikely until after the year 2000-the U.S. can only pray that its Persian Gulf sources remain unimpeded.

The relatively stable oil prices since the 1979 crisis may have lulled Americans into complacency, but the authors repeatedly-and aptly-stress that any number of international tensions could spur a new energy catastrophe here in a matter of mere weeks. "The legion of threats to oil supplies is ominous. The potential for the unexpected is very great," according to contributor Gray Samore.

Their recommendations don't stop there. Greatly expanded strategic reserves and private stocks of oil-managed internationally, for the first time-would ease the threat of Middle East embargoes by allowing allies to draw down stocks. A "disruption tariff," imposed the moment imports seemed threatened, would steel U.S. consumers and muffle and embargo. Diversifying Western imports would also weaken its impact. Standby lines of credit for importing nations would ease inflation's increase in the aftermath of a cut-off. And coordinated international demand restraint and stockpile sharing, run by an effective international agency, would spur consumer solidarity against OPEC and equalize Western suffering.

Happily, the authors of Energy and Security are more than doomsayers predicting an oil-based global cataclysm. In detailing how current energy tactics have actually exacerbated U.S. vulnerability to oil cut-offs, they recommend sweeping changes aimed at preventing and easing future energy shortfalls. Some proposals are more complex or expensive than the authors acknowledge, but they also seem great improvements over current backfiring U.S. strategies.

One of these strategies, price controls on domestic oil and natural gas-imposed to pacify a price-conscious public-has effectively discouraged U.S. production, necessitating foreign imports just when they most threatened U.S. security. Thus, imported oil's share of U.S. consumption boomed, reaching a peak of 47 per cent three years ago. "The painful 1973 Arab oil embargo seemed to have taught us nothing," Nye writes. Nor has America learned the lessons the 1979 Iranian Revolution's oil curtailment should have taught, they emphasize.

TOREDUCE this crippling dependence, they advocate swift decontrol of prices and demand reductions through conservation. But unlike rightwing proponents of decontrol, they are aware at least of equity considerations, and propose a huge windfall profits tax of up to 90 per cent to slash Big Oil's potential profits.

This "market solution" would eliminate the mammoth gas lines of past shortages by evening up supply and demand at sharply higher emergency prices. And by rebating windfall profits tax revenues to all households, not just car owners, they argue their plan would be substantially more progressive than systems conferring rebates on car owners only. Nor, they argue, would it cause the immense paperwork and fraud inevitable in proposed gas rationing schemes, which "will disrupt lives of millions of Americans."

They call the raging Iran-Iraq war the most likely such spark, but cite others-including domestic revolt in Saudi Arabia, or the use of the Arab oil weapon again in another war with Isreal-that could slash U.S. energy supplies drastically, creating longer gas lines and higher prices than ever. Such gloomy scenarios may sound improbable, but don't dismiss them: the authors accurately forecast the Iran-Iraq conflict as likely weeks before it began.

Should these steps fail to protect the U.S. and its allies from a severe, sustained oil interruption, the study says, strengthened military forces in the Gulf could step in to protect American interests. But they wisely counsel intervention as only a last resort-and a questionable one at that-and place more emphasis on supplying arms to pro-U.S. Gulf nations and on deterring cut-offs by non-military strategies, including trade partnerships.

The study is by no means flawless. It occasionally perceives the West as too monolithic, underestimating domestic factors that make Western unity unrealistic on schemes like shared stockpiles and mutual demand cutbacks. It seems vague in detailing what policies the U.S. can employ to pacify OPEC nations and forestall another use of their potent oil weapon. And its prescription for per-capita tax rebates of windfall profits tax revenues, though seemingly equitable, would crush low-income families required to use cars to get to work.

Energy and Security is not particularly scintillating: its chapters and paragraphs are long, its charts and graphs unending, and its language often turgid. ButEnergy and Security is also a very important book, one that wisely prescribes largely peaceful strategies for averting another all-too-likely oil crisis. If you'd like to know what the U.S. should be doing to lessen the frightening possibility of an oil war, then you may find Energy and Security worth reading. Too bad Ronald Reagan won't.