Oapec June 77

Carter’ s Energy Program :
Where Do The Oil Exporters Stand ?

President Carter’ s energy program broke forth as though it were heralding the acceleration of the historial transformation in the international economic energy structure toward reducing dependence on oil, and especially imported oil, as a main source of energy. More emphasis was laid on contracting demand, through conservation measures, than on expanding supply from alternative sources of energy. Yet irrespective of what the program’ s declared details with regard to objectives, statistical targets, methods, or timetables may be, the program is, in point of fact, no different from the energy programs annouced by former daministrations. All these programs ultimately aimed at restricting growth in energy consumption through intensifying the degress of rationalization in its use and at promoting the development of local energy resources, while proposing to resort to pricing and taxation policies as the means for realizing these objectives.

What is new in MR. Carter’ s approach, however, is that it makes of the question of change in the energy structure a persistent and urgent national issue determined by the considerations of national security - so much so that the matter must be brought under the direct political and administrative jurisdiction of the state.

No matter what the program’ s chances of success may be in realizing its aspired objectives on schedule, and without disruption of the domestic patterns of economic activity, one thing is certain : sooner or later the world has to confront a similar option, now that the finite nature of petroleum resources in the face of ever-growing demand has been clearly established. Viwed in this sense, the program represents a bright landmark.

Such a turning of the tide toward conservation of depletable petroleum resources and the arresting of their squander, coincides, no doubt, with the objectives of the petroleum producing countries that had been the sole victims of this waste. Yet one aspect of this matter calls for further consideration, and that is the process of transformation during the period of transition, both with regard to determining the value of their depletable resources and to the creation of suitable material and technological conditions for the development and diversification of their sources of income in compensation for the depletion of those resources. In other words, there is no avoiding the question as to who will bear the cost of this transformation.

It was those same countries that paid dearly the heavy subsidy for the previous transformation from coal to oil, throught the artificial pricing of the latter by the major companies. This way the western industrial economy could prosper at the expense of the producers and be spared the cost of developing efficient energy alternatives. The present price of oil in the world market is still below its real value, so that the industrialized countries continue to retain a substantial part of the economic rent of this comodity. It follows that if this price were to be maintained, even in real terms, allocing for inflation, it would still fail to be sufficient for releasing the required chain of structural changes. The program implicity points to the mechanics of pricing as a means for achieving conservation, but instead of conceding a fair price for oil, it resorts to internal taxation as a means to that end. This is in collusion with the long-standing policies of the industrialized oil-importing countries, aimed at retaining a substantial portion of the oil-generalted wealth within them and with-holding it from the producing countries. It represents an an invitation to the producers to continue depleting their resources at cheap prices, which ultimately means inviting these countries to pay, once again, the price for the structural transformation in energy.