The Case for Conservation
Ask people what imports account for the U.S. trade deficit and they are likely to name cars from Japan, video cassette recorders from South Korea, textiles from Taiwan, shoes from Brazil, maybe even cheese from Finland and pickled peppers from Greece. Chances are what they won’t think to mention--evidence of how far Americans have thrust the matter from their minds--is oil. Yet foreign oil, flowing into the United States from Canada and Mexico, from Venezuela, Saudi Arabia and Nigeria, from a dozen other countries including even China, makes up a large share of imports and so of the trade deficit. The problem, serious already, is inexorably fated to grow worse.
As recently as two years ago foreign oil met only 31% of U.S. oil needs, about the same as in 1972. Now 4 out of 10 barrels of oil are imported, with the rate of growth in consumption pointing to a 50% dependency by the early 1990s. That would put this country right back where it was 10 years ago, just before the revolution in Iran set in motion the events that pushed oil prices up near the $40-a-barrel mark and brought on a crippling international recession.
Cheaper oil--and for the last three years or so the price of oil as measured in constant dollars has been remarkably low--feeds the appetite for more oil. U.S. oil consumption in the first half of this decade fell, partly because of conscious conservation measures, partly because of the recession-induced slowdown in economic activity. But in 1986 oil consumption turned around, rising by 3% that year and by 2% more in 1987. This year a further rise is expected.
Simultaneously, domestic production has fallen since 1986 by an average of 700,000 barrels a day. No one thinks that this lost production can bereplaced, or that readily accessible alternatives will be found to fields that are inexorably playing out. About the only potentially promising sites left to explore are expensive and environmentally risky areas on the outer continental shelf. To be sure, there have been warnings raised ever since the 1920s that the United States was in danger of running out of oil. This time the predictions finally seem to be coming true.
So the trade deficit continues to be fed by rising oil imports. In January those imports came to 214 million barrels, costing $3.6 billion and accounting for 29% of the trade defict. In February, a shorter month, they rose to 233 million barrels, costing $3.8 billion. The average price of a barrel of imported oil in February was $16.42. The Organization of Petroleum Exporting Countries is desperately trying to fix prices at $18 a barrel. If it succeeds the nation’s oil bill--and the deficit--will go up that much more.
Certainly there’s no secret about what has to be done to slow the nation’s rising and costly reliance on foreign oil. Conservation, which essentially means using energy more efficiently, must again be recognized for the national priority it is and not--as the Reagan Administration has since the day it took office--as a dirty word. Incentives to develop alternative fuels are needed. So are disincentives to cut oil use. The best wouldbe a sharp boost in the gasoline tax, a stepthat would have the threefold value of cutting demand, raising revenues and lowering the trade deficit.
The nation is not far from the time when its imported oil bill will reach $50 billion. The choice is either to act soon to curb that prospect or see the bad old days return with a vengeance.
