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    "ocrText": "Digitized from Box 5 of the White House Press Releases at the Gerald R. Ford Presidential Library\nFOR IMMEDIATE RELEASE\nDECEMBER 7, 1974\nOFFICE OF THE WHITE HOUSE PRESS SECRETARY\nTHE WHITE HOUSE\nPRESS CONFERENCE\nOF\nALAN GREENSPAN, CHAIRMAN,\nCOUNCIL OF ECONOMIC ADVISERS,\nAND\nFRANK ZARB, ADMINISTRATOR-DESIGNATE,\nFEDERAL ENERGY ADMINISTRATION\nTHE BRIEFING ROOM\n12:20 P.M. EST\nMR. NESSEN: The President met for an hour and forty-\nfive minutes this morning to begin his role in developing a\nnational energy policy. The participants were: Secretary Morton;\nFrank Zarb, who is Executive Director of the Energy Resources\nCouncil; Alan Greenspan, the Chairman of the Council of Economic\nAdvisers; Michael Duvall, of the Domestic Council; Richard Cheney,\nwho is a deputy to Don Rumsfeld; Bill Seidman, whom you know;\nsome staff members from the FEA; Secretary Simon and General\nScowcroft.\nAs we told you yesterday, the purpose of the meeting\nwas not to make decisions, but rather to give the President,\nfirst of all, a broad look at the problem, to sketch out for him\nin very broad terms what the strategies might be to solve this\nproblem and to outline for the President the procedures that will\nbe followed over the next few weeks to prepare for him, first of\nall, a comprehensive set of recommendations, which will then lead\nto the President's national energy policy.\nWe are going to have the briefing this morning by Frank\nZarb and by Alan Greenspan. Let me give you one quote from the\nPresident, which will give you some idea of his reaction to this\nmeeting.\nAfter hearing the presentation, he said, \"It is\nimpressive in the complexity it spotlights. It's complex as the\ndevil.\"\nThe reason I tell you that is that we are going to be\ndiscussing energy in some depth in the next couple of weeks in\npreparation for the national energy policy, and it is a complex\nproblem which involves more than what we have talked a lot about\nhere, a gas tax or gas rationing.\nI think by having Frank and Alan here today they can\ngive you not only information you can have for your readers and\nbroadcasters tonight and tomorrow, but some of the complexities\nof the problem, as the President says, which you will need in the\nnext few weeks as you follow this story and as you report on it.\nWith that, I am going to give you Frank Zarb and Alan\nGreenspan..\nMORE\n(OVER)\n- 2 -\nMR. ZARB: Good morning.\nThis is my first occasion to \"brief the press\" so you\nare going to have to -- I hope -- be tolerant of my not knowing\nyour customs and procedures.\nI think Ron has fairly well described the essence of\nthe meeting. The purpose was to review with the President the\nnature of the total problem, where we have been, where we are\ntoday, and the procedures which we are using, which will enable\nhim to choose from a selective set of options in determining\nwhere we may be going in the future.\nWe covered a very wide range of energy planning. The\ntwo major areas of the national energy plan will be the short-\nterm problem, in terms of conservation, and in terms of what is\navailable to us in increasing our resource developments over the\nshort term.\nThe time frame, for your information, is generally\nbetween now and 1977 in the short-term range.\nWe then talked about the longer term and, again, the\nsame two areas where we described the ability for conservation,\nchange of our methodology and treatment of using energy and also\nour ability to generate a larger percentage of domestic\nproduction and thereby get to the point of independence.\nI think it is important to note that the work that we\nreviewed this morning represents the work of all of the agencies\nthat are participants on the Energy Resources Council, that the\nissues which we described are issues which have been discussed by\nthe total Federal family.\nWe further described our process for fine-tuning those\nissues. You are all aware of a meeting which we will have, at\nthe senior staff level, at Camp David next weekend where we will\npull together all of that work and come back with the first draft\nfor the President outlining both recommendations and options.\nDo you wish to add anything?\nMR. GREENSPAN: No.\nMR. ZARB: I think rather than the gospel according to\nme, why don't we see what questions you have.\nQ\nFrank, did the President express any further\nfeelings about some of the leading possibilities? I guess that\nhas been mentioned so often I am ashamed to ask it again but, for\nexample, what did he say this time about the gasoline tax as a\npossibility?\nOn the other hand, perhaps you had an alternative to\noffer him in terms of an outright reduction of the imports program\nand a tightening up of the allocation procedure to accompany it\nthat would be an interim step between volunteer approach and\nsomething as severe as a gasoline tax.\nMORE\n- 3 -\nCould you talk on those subjects?\nMR. ZARB: Next question. (Laughter.)\nWe started the meeting by pointing out that it was not\na decision meeting, nor did we intend for it to become a meeting\nwhere we would take one or two of the elements of a national\nenergy plan and debate the benefits or the losses to exercising\neither one.\nIt was intended to review with the President the wide\nrange of options that will be at his disposal to effect selected\ngoals once he has selected those precise goals.\nWe described the nature of what those goals might be\nand the range within which we thought he had to choose. We\npurposefully stayed away from -- when we talked about\nconservation both near term and long term-debating whether\nor not price was a better vehicle than mandating a limitation on\nour imports and using an allocation procedure.\nQ\nPerhaps you could conduct a little academic\ndiscussion to edify us on the merits and the need for these two\nalternatives.\nFor example, we were discussing before you came out\nhere -- and there is a general impression here that we have\nan obligation to cut our imports by about 15 percent in\naccordance with the importing nations' agreement which is now on\nthe table in Europe.\nIf that would appear possible through an outright cut\nin imports through the existing oil import program, in effect\nduplicating what the embargo did last year but to a lesser\ndegree, the impact on the economy, there would be some, but it\nwould appear to be tolerable.\nCould you talk on that subject and give us your own\nthinking on that as an interim step to something more severe,\nlike a gasoline tax? Is that the way you conceive of it?\nMR. ZARB: There are, really, three ways and three\nmajor areas in which we can effect conservation.\nThe first you adequately described, as you have in the\npast, Burt. We can pitch in for it, the import line, either with\na volumetric limitation or a dollar limitation, saying that this\nnation, effective a given date, will not import more than a level\nthat has been pre-selected.\nWhen you start with that as an option, you also have\nsome subabstractions of that option. You can say that effective\nJanuary 1 we will do it to the tune of one million barrels a day,\nor you can say that effective January 1 we can do it at 50,000\nbarrels a day, and then escalate it up gradually.\nMORE\n- 4 -\nIn each instance, you have a different set of economic\nimpacts. In our work with Alan Greenspan and his good people in\nthe economic area, we have undertaken to analyze carefully the\neconomic impact of each of these steps so that when we do go\nbefore the President with our final paper, he will have at his\ndisposal not only where we think we come out and where some other\nagencies may come out, but also some hard, cold, precise data on\neconomic impact.\nI said there were three major areas.\nQ\nBefore getting to area two, could you give us the\nhigh and low economic impacts for the gradual approach and\nintermediate approach?\nMR. ZARB: I can't this morning.\nCan you, Alan?\nMR. GREENSPAN: There are actually two separate ways\nto come at imports. One is you can mandate an actual reduction\nin imports and then let the system readjust to that mandated\ncutback.\nOf course, secondly, you can attempt to somehow reduce\nconsumption of oil. Since imports are your residual source of\nsupplies, whatever you reduce consumption by, you will obviously\nautomatically reduce imports by.\nThe economic effects of these two different approaches\nare actually quite dissimilar. If you reduce from the consumption\nside in a manner which, for example, you shift from oil to coal in\nutilities, you will reduce oil consumption but not reduce electric\npower output, nor all of the secondary consequences of an electric\npower output curtailment.\nTherefore, you have zero economic impact from the oil\nreduction which is indirect on the import side. That is the\nextreme form of where there is zero effect.\nObviously, there are numerous other means by which you\ncan suppress demand and then, as a residual effect, imports.\nHowever, the problem with that is that you do not know in advance\nwhat your import curtailment will be since it is a calculated\nsecondary, tertiary effect.\nOn the other hand, if you mandate a cutback in imports,\nyou are forcing the system to adjust to that shortage. The\nshortages are essentially unknown because of the complexities of\nthe problems, and you can have some very unexpected and adverse\nimpacts on economic activity.\nSo, either way one goes, there are pluses and there are\nminuses, and I think it is up to us to try to filter out, in as\nmuch detail as possible, what these are, what their probabilities\nare, and present these various options to the President for\ndecision.\nMORE\n- 5 -\nQ Mr. Greenspan, based on what you just\nsaid, doesn't it rather tend to point the President\ntoward some form of consumption cut, tax increase, or\nprice increase, as opposed to what has been talked\nabout more consistently out here, which is the straight\nimport quota?\nMR. GREENSPAN: Not necessarily, because there\nare numbers of options on so curtailing the levels of\nimports and then doing it in such a manner that when\nyou audit the effects, you are capable of calibrating\nthe changes in imports.\nI would certainly agree that if you took an\narbitrary number and said we are going to cut imports by\nX million barrels a day, irrespective of what the\nconsequences are, then I do think that is a high risk\npolicy since one does not know in advance the\nsecondary repercussions.\nBut I don't think that is what we are thinking of\nthese gross bludgeoning type of effects. We are a little more\ncalibrating in our views. There are feasible policies\nby which one can work from the import side, but do it in\na way other than just a flat, specific, unequivocal\nnumber. That is not what our alternatives are.\nQ\nWould you give us an example so we can\nunderstand what you mean by calibrating?\nMR. GREENSPAN: I would just as soon not\nget into the specifics of some of the very details of our\nprogram because I think it would be inappropriate.\nQ\nWhat was the President's reaction? Are\nyou voicing just your own reaction or the President's\nreaction to what you call a flat bludgeoning attack on it?\nMR. GREENSPAN: At this point, I am referring to\nmy own as an economist on this type. This was not the\ntype of detail which we discussed with the President.\nMR. ZARB: May I add to that one thing, and\nperhaps this is something you can help me with, Alan. I wish\nwe had an opportunity to ask you some questions and an\nopportunity to get some answers. Perhaps we will in\nsubsequent days and weeks.\nWe tend always to get into a narrow discussion\nof one element of a national energy plan, and somehow\nI think we have to put it all into context that\na national energy policy or a. national energy plan\ncontains not only two time frames, the short-term,\nbecause of the economic aspects of balance of payments as\nrelated to petroleum, but also both dimensions of the\nprogram in terms of improving our own domestic sources of\navailability and the change in our consumption patterns.\nMORE\n- 6 -\nI hope that we can continue to look at that\ntotal picture and talk of the total picture rather\nthan striking at only one narrow area.\nQ Sir, in that context, would you give us\nsome indication of where we are now in terms of\nthe energy situation and how Americans may have to change\ntheir consumption patterns? I want just a general\nstatement.\nMR. ZARB: I think Americans have\nalready changed their consumption patterns in a rather\nmajor way because of the change in the cost of energy\nin this Nation.\nIf we look back some years ago and look at what\nit cost to buy a gallon of gasoline as compared to the\nnew cost because of the change in cartel prices, I think\nwe can see a change in lifestyle.\nAs we go forward and look toward the Project\nIndependence period, it seems fairly clear that things\nwill be different with respect to how this society\ntreats the real value and worth of energy.\nAutomobiles probably will be smaller and fleet\nmixes will be different, technology within automobiles\nwill be somewhat revamped, the construction of buildings\nundoubtedly will be impacted, so that in\ngeneral terms, as we move toward this period of the\neighties and early eighties, I think we will see a marked\nchange.\nQ\nI have a second question. The second question\nis where are we now in terms of the criticalness of the\nsituation? How bad is the energy outlook right now\nfor the American public?\nMR. ZARB: If you are talking about supply--\nand this is what makes this job so difficult--there is\nsufficient petroleum out there, if you are willing to\npay the price, to meet almost any needs. The nature of\nthe short-term problem, at least at the moment -- I think\nI ought to add that we also talked about the fact that\nwe do have a system in place to accommodate an embargo\nkind of event that we had experienced before, so that goes\nwithout saying.\nThe problem at the moment is not one of supply,\nit is how much this society is paying for that supply.\nWhen a society pays too much for one of its products,\nvis-a-vis the rest of the economy, it gives it serious\ndifficulties internally.\nAlan, may want to speak to that more clearly, about\nour near-term problem is one of too much of our national\nwealth being devoted to the consumption of energy.\nMORE\n- 7 -\nQ\nYou were answering the question in three\nparts, and we got through part one. I am just concerned\nthat we might have missed parts two and three along\nthe way.\nMR. ZARB: We did because we didn't get back\nto them. We started with the pinch of imports.\nThe second major layer of conservation tools\nat our disposal is called allocation, and that means that\nafter the product is refined, the Government would\nallocate to society, based upon some formula. If we\ndid that, logically the refiners would be importing less\nand you would get the same results.\nThe third level -- and as I mentioned earlier,\nthere are many subabstractions to each of these -- is the\nend use. That is through voluntary, or other means,\nlimiting the consumption at the home, in the automobile,\nthe farm, so that you actually affect consumption. In\neach case, as you go back to the beginning, you achieve\nthe results.\nQ\nOne other thing that wasn't answered. I\nasked Mr. Greenspan to give us the topside number for the\neconomy, and I guess that would be the price tag for\nthe gross bludgeon method without saying you intend to\nuse it, but I would like to have the outside range of\nthis cost.\nI had heard a figure you used at your confirmation\nhearing. Is that a correct figure, 400,000 jobs and about\n$20 billion, $30 billion or $40 billion from one million\nbarrels lost?\nMR. ZARB: I don't remember the exact context\nin which I answered that along with so many other questions,\nbut I did point out that an abrupt cutting off of imports\nas of a fixed date, let's just use -- I think the Senator\nsaid a million barrels as of January 1--a million barrels\na day.\nI pointed out it was my understanding that would\nhave a negative impact of $10 to $25 billion in Gross\nNational Product and somewhere around 100,000 jobs.\nI may stand corrected here, in which case I will\nget red-faced.\nMORE\n- 8 -\nMR. GREENSPAN: You won't be red-faced, but\nI will say you have to realize those sorts of calculations\nby their very nature are crude and cannot be looked at\nother than in very broad orders of magnitude.\nQ\nThe question I had was: Is the million-\nbarrel-a-day target the same as ever?\nMR. ZARB: Yes.\nQ\nMr. Zarb, can you tell us whether the\nPresident is now willing to acknowledge that his voluntary\nsystem of conservation is not working and he is going\nto bite the bullet on some kind of mandatory controls\nand, if so, what, in simple terms -- because most of us\nhere are not specialists -- what biting the bullet\noptions are we talking about?\nMR. ZARB: I am not prepared to say what you\njust said. One of the things we discussed during the\ncourse of the meeting is whether or not we should be\ndoing more things to help make the voluntary program\nsucceed.\nWe had a rather lengthy discussion on how we\nmight explain both the nature of the program and the\npotential solutions to the American people. The\nPresident did instruct us to insure, as a part of our\nwork in creating a national policy, that we fix on a\nmethod of describing in a candid, clear, honest form both\nthe size and shape of the problem, the options available\nto the Government and the potential solutions.\nI don't know if that answers your question.\nQ\nYou are saying then at the moment you don't\nhave either an answer as to whether the President is\nwilling to bite the bullet or how he is going to bite\nit, in effect?\nMR. ZARB: That iscorrect. The President will\nmake his decision after he has seen all the analytical\nwork and all the options.\nQ\nFrom our own point of view, would you\nadvise the President the voluntary method is not\nworking right now?\nMR. ZARB: I am not going to dance around that question, a\nto be really honest with you, I am not sure. We have done\na lot of work on that question, along with other\nquestions related both to voluntarism and impact of\nmandatory steps.\nMORE\n- 9 -\nWe are going to be spending the next few\nweeks pulling that analysis together and all next weekend\nworking on questions such as that one. Intellectually,\nI am not there yet, but I will be.\nMr. Greenspan also reminded me it is too soon\nto make that kind of judgment. We have only been about\nit two or three weeks.\nMR. GREENSPAN: There is almost no way to have\na statistical evaluation in so short a period, and I\nthink it would be a mistake to try to look at such small\namounts of data and make a conclusion of that sort.\nQ What is the period that you need?\nMR. GREENSPAN: I would guess myself that we\nprobably would need two to three months at a minimum to\nget a judgment, the reason being you have so many things\ngoing on in the economy which affect the levels of oil\nconsumption that to ferret out of that those specific\nelements which refer to the voluntary program is something\non which you need far more information than we have\nnow available to us.\nQ Does that mean three or four months before\nyou can bite the bullet, if necessary, or come to a hard\ndecision?\nMR. GREENSPAN: No, it means basically to come to\na definitive conclusion. I would suggest to you well\nbefore then we will have very early indications which\nmake forecasts quite likely, and I think in this\nparticular instance we will probably have to start\nmoving on the issue of your best judgment as to\nabout what will happen rather than wait until there is\na wrapped up statistical report stamped and sent\naround, as those things generally are.\nQ\nCan you describe some of the options\ndiscussed? I don't mean necessarily considered, but just\nsome of the options discussed?\nMORE\n- 10 -\nMR. ZARB: Let me go over those with you in broad form,\nif you will.\nIn the area of constraining demand, as I tried to\ndescribe earlier, we had three major opportunities. Within each\nof those opportunities, we have other alternatives. Let's start\nwith the end use.\nAt the end use we could effect a lesser demand by\nvirtue of price, which breaks out into other strategies that may\nrelate to tax questions or non-tax questions.\nWe have the availability of allocation, which says\nthat the end user of a variety will receive 90 percent of 1972\nas we did during the embargo.\nI read this morning in the paper where we are being\nasked to consider seriously rationing, which is also an end-use\ntype of strategy. Now, that is kind of a macro description of\nthe opportunity in that sphere. They each break down into many,\nmany different opportunities under those major headings.\nIf we go to the front end of this thing, the question\nis: How can we cut down on imports in a bold, dramatic way and\ncontrolled way? We can talk about barrel volume beyond which we\nwill not import, we could talk about a dollar volume beyond which\nwe will not import, and that breaks down into a number of different\nstrategies which could be employed.\nIf we talk about just sheer allocation, we can talk\nabout allocation similar to the program we had during the last\nembargo or a more selective allocation program which would affect\nthe big uses and the big opportunities for saving over the short\nanother. term which, for the most part, relate to gasoline in one form or\nSo, if you ask about the options that were discussed\nwith the President, I think that covers them. We went into the\nsubject a lot more detailed than that. He asked a good many very\nprecise questions and this all leads, as we said earlier, to his\nhaving on his desk a more complete analysis of what each option\ndoes or doesn't do.\nQ\nThe President at one point had expressed his\nviewpoint on how he felt about some of the options. Is he now,\nafter this briefing, open minded on any and all of them?\nMR. ZARB: I think the President is open minded and has\nasked for a total energy policy draft plan with options -- I\nunderline \"with options\" -- so that he can look at the total\npicture and then reach his judgments.\nQ\nand announcements?\nWhen is the target date for judgment, decisions,\nMORE\n- 11 -\nMR. ZARB: I think it has been announced earlier\nthat probably around the first of the year or at the State of\nthe Union time is the target date for finalization.\nQ\nIs there a dispute within the top energy and\neconomic advisers on whether to consider majorly the impact on\ninflation or recession in these options?\nMR. ZARB: Did everybody hear the question?\nQ\nNo.\nMR. ZARB: The question was: Is there a dispute in\nthe Administration with respect to inflation or recession, and\nhow these strategies should treat either problem.\nIs there what you might classify a dispute? The answer\nwould be no.\nOn the other hand, I should point out we have 16 agencies\nworking with us on one part or another of this total program. I\nam certain, as there have been in the past, there will be honest,\ngood, intellectual disagreements as to what the benefits of one\nalternative or another are.\nIn each of those instances we will have complete\nanalytical work done. The President will be aware of the opinions\nof his advisers at the time that he looks at the final document.\nIt is a very orderly process.\nMR. GREENSPAN: I would also like to point out that\nenergy policy for the United States cannot be made in a vacuum,\nthat essentially policy in this area has to interface and be\nconsistent with domestic economic policy per se as well as the\nextraordinarily broad interface of both domestic economic\npolicy and energy policy with those policies which constitute\nour position with the rest of the world.\nI think that one thing which makes the whole body of\npolicy-making in this area exceptionally difficult and complex\nat the moment is that we are dealing and have to deal with a\nvery wide variety of problems and setting up of options.\nI needn't say to you that anything that we do on the\ndomestic economic front has repercussions throughout the world,\nand vice versa, and anything we do with respect to our domestic\nenergy policies has international financial consequences.\nSo, one of the things that is incumbent upon us, in\nputting together these various sets of policies, is to recognize\nthat these are really a single complex set of policies with\ndifferent aspects, one aspect being that which relates to our\nenergy policy, another to our domestic economic policy, and a\nthird to our international economic policy.\nObviously, they must all interface and be consistent.\nQ\nIs that, Mr. Greenspan, what the President was\ntalking about when Mr. Nessen said he referred to the complexity\nof the overall situations?\nMORE\n- 12 -\nMR. GREENSPAN: I would believe that is one, certainly.\nQ\nWas there any discussion about why the volunteer\neffort has not been as effective as it had been considered to\nbe so far?\nMR. ZARB: I think Alan's earlier comments are quite\nright in that regard. It is too early to come to that\nconclusion.\nThere was sizeable discussion, however, in how we\narticulate both the problem and the solutions, which we\nultimately determine to be the correct solutions, to the American\npeople.\nQ\nThat sounds like you feel you have not been\narticulating them right. Is that acceptable?\nMR. ZARB: I will speak from a personal point of view,\nnow, on this. This is not a report of the meeting.\nI think it is fair to say the dimensions of this problem\nare so complicated, particularly when you begin to talk about\nshort term and long term, and begin to talk about balance of\npayments and the impact on the economy, that we could probably\ndo a better job of describing the nature of the problems to the\npeople.\nQ\nCan we assume that you are considering, in all of\nthis, the possibility of another Arab oil embargo?\nMR. ZARB: I think you can assume that we will keep\nintact our capability to react to any kind of abrupt shut-off\nof our oil imports.\nMORE\n- 13 -\nQ\nWhat about political implications, the\nrealities of what you can or cannot do with the new\nCongress? Are you people considering it at your level?\nIs the President getting simultaneous readouts on the\npolitical side?\nMR. ZARB: The process we have been using includes\nthe talents of many folks around Government to help\nanalyze not only the substantive impact of an alternative\nbut also the ability to accomplish the task through that\nvehicle with consideration for what you call political --\nthat sometimes is a big \"p\" and sometimes a small \"p\".\nIt is clear that we cannot recommend a program\nto the President or offer him options where we have\nconcluded that those options are not achievable.\nWe would obviously have to show them to him\nand tell him our conclusions were that this option or\nthat is not \"doable\" because of one constraint or another.\nQ\nThis effect of voluntarism, without having\nany scientific polls to draw on, it seems obvious to\nme personally that the country is not talking about a\nchange in lifestyle and certainly not the dramatic change\nthat appears to be required.\nThere doesn't seem to be any awareness that the\nFederal Government is demanding this of the Nation's\ncitizens. Is there any consideration being given to\ndoing something more effective in explaining what\nvoluntarism requires beyond the President's speech of\nOctober? Will there be nothing from then until his\nmessage to Congress in January?\nMR. ZARB: The answer to that question is no.\nThere has been a considerable amount of work done in\nrecent weeks in analyzing how we might do a more complete\njob of relating to the public with respect to how they\ncan conserve, not only from the standpoint of the benefit\nof the public, but also from the standpoint of the\nindividual family budget.\nI think you will see substantially more\nactivity in this area, both in terms of discussion by\nvarious Cabinet officers and in Secretary Morton's\nvarious presentations, and the work with you we do on a\nday-to-day basis.\nI want to point out one other thing I think is\nreally important; that whatever plan, whatever strategy,\nwhatever technique, it will need to have the support of\nthe American people.\nMORE\n- 14 -\nI think we have all agreed that as a prerequisite\nto that support, we need to offer the American people\nnot only a complete description of the problem, but a\ncomplete and candid description of how we intend to\nsolve the problem, and that, of course, is what this\nis all about.\nMR. NESSEN: Why don't you say a word about\nboth the long-term and short-term supply, and maybe\nAlan wants to say a word about long-term reliance on\nimported oil, which was a fair subject of discussion\ntoday.\nMR. ZARB: The short-term supply improvement\nsituation can really be described in two categories.\nOne is called coal and coal conversion. There is\nsome opportunity there to get some short-term\nimprovement.\nBurt Schorr is going to ask me about the\nenvironmental aspects of that in a few minutes, so I\nwill hold off and wait for his questions.\nThe other is the known reserves or the naval\npetroleum reserves and particularly Elk Hills. Over the\nshort-term, which I define between today and 1977,\nthat primarily is it. We are not going to make a big\nimpact in the nuclear contribution or in some of the other\nexotic areas we have discussed earlier.\nOver the longer-term, however, there are other\nopportunities. We will have an opportunity to more\nboldly convert to coal with the liquifaction and\ngasification processes now underway. Nuclear will make\na bigger contribution, and hopefully we will have\nsettled some of the environmental concerns with respect\nto both the environment and safety.\nOf the known reserves, we have the\nAlaska pipeline, we hopefully, over the longer-term, can\nsatisfactorily settle the question of OCS to the satis-\nfaction of the Nation and get on with the job of\ndetermining where we do some additional work there.\nOther questions will be resolved, one which is\nnow a current question, such as the surface mining\nissue, will become clearer. The leasing question of public\nland for the use of coal, the impact in terms of ability\nto transport from the Arctic, both gas and oil, will\nbecome clearer so that as we look toward 1985 we can\nsee the capability of achieving independence and making\na real impact in additional sources of energy to be\nfairly optimistic, but I think you can see from earlier\ncomments the ability on the short-term to improve additional\nsupplies is fairly short.\nMORE\n- 15 -\nQ\nHow many barrels are possible from coal\nconversion between now and 1977?\nMR. ZARB: Bert, I don't have that in front\nof me. As I recall the earlier staff work, it went\nsomewhere between 200,000 and 300,000 barrels a day, but\nthat number may be corrected because I don't recall\nit specifically.\nMR. NESSEN: Alan was going to talk about long-\nrange reliance on imported oil.\nQ I want to ask about economic effect, if\nthat continues.\nMR. GREENSPAN: One of our really basic dilemmas\non long-term energy policy is that at these prices in\nthe world markets it is fairly obvious that the amount\nof new oil that is being discovered, potentially\nexploited, then may well become available in the years\nahead is quite heavy.\nAt $11 or $12 for oil you begin to create vast\npossibilities of exploration and development which were\nnowhere near feasible at $2 and $3 and $4 oil.\nIt is very difficult to forecast oil supplies\nover the long-term worldwide. You have very large elements\nof risk in these forecasts, but there is some evidence,\nat least some weighting of opinion marginally -- I emphasize\nthe word marginally - -- that the oil price could be down\nsignificantly five, eight or ten years from now largely\nbecause consumption is falling relative to real\nGNP worldwide simply because of displacements of other\nforms of energy and the capital facilities to change the\nuse of oil per unit of production.\nOne is confronted with the difficulty on the one\nhand, this country, for example, having a basic problem.\nShould it risk longer-term waiting for this event to\noccur, have vast amounts of oil at lower prices, or should\nit attempt to insure its industrial structure, its\nmechanism of economic activity over the very long run?\nA very major dilemma is obviously confronting\nus, and it has confronted us for a very long. period of\ntime: can we depend on even low-cost oil which can be\nshut off at any particular point in time for reasons\nover which we have no control and which could, of\nnecessity, cripple our industrial structure, or\nshould we attempt to construct some form of insurance\nwhich--remember, insurance means you pay a premium--you\npay a cost to try to lock in against the contingency\nwhich you hope will never happen.\nMORE\n- 16 -\nThat is what insurance is all about, and much\nof our major, longer-term policies must rest on a\nvaluation of this very complex issue.\nIf we knew for certain that the oil price\nwould fall and fall sharply and, more importantly,\nthat it would be always available in adequate flows to\nmeet the financing, or rather the supplying of our\nindustrial structure, then most of what we are talking\nabout today makes very little sense.\nFrankly, we don't believe that, and I\nthink it is incumbent upon us to look very closely at\nthe risks that are involved and to make the judgments\nwhich are not easy, but which have to be made on\nconstructing a long-term energy plan for the United\nStates which assures our capability of maintaining\nadequate industrial activity, adequate economic activity\nto sustain the level of economic well-being of the\nAmerican people and not leavethem vulnerable to actions\noutside of our control.\nQ Mr. Greenspan, how much of the current\ndiscussion and analysis deals with an immediate energy\ncrisis? It seems to me that the focus is on thelong-\nrange. What can the American people expect in the months\nof December, and in January, or February of next year?\nMR. GREENSPAN: Frank is our expert.\nMR. ZARB: Before I answer that, may I add to\nmy colleague's comments. That is a very critical and\ncutting issue, and the issue that Alan describes is\nsimply if the supplying countries broke their price\nto $4 a barrel by the end of next year, would this Nation\ndo anything different than it is currently planning to\ndo to achieve independence. I think that is really a\nvery important question.\nWhen you ask what the American people expect\nin December, January and February, I think we will be in\na better position to talk to that point after the\nPresident has made his decisions with respect to both\nnear-term and long-term actions.\nI tried to describe earlier that supply --\nexcept in the area of natural gas where we do have a\nproblem -- supply at a high price is not the problem as\nit was during the course of the embargo, so that the\nproblem in December and in January is going to be one of\nhaving to pay a lot of money for the energy that we use.\nThank you very much.\nTHE PRESS: Thank you, gentlemen.\nEND\n(AT 1:05 P.M. EST)"
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