It is now generally accepted that the energy problem of the 1980s was no passing phenomenon but marked the end of an era of cheap coal and oil, and the transition to high-cost energy. In real terms the price of oil is now more than five times what it was in 1972, and seems likely to continue to rise. Now that energy is no longer cheap, it ranks in importance with the classical factors of production--land, labor, and capital--and its supply and cost must be given due weight in the plans of economic managers at all levels. These considerations apply not only to forms of energy that are traded internationally but also to energy that is produced and consumed domestically, and to traditional as well as commercial energy, because the prices, availability, and consumption levels of all forms of energy are closely related. Commercial energy includes coal, oil and natural gas, and electricity generated by burning one of these fuels, or obtained from hydroelectric, nuclear, or geothermal power. Traditional energy is derived from materials commonly used in preindustrial societies, such as wood, charcoal, agricultural residues, and animal or human wastes.
Developing countries consume a small share--12 per cent--of the world's commercial energy. However, their economies are growing faster than those of the industrial countries, and the rapid growth of cities, industries, motorized transport, and other energy-intensive developments, has in the past caused their demand for commercial energy to grow faster than their gross national product (GNP). Much of the increased demand has been met by oil, and the great majority of developing countries must import all or a portion of their oil requirements (see Tables 1 and 2).
The oil importing developing countries face severe problems in maintaining their economic progress in view of the higher cost of energy. As well as having to adapt their long-term investment____________________