Air University Review, September-October 1976

It is a sad commentary on American democracy that we have been unable to formulate a national energy policy that effectively combines national security, optimum energy utilization, as well as economic, environmental, and social objectives. Approximately three years after the imposition of the Arab oil embargo, we give little indication of awareness of our national vulnerability to supply blockages and price escalation. In the past several years, a variety of factors, including the recession, higher prices, conservation measures, and mild winters, has held the level of energy consumption below pre-embargo levels. However, as the economy has improved and memories have dimmed, energy consumption has increased markedly. With crude oil production about 13 percent below the peak levels of 1970 and natural gas output slipping about 11 percent below 1973 levels, this increased consumption has been reflected in imports which currently exceed six million barrels per day or about 40 percent of the total. The fiat-price increases by the Organization of Petroleum Exporting Countries (OPEC) have been significant elements of the inflation which in recent years has rocked the world. In the United States, for example, the refiner acquisition cost of imported crude petroleum soared from $4.54 in September 1973 to $14.66 in October 1975, and there is little likelihood of cost reductions of petroleum in world trade in the short-term future. In fact, higher prices seem probable next year.

In 1976 the cost to the United States of imported petroleum will approximate $30 billion, compared with about $3 billion in 1970. The volume and cost of imported oil and natural gas are likely to increase at least until there is a full flow of North Shore Alaskan oil through the Alaskan pipeline. Even then we will be confronted with severe distribution problems and dwindling output in the lower 48 states. Furthermore, North slope natural gas will not be available before the 1980s, when access to pipelines may be available. In addition to the growing strain on our economy, including our international accounts, the source of these imports is potentially dangerous.

As a result of declining Canadian and Venezuelan production, our imports are increasingly purchased from Middle Eastern and particularly Persian Gulf sources.¹ Since Western Europe and Japan are substantially more dependent on Arab oil sources than we are, the entire industrial world is vulnerable to severe disruption if supplies are blocked by accident or deliberate intent. Furthermore, in the event of war involving the major powers, the task of protecting tanker traffic from the Persian Gulf to Japan, North America, and Europe would be enormous. Some buildup in supplies in the industrial countries has occurred, and International Energy Agency mechanisms exist for sharing the limited available supplies in the event of supply disruptions. These full stocks do not, however, obviate the need for an American strategic oil reserve which does not currently exist.

National security interests and common sense dictate the establishment of rational national-energy policies. In their absence, the American people will continue to live expensively and dangerously. Furthermore, conservation is the only short- term means of curtailing our growing dependence on foreign sources.

Probably because of the complexities and dilemmas involved, the energy issue has hardly surfaced in the current political campaign. In addition, the current profligacy in the use of energy suggests that the American people have only a limited awareness of the seriousness of the problem confronting the nation. To some degree this reflects lingering suspicions of the oil companies and the existence of price controls on some domestically produced oil and on interstate sales of natural gas which obscure the replacement price of these products. The net effect has been to hold average oil prices in the U.S. below world levels, reduce the total revenues of domestic petroleum producers, slow the increase in petroleum product prices to consumers, stimulate consumption, increase petroleum imports, and retard structural adjustment to higher world oil prices. Thus, the short-term benefits in terms of restricting price advances and stimulating economic activity have been at the cost of effectively dealing with the basic energy problem and the underlying national security issue.

Despite the paucity of comment in the political arena, there is a growing number of books and periodical articles on the energy issue. Volumes written by Barry Commoner; Edward Friedland, Paul Seabury, and Aaron Wildavsky; Howard Bucknell; and Lincoln Landis cover wide spectrums of the varied energy aspects.

In his latest book, Barry Commoner* chooses the role of a polemicist in what he calls "a great national debate" on the interrelationship between the American ecosystem, production, and economic systems. At the heart of our current difficulties, he finds one basic defect, the profit motive. His implied solution "at least in principle.. . is socialism." Throughout, he writes with considerable felicity.

*Barry Commoner, The Poverty of Power: Energy and the Economic Crisis (New York: Alfred A. Knopf, 1976, $8.95), 314 pages.

Few would doubt that there have been incongruities and inanities in the American economic system, but it is doubtful that they all rest as neatly at the doorstep of the profit motive as he suggests. Correcting the various weaknesses of our society should not necessitate the wholesale adoption of socialism. Furthermore, existing socialistic models are hardly encouraging, although they all may run railroads better than we do. On the other hand, the depth of the energy problem and the magnitude of the capital requirement probably will require a greater governmental role than in the past. This is particularly true in respect to the more exotic fuels.

While there are substantial reasons to question Commoner's economic formulations, he has provided a highly useful description of the technological basis of the energy problem. He lucidly explores the source, nature, values, and complications of fossil fuels, nuclear power, and solar energy. And he convincingly delineates the varying degrees of energy inefficiency in our production system. It is readily apparent that we bootlessly waste vast amounts of energy. The availability of cheap fuel may be more fundamental to this wastage than the profit-motive or technological inadequacies. He is highly critical of the nuclear energy program in terms of its thermodynamic efficiency, its by-product dangers, and its ultimate financial costs. He is also dubious of the net values of synthetic fuels derived from coal. In fact, his environmental strictures in respect to nuclear energy, coal, and its derivatives would, if determinant, severely limit energy availabilities. In his perfervid advocacy of solar energy, he is far more optimistic about its near-term values on a nationwide basis than most other energy advocates. Similarly, his estimates of oil and natural gas resources in the lower 48 states are substantially greater than those of the federal government. Only time and adequate energy prices will prove who is correct; but if we do not bring additional domestic fossil supplies to the marketplace, we will be confronted with increased dependence on foreign sources. In view of the critical nature of natural energy to our future, a "great national debate" is a democratic requirement. His views merit consideration.

The books by Friedland et al., Bucknell, and Landis have a common threadline of concern about the assurance of continuing foreign supplies. In a scholarly manner, Lincoln Landis* explores the development of Soviet Middle Eastern and oil policies, including Soviet efforts to penetrate the Middle Eastern oil markets and to stimulate Middle Eastern resentments against the involvement of the industrial countries in their oil industries.

*Lincoln Landis, Politics and Oil: Moscow in the Middle East (New York: Dunellen Publishing Company, 1973, $15.00), 201 pages; idem (Port Washington, N.Y.: Kennikat, 1976, $12.95), 201 pages.

In so doing, he systematically utilizes Soviet documentation. Unfortunately, his study predates the 1973-74 oil embargo. It can be supplemented, however, by referring to the publication of the Center for International Studies of the University of Miami, entitled The Soviet Union and the October l973 Middle East War: Implications for Détente. In combination, they highlight the extent of Soviet interest in the Persian Gulf area and the potential danger of the growing dependence of the industrial countries on oil from there.

Bucknell’s book* contains comments and conclusions on military strategy that are more controversial than his succinct outline of our energy problems. In respect to the latter, he correctly concludes that we will remain heavily dependent on imported oil from the Persian Gulf for years ahead. He foresees increasing competition between the Soviet Union and the industrial countries for those supplies. This competition, in his view, raises distinct possibilities of military conflict for which the U. S. Navy is deemed to be poorly prepared. To husband our limited naval strength, be advocates the essential abandonment of the Mediterranean and bases west of Guam. Japan must protect its own ocean traffic. On the assumption that the American people are unprepared to finance balanced forces, he advocates a naval buildup at the expense of the Army and tactical air forces. Furthermore, to mitigate the effects of numerical ship shortage, he calls for a rapid transition to nuclear propulsion systems. In my view, his strategic proposals would seriously weaken NATO and the political-economic cohesion of the triad of Western Europe, North America, and Japan, which in turn could increase the chances of major power conflict.

*Howard Bucknell III, Energy Policy and Naval Strategy (Beverly Hills, California: Sage Publications, 1975, $3.00 paper), 68 pages.

Friedland, Seabury, and Wildavsky** view with appropriate concern the worldwide consequences of the energy problem. In essence, they endeavor to "comprehend what is happening, to predict what might happen, and to suggest preventive measures." The result of their efforts is mixed. In the first place, there is a disjointed aspect to the flow of their argumentation, possibly reflecting the multiple authorship. Second, the book is replete with hyperbole. Finally, the oil problem is a grave foreign policy issue, but it is doubtful that it should be encompassed under the title of The Great Détente Disaster.

Separately and collectively, the authors cited have helped to delineate the nature, danger, and complexity of the energy problems confronting us. Their message rings like a firebell in the night, warning that the basic security of the Industrial Triad--Western Europe, North America, and Japan--is increasingly dependent on the unimpeded flow of oil from the turbulent Persian Gulf area.

The flow could be impeded or interdicted by the decision of the oil producers, by sabotage, or by direct military action. In the latter sense, we should recognize the potential consequences of the formidable air and sea power of the Soviet Union. The vast military, political, and economic strength of the Free World alliance is far too dependent on this vulnerable source of oil. This is an untenable situation. The firebell calls to us to put our energy house in order. Will this great democracy listen?

1. According to the Federal Energy Administration, the U.S. at the end of 1975 was receiving 81.5 percent of its total oil imports from OPEC countries with nearly half coming from Arab sources. By mid-1976 these percentages were higher.

Whatever each man can separately do, without trespassing upon others, he has a right to do for himself; and he has a right to a fair portion of all which society, with all its combinations of skill and force, can do in his favor. In this partnership all men have equal rights; but not to equal things.

Edmund Burke:
Reflections on the 
Revolution in France 1
790.