Conservation Weakens
Trade-deficit figures for September show that Americans spent “only” $3.6 billion overseas on oil and refined petroleum products, down from $4.4 billion in August. That $800-million difference, as it happens, accounted for just half of the improvement in the month-to-month deficit. Does this signify a trend in the making? Hardly. Energy experts point out that September’s oil-import bill looked good only in comparison to the unusually heavy buying of the previous month. What all the long-term signs point to is an increasing volume of foreign-oil purchases, undercutting efforts to reduce the trade deficit.
Oil is currently responsible for about 30% of that $165-billion-plus deficit. Oil imports have averaged 6.5 million barrels a day this year. That’s about 40% of total consumption. By the mid-1990s, at current trends, between 48% and 60% of U.S. oil demand will be met from overseas. Why this swelling appetite for foreign oil? One reason is that the United States, a high-cost energy producer, has lost more than 1 million barrels a day of production in the last few years as cheaper oil made marginal wells uneconomical to operate. A second reason is that that U.S. demand for oil, spurred by lower prices, has risen by about 800,000 barrels a day over the last two years.
To be sure, the energy conservation adopted under the pain of earlier oil shocks hasn’t disappeared. But progress in making new gains has slowed, not least because of the Reagan Administration’s utter indifference to any conservation incentives except those imposed in the marketplace. Market forces, of course, shouldn’t be scorned. Higher prices are a proven way to discourage demand. That’s precisely why, in this period of consumption-encouraging lower prices, Congress should seize the initiative and impose a major boost in gasoline taxes.
Three immediate and valuable purposes would be served by the tax increase. Conservation would be given a boost, the trade deficit would decline, and revenues would rise, helping to reduce the budget deficit. Not many simple steps are capable of providing such great rewards. All that’s needed is the political courage to act.
