The Economic And Energy Effects Of Alternative Oil Import Policies PDF Download

Once again, the United States has passed through a period of disruption in international oil supplies, with sharp price increases. Again external events--their effects magnified by our domestic policies--have impinged on the lives of large numbers of people. There is heightened awareness of an energy problem, though there is little consensus about its nature, how bad it is, or what should be done. Conflicting claims are made about who bears responsibility; and there are competing proposals for solutions, ranging from import quotas and rationing to large investments in synthetic fuels. In this paper we examine both the nature of the problem and a number of proposed solutions. Unfortunately, there is tremendous pressure to make decisions. There is no time for major new analysis. In this review, therefore, we sacrifice thoroughness to speed, presenting our best view of what seem to be the most important issues and choices. Moreover, this paper is incomplete: there are important questions not now before the Congress, and presumably there are good proposals that have not yet made their way to the head of the legislative agenda. But we hope this review may serve a larger purpose in providing a basis for analyzing the changing situation now before us and evaluating proposals being made. Such a perspective--in which the risks and benefits of alternative courses of action are the central focus of discussion--seems to us superior to the absolutist rhetoric of the moment, in which it is worth any price to meet what is viewed as a critical threat to the country. In Section 2 of the paper, we review the nature of the energy problem. There are many views of this issue, and analyses are frequently framed to suggest a specific solution. This paper tries to avoid working from an answer back to the problem, bit that judgment will be up to the reader. For those who have no stomach for further problem analysis, you may wish to go directly to Section 3 for comments on current policy proposals. We discuss two aspects of the energy problem: the economic and the political (including national security and foreign policy). While these are not truly separable, it is important to understand that solutions responding only to one element may have significant adverse impacts on the other. In the discussion on national security and foreign policy, we assess the policy strategy of oil import reductions. Attention is given to the nature of the security problem, and how it presents itself. Then we probe the question: If imports are reduced, are there significant national security benefits? In reviewing the issue, we observe three kinds of security problems: accidents (Iran), embargo and short-term cutback, and price as a weapon. Finally we suggest that our policy needs. to maintain a careful balance of economic and political goals. Import reduction is important for economic reasons, and actions to speed that reduction are appropriate. However, we should not spend a great deal more to avoid imports than we would have paid for the imported barrel. In Section 3, with those criteria in mind, we review various measures now before the Congress. During the discussion, the difficulties and complexities are mentioned, and some suggestions are tendered. The following table summarizes our reactions.