Can America curb its addiction to fossil fuels? A decade ago,
in the wake of the Arab oil embargo, the worry was dwindling world
supply. Today, fears focus on demand.
Oil, gas and coal will almost certainly be available in
abundance well into the next century. But warming of the atmosphere
caused by burning these carbon-based fuels in ever-growing
quantities - the ``greenhouse effect'' - could prove catastrophic to
the world economy.
And while there may be plenty of opportunities for conserving
energy and switching to non-carbon fuels, a new study by Donald A.
Norman, an economist at the American Petroleum Institute, suggests
that the costs of adjustment will be high.
When oil prices took off in the 1970s, energy consumers went on
a crash diet. Cars were downsized, houses insulated and basic
industrial processes streamlined to reduce the proportion of heat
going up in smoke. All told, the energy Americans use to produce a
dollar's worth of gross national product has declined by 27 percent
That speedy fix, combined with a robust supply response from
leading oil-exporting nations, made fools of energy Cassandras who
forecast prices as high as $100 a barrel by 1990. And it left
policy makers with the comforting impression that, should necessity
dictate, the economy could always pull off another conservation
Perhaps it could, Norman argues. But his statistical
extrapolation suggests that it would not be easy. Norman estimated
the demand for energy over the last 38 years, relating consumption
to both prices and GNP. He then projected the increases in energy
prices needed to contain consumption while the economy grows at a
historically plausible rate of 3 percent annually.
To induce sufficient conservation to hold energy use to 1987
levels in the year 2000, the average price of all fuels would have
to rise from the current per-barrel equivalent of $13 to a whopping
$38. To manage a 10 percent cut in energy use over the same period,
a not-unthinkable goal if poor countries are to be given leeway to
consume more fossil fuels as they industrialize, the price faced by
consumers would have to jump to $80.
These numbers, implicitly confirmed by the Energy Department's
own long-term estimates of demand, are not quite as alarming as they
appear at first blush.
They are not forecasts of prices likely to prevail in private
markets - virtually every economist agrees that the world would be
awash in unused oil production capacity if energy prices rose so
sharply. Thus, unlike the oil shocks of the 1970s, the adjustment
would not require the transfer of wealth from energy-consuming
nations to producers. …