IN THE 1970s the dramatic price shocks associated with the Arab-Israeli war of October 1973 and the Iranian revolution of 1979 resulted in an "energy crisis." Long lines at gas stations vividly symbolized the problems of adjusting to temporary shortages of oil. Even though that particular crisis is over and gas lines are unlikely to reappear in the 1980s, energy security remains an important issue.
In 1980 the Brookings Institution and Resources for the Future began a systematic program of research, supported primarily by the Department of Energy, to examine the economic and political dimensions of energy security in the 1980s. This study draws extensively on that research and looks ahead to how the energy problem is likely to develop in the rest of the decade. Douglas R. Bohi, a senior fellow at Resources for the Future, and William B. Quandt, a senior fellow at Brookings, have brought together their respective economic and political expertise to address this question.
According to Bohi and Quandt, energy markets in the 1980s are expected to work more efficiently than they did in the 1970s, with less risk of large and enduring price shocks. The authors caution, however, that political developments, especially in the Middle East, could still lead to disruptions of oil supplies and a rise in prices. But once the disruptions have ended, consumers should expect prices to decline.
This study emphasizes that the energy security problem of the 1980s will differ significantly from that of the 1970s. Lessons from the past are not always a good guide to the future. The authors do not, however, suggest that the energy problem is behind us and that markets alone can be left to work their magic. Diplomacy, military preparedness, and public policy still have a role in reducing the risks of future energy crises and in dealing with the consequences of oil-supply disruptions.
The authors have benefited from the comments of their colleagues at Resources for the Future and Brookings. In particular, thanks go to Harry Broadman, Joel Darmstadter, Joy Dunkerley, Edward R. Fried, Ed A. Hewett, Hans Landsberg, Richard P. Mattione, Thomas L. McNaugher, John D. Steinbruner, and Michael Toman. Ted Moran and Lincoln Gordon reviewed the manuscript and made useful suggestions. Ruth E. Conrad served as administrative assistant to the energy and national security program and typed the manuscript; Gregg Forte edited it; and Alan G. Hoden verified its factual content.