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ENERGY SELF-SUFFICIENY: AN ECONOMIC EVALUATION

This study examines the responsiveness of today's complex energy system to those changes in the supply of fuels and in the demand for energy which are possible by 1980 through present and foreseeable technology, and the effect on both changes in the prices of fuel and of energy. Estimates available from various studies show that by 1980 the market- clearing price on oil with no net imports (or nearly none) will be approximately 6 to 7 dollars per barrel. Other studies indicate that the price will rise as high as 15 dollars per barrel before self-sufficiency is attained. It is extremely important to reduce the uncertainties in these predictions, insofar as it is possible to do so, since government policies vary considerably according to the estimated price per barrel. At 6 dollars per barrel government policy would be to remove unnecessary bottlenecks to the adjustment process and otherwise do nothing, whereas at 15 dollars per barrel a do nothing policy would have undesirable implications and unacceptable effects on the domestic economy. The approach taken in this study is to combine studies of supply for specific energy resources with overall demand forecasts to estimate "total supply and total demand" for energy in the domestic economy. The studies used imply different levels of responsiveness of supply and demand to price, and the resulting estimates define a range of prices likely under energy self- sufficiency. Chapters 3 through 5 are devoted to specific fuels, and the overall supply and demand estimates for 1980 are summarized in Chapter 2. In looking at the price of oil imports, which are an alternative to self-sufficiency, there appears little basis upon which to predict any specific oil price over the next ten years. As discussed in Chapter 6, the critical uncertainty concerns the ability of the Persian Gulf states to restrict production so as to increase the price for their sales and the sales of other countries not taking part in output restriction. Analysis can only be concentrated on the range of possible quantities and prices of oil and gas from abroad. Two areas specifically examined in the context of this study are the cost of synthetic fuels and the expansion capacity of the construction industry. Data currently available on processes for liquefaction or gasification of coal are summarized and ranges of likely costs for each are presented. While they do not promise significant supplies by the early nineteen-eighties at prices comparable to those for fossil fuels, there may be some change that these processes can make at least modest additions to domestic energy resources in this period. Tremendous pressures are foreseen on particular segments of the construction industry as the process of scaling up the domestic fuel supply proceeds. Also, these problems in construction may be excerbated by problems in the transportation of fuels. This study indicates that further considered of this "scaling" effect on industries serving the energy sector of the economy is required. In conclusion, it is seen that many uncertainties make it extremely difficult to anlayze any policy favoring self-sufficiency in energy. This study, however, is a beginning in providing an understanding of energy issues involved in answering the question of whether the goal of self-sufficiency can be achieved and, if so, the price its achievement might entail for the nation.

  • Corporate Authors:

    American Enterprise Institute for Public Policy Research

    1150 17th Street, NW
    Washington, DC  United States  20036
  • Publication Date: 1974

Media Info

  • Features: Appendices; Figures; References; Tables;
  • Pagination: 89 p.

Subject/Index Terms

Filing Info

  • Accession Number: 00084962
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Apr 22 1975 12:00AM