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Press Conference of Alan Greenspan and Frank Zarb on Developing a National Energy Policy
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Press Conference of Alan Greenspan and Frank Zarb on Developing a National Energy Policy
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Digitized from Box 5 of the White House Press Releases at the Gerald R. Ford Presidential Library
FOR IMMEDIATE RELEASE
DECEMBER 7, 1974
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
PRESS CONFERENCE
OF
ALAN GREENSPAN, CHAIRMAN,
COUNCIL OF ECONOMIC ADVISERS,
AND
FRANK ZARB, ADMINISTRATOR-DESIGNATE,
FEDERAL ENERGY ADMINISTRATION
THE BRIEFING ROOM
12:20 P.M. EST
MR. NESSEN: The President met for an hour and forty-
five minutes this morning to begin his role in developing a
national energy policy. The participants were: Secretary Morton;
Frank Zarb, who is Executive Director of the Energy Resources
Council; Alan Greenspan, the Chairman of the Council of Economic
Advisers; Michael Duvall, of the Domestic Council; Richard Cheney,
who is a deputy to Don Rumsfeld; Bill Seidman, whom you know;
some staff members from the FEA; Secretary Simon and General
Scowcroft.
As we told you yesterday, the purpose of the meeting
was not to make decisions, but rather to give the President,
first of all, a broad look at the problem, to sketch out for him
in very broad terms what the strategies might be to solve this
problem and to outline for the President the procedures that will
be followed over the next few weeks to prepare for him, first of
all, a comprehensive set of recommendations, which will then lead
to the President's national energy policy.
We are going to have the briefing this morning by Frank
Zarb and by Alan Greenspan. Let me give you one quote from the
President, which will give you some idea of his reaction to this
meeting.
After hearing the presentation, he said, "It is
impressive in the complexity it spotlights. It's complex as the
devil."
The reason I tell you that is that we are going to be
discussing energy in some depth in the next couple of weeks in
preparation for the national energy policy, and it is a complex
problem which involves more than what we have talked a lot about
here, a gas tax or gas rationing.
I think by having Frank and Alan here today they can
give you not only information you can have for your readers and
broadcasters tonight and tomorrow, but some of the complexities
of the problem, as the President says, which you will need in the
next few weeks as you follow this story and as you report on it.
With that, I am going to give you Frank Zarb and Alan
Greenspan..
MORE
(OVER)
- 2 -
MR. ZARB: Good morning.
This is my first occasion to "brief the press" so you
are going to have to -- I hope -- be tolerant of my not knowing
your customs and procedures.
I think Ron has fairly well described the essence of
the meeting. The purpose was to review with the President the
nature of the total problem, where we have been, where we are
today, and the procedures which we are using, which will enable
him to choose from a selective set of options in determining
where we may be going in the future.
We covered a very wide range of energy planning. The
two major areas of the national energy plan will be the short-
term problem, in terms of conservation, and in terms of what is
available to us in increasing our resource developments over the
short term.
The time frame, for your information, is generally
between now and 1977 in the short-term range.
We then talked about the longer term and, again, the
same two areas where we described the ability for conservation,
change of our methodology and treatment of using energy and also
our ability to generate a larger percentage of domestic
production and thereby get to the point of independence.
I think it is important to note that the work that we
reviewed this morning represents the work of all of the agencies
that are participants on the Energy Resources Council, that the
issues which we described are issues which have been discussed by
the total Federal family.
We further described our process for fine-tuning those
issues. You are all aware of a meeting which we will have, at
the senior staff level, at Camp David next weekend where we will
pull together all of that work and come back with the first draft
for the President outlining both recommendations and options.
Do you wish to add anything?
MR. GREENSPAN: No.
MR. ZARB: I think rather than the gospel according to
me, why don't we see what questions you have.
Q
Frank, did the President express any further
feelings about some of the leading possibilities? I guess that
has been mentioned so often I am ashamed to ask it again but, for
example, what did he say this time about the gasoline tax as a
possibility?
On the other hand, perhaps you had an alternative to
offer him in terms of an outright reduction of the imports program
and a tightening up of the allocation procedure to accompany it
that would be an interim step between volunteer approach and
something as severe as a gasoline tax.
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- 3 -
Could you talk on those subjects?
MR. ZARB: Next question. (Laughter.)
We started the meeting by pointing out that it was not
a decision meeting, nor did we intend for it to become a meeting
where we would take one or two of the elements of a national
energy plan and debate the benefits or the losses to exercising
either one.
It was intended to review with the President the wide
range of options that will be at his disposal to effect selected
goals once he has selected those precise goals.
We described the nature of what those goals might be
and the range within which we thought he had to choose. We
purposefully stayed away from -- when we talked about
conservation both near term and long term-debating whether
or not price was a better vehicle than mandating a limitation on
our imports and using an allocation procedure.
Q
Perhaps you could conduct a little academic
discussion to edify us on the merits and the need for these two
alternatives.
For example, we were discussing before you came out
here -- and there is a general impression here that we have
an obligation to cut our imports by about 15 percent in
accordance with the importing nations' agreement which is now on
the table in Europe.
If that would appear possible through an outright cut
in imports through the existing oil import program, in effect
duplicating what the embargo did last year but to a lesser
degree, the impact on the economy, there would be some, but it
would appear to be tolerable.
Could you talk on that subject and give us your own
thinking on that as an interim step to something more severe,
like a gasoline tax? Is that the way you conceive of it?
MR. ZARB: There are, really, three ways and three
major areas in which we can effect conservation.
The first you adequately described, as you have in the
past, Burt. We can pitch in for it, the import line, either with
a volumetric limitation or a dollar limitation, saying that this
nation, effective a given date, will not import more than a level
that has been pre-selected.
When you start with that as an option, you also have
some subabstractions of that option. You can say that effective
January 1 we will do it to the tune of one million barrels a day,
or you can say that effective January 1 we can do it at 50,000
barrels a day, and then escalate it up gradually.
MORE
- 4 -
In each instance, you have a different set of economic
impacts. In our work with Alan Greenspan and his good people in
the economic area, we have undertaken to analyze carefully the
economic impact of each of these steps so that when we do go
before the President with our final paper, he will have at his
disposal not only where we think we come out and where some other
agencies may come out, but also some hard, cold, precise data on
economic impact.
I said there were three major areas.
Q
Before getting to area two, could you give us the
high and low economic impacts for the gradual approach and
intermediate approach?
MR. ZARB: I can't this morning.
Can you, Alan?
MR. GREENSPAN: There are actually two separate ways
to come at imports. One is you can mandate an actual reduction
in imports and then let the system readjust to that mandated
cutback.
Of course, secondly, you can attempt to somehow reduce
consumption of oil. Since imports are your residual source of
supplies, whatever you reduce consumption by, you will obviously
automatically reduce imports by.
The economic effects of these two different approaches
are actually quite dissimilar. If you reduce from the consumption
side in a manner which, for example, you shift from oil to coal in
utilities, you will reduce oil consumption but not reduce electric
power output, nor all of the secondary consequences of an electric
power output curtailment.
Therefore, you have zero economic impact from the oil
reduction which is indirect on the import side. That is the
extreme form of where there is zero effect.
Obviously, there are numerous other means by which you
can suppress demand and then, as a residual effect, imports.
However, the problem with that is that you do not know in advance
what your import curtailment will be since it is a calculated
secondary, tertiary effect.
On the other hand, if you mandate a cutback in imports,
you are forcing the system to adjust to that shortage. The
shortages are essentially unknown because of the complexities of
the problems, and you can have some very unexpected and adverse
impacts on economic activity.
So, either way one goes, there are pluses and there are
minuses, and I think it is up to us to try to filter out, in as
much detail as possible, what these are, what their probabilities
are, and present these various options to the President for
decision.
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- 5 -
Q Mr. Greenspan, based on what you just
said, doesn't it rather tend to point the President
toward some form of consumption cut, tax increase, or
price increase, as opposed to what has been talked
about more consistently out here, which is the straight
import quota?
MR. GREENSPAN: Not necessarily, because there
are numbers of options on so curtailing the levels of
imports and then doing it in such a manner that when
you audit the effects, you are capable of calibrating
the changes in imports.
I would certainly agree that if you took an
arbitrary number and said we are going to cut imports by
X million barrels a day, irrespective of what the
consequences are, then I do think that is a high risk
policy since one does not know in advance the
secondary repercussions.
But I don't think that is what we are thinking of
these gross bludgeoning type of effects. We are a little more
calibrating in our views. There are feasible policies
by which one can work from the import side, but do it in
a way other than just a flat, specific, unequivocal
number. That is not what our alternatives are.
Q
Would you give us an example so we can
understand what you mean by calibrating?
MR. GREENSPAN: I would just as soon not
get into the specifics of some of the very details of our
program because I think it would be inappropriate.
Q
What was the President's reaction? Are
you voicing just your own reaction or the President's
reaction to what you call a flat bludgeoning attack on it?
MR. GREENSPAN: At this point, I am referring to
my own as an economist on this type. This was not the
type of detail which we discussed with the President.
MR. ZARB: May I add to that one thing, and
perhaps this is something you can help me with, Alan. I wish
we had an opportunity to ask you some questions and an
opportunity to get some answers. Perhaps we will in
subsequent days and weeks.
We tend always to get into a narrow discussion
of one element of a national energy plan, and somehow
I think we have to put it all into context that
a national energy policy or a. national energy plan
contains not only two time frames, the short-term,
because of the economic aspects of balance of payments as
related to petroleum, but also both dimensions of the
program in terms of improving our own domestic sources of
availability and the change in our consumption patterns.
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- 6 -
I hope that we can continue to look at that
total picture and talk of the total picture rather
than striking at only one narrow area.
Q Sir, in that context, would you give us
some indication of where we are now in terms of
the energy situation and how Americans may have to change
their consumption patterns? I want just a general
statement.
MR. ZARB: I think Americans have
already changed their consumption patterns in a rather
major way because of the change in the cost of energy
in this Nation.
If we look back some years ago and look at what
it cost to buy a gallon of gasoline as compared to the
new cost because of the change in cartel prices, I think
we can see a change in lifestyle.
As we go forward and look toward the Project
Independence period, it seems fairly clear that things
will be different with respect to how this society
treats the real value and worth of energy.
Automobiles probably will be smaller and fleet
mixes will be different, technology within automobiles
will be somewhat revamped, the construction of buildings
undoubtedly will be impacted, so that in
general terms, as we move toward this period of the
eighties and early eighties, I think we will see a marked
change.
Q
I have a second question. The second question
is where are we now in terms of the criticalness of the
situation? How bad is the energy outlook right now
for the American public?
MR. ZARB: If you are talking about supply--
and this is what makes this job so difficult--there is
sufficient petroleum out there, if you are willing to
pay the price, to meet almost any needs. The nature of
the short-term problem, at least at the moment -- I think
I ought to add that we also talked about the fact that
we do have a system in place to accommodate an embargo
kind of event that we had experienced before, so that goes
without saying.
The problem at the moment is not one of supply,
it is how much this society is paying for that supply.
When a society pays too much for one of its products,
vis-a-vis the rest of the economy, it gives it serious
difficulties internally.
Alan, may want to speak to that more clearly, about
our near-term problem is one of too much of our national
wealth being devoted to the consumption of energy.
MORE
- 7 -
Q
You were answering the question in three
parts, and we got through part one. I am just concerned
that we might have missed parts two and three along
the way.
MR. ZARB: We did because we didn't get back
to them. We started with the pinch of imports.
The second major layer of conservation tools
at our disposal is called allocation, and that means that
after the product is refined, the Government would
allocate to society, based upon some formula. If we
did that, logically the refiners would be importing less
and you would get the same results.
The third level -- and as I mentioned earlier,
there are many subabstractions to each of these -- is the
end use. That is through voluntary, or other means,
limiting the consumption at the home, in the automobile,
the farm, so that you actually affect consumption. In
each case, as you go back to the beginning, you achieve
the results.
Q
One other thing that wasn't answered. I
asked Mr. Greenspan to give us the topside number for the
economy, and I guess that would be the price tag for
the gross bludgeon method without saying you intend to
use it, but I would like to have the outside range of
this cost.
I had heard a figure you used at your confirmation
hearing. Is that a correct figure, 400,000 jobs and about
$20 billion, $30 billion or $40 billion from one million
barrels lost?
MR. ZARB: I don't remember the exact context
in which I answered that along with so many other questions,
but I did point out that an abrupt cutting off of imports
as of a fixed date, let's just use -- I think the Senator
said a million barrels as of January 1--a million barrels
a day.
I pointed out it was my understanding that would
have a negative impact of $10 to $25 billion in Gross
National Product and somewhere around 100,000 jobs.
I may stand corrected here, in which case I will
get red-faced.
MORE
- 8 -
MR. GREENSPAN: You won't be red-faced, but
I will say you have to realize those sorts of calculations
by their very nature are crude and cannot be looked at
other than in very broad orders of magnitude.
Q
The question I had was: Is the million-
barrel-a-day target the same as ever?
MR. ZARB: Yes.
Q
Mr. Zarb, can you tell us whether the
President is now willing to acknowledge that his voluntary
system of conservation is not working and he is going
to bite the bullet on some kind of mandatory controls
and, if so, what, in simple terms -- because most of us
here are not specialists -- what biting the bullet
options are we talking about?
MR. ZARB: I am not prepared to say what you
just said. One of the things we discussed during the
course of the meeting is whether or not we should be
doing more things to help make the voluntary program
succeed.
We had a rather lengthy discussion on how we
might explain both the nature of the program and the
potential solutions to the American people. The
President did instruct us to insure, as a part of our
work in creating a national policy, that we fix on a
method of describing in a candid, clear, honest form both
the size and shape of the problem, the options available
to the Government and the potential solutions.
I don't know if that answers your question.
Q
You are saying then at the moment you don't
have either an answer as to whether the President is
willing to bite the bullet or how he is going to bite
it, in effect?
MR. ZARB: That iscorrect. The President will
make his decision after he has seen all the analytical
work and all the options.
Q
From our own point of view, would you
advise the President the voluntary method is not
working right now?
MR. ZARB: I am not going to dance around that question, a
to be really honest with you, I am not sure. We have done
a lot of work on that question, along with other
questions related both to voluntarism and impact of
mandatory steps.
MORE
- 9 -
We are going to be spending the next few
weeks pulling that analysis together and all next weekend
working on questions such as that one. Intellectually,
I am not there yet, but I will be.
Mr. Greenspan also reminded me it is too soon
to make that kind of judgment. We have only been about
it two or three weeks.
MR. GREENSPAN: There is almost no way to have
a statistical evaluation in so short a period, and I
think it would be a mistake to try to look at such small
amounts of data and make a conclusion of that sort.
Q What is the period that you need?
MR. GREENSPAN: I would guess myself that we
probably would need two to three months at a minimum to
get a judgment, the reason being you have so many things
going on in the economy which affect the levels of oil
consumption that to ferret out of that those specific
elements which refer to the voluntary program is something
on which you need far more information than we have
now available to us.
Q Does that mean three or four months before
you can bite the bullet, if necessary, or come to a hard
decision?
MR. GREENSPAN: No, it means basically to come to
a definitive conclusion. I would suggest to you well
before then we will have very early indications which
make forecasts quite likely, and I think in this
particular instance we will probably have to start
moving on the issue of your best judgment as to
about what will happen rather than wait until there is
a wrapped up statistical report stamped and sent
around, as those things generally are.
Q
Can you describe some of the options
discussed? I don't mean necessarily considered, but just
some of the options discussed?
MORE
- 10 -
MR. ZARB: Let me go over those with you in broad form,
if you will.
In the area of constraining demand, as I tried to
describe earlier, we had three major opportunities. Within each
of those opportunities, we have other alternatives. Let's start
with the end use.
At the end use we could effect a lesser demand by
virtue of price, which breaks out into other strategies that may
relate to tax questions or non-tax questions.
We have the availability of allocation, which says
that the end user of a variety will receive 90 percent of 1972
as we did during the embargo.
I read this morning in the paper where we are being
asked to consider seriously rationing, which is also an end-use
type of strategy. Now, that is kind of a macro description of
the opportunity in that sphere. They each break down into many,
many different opportunities under those major headings.
If we go to the front end of this thing, the question
is: How can we cut down on imports in a bold, dramatic way and
controlled way? We can talk about barrel volume beyond which we
will not import, we could talk about a dollar volume beyond which
we will not import, and that breaks down into a number of different
strategies which could be employed.
If we talk about just sheer allocation, we can talk
about allocation similar to the program we had during the last
embargo or a more selective allocation program which would affect
the big uses and the big opportunities for saving over the short
another. term which, for the most part, relate to gasoline in one form or
So, if you ask about the options that were discussed
with the President, I think that covers them. We went into the
subject a lot more detailed than that. He asked a good many very
precise questions and this all leads, as we said earlier, to his
having on his desk a more complete analysis of what each option
does or doesn't do.
Q
The President at one point had expressed his
viewpoint on how he felt about some of the options. Is he now,
after this briefing, open minded on any and all of them?
MR. ZARB: I think the President is open minded and has
asked for a total energy policy draft plan with options -- I
underline "with options" -- so that he can look at the total
picture and then reach his judgments.
Q
and announcements?
When is the target date for judgment, decisions,
MORE
- 11 -
MR. ZARB: I think it has been announced earlier
that probably around the first of the year or at the State of
the Union time is the target date for finalization.
Q
Is there a dispute within the top energy and
economic advisers on whether to consider majorly the impact on
inflation or recession in these options?
MR. ZARB: Did everybody hear the question?
Q
No.
MR. ZARB: The question was: Is there a dispute in
the Administration with respect to inflation or recession, and
how these strategies should treat either problem.
Is there what you might classify a dispute? The answer
would be no.
On the other hand, I should point out we have 16 agencies
working with us on one part or another of this total program. I
am certain, as there have been in the past, there will be honest,
good, intellectual disagreements as to what the benefits of one
alternative or another are.
In each of those instances we will have complete
analytical work done. The President will be aware of the opinions
of his advisers at the time that he looks at the final document.
It is a very orderly process.
MR. GREENSPAN: I would also like to point out that
energy policy for the United States cannot be made in a vacuum,
that essentially policy in this area has to interface and be
consistent with domestic economic policy per se as well as the
extraordinarily broad interface of both domestic economic
policy and energy policy with those policies which constitute
our position with the rest of the world.
I think that one thing which makes the whole body of
policy-making in this area exceptionally difficult and complex
at the moment is that we are dealing and have to deal with a
very wide variety of problems and setting up of options.
I needn't say to you that anything that we do on the
domestic economic front has repercussions throughout the world,
and vice versa, and anything we do with respect to our domestic
energy policies has international financial consequences.
So, one of the things that is incumbent upon us, in
putting together these various sets of policies, is to recognize
that these are really a single complex set of policies with
different aspects, one aspect being that which relates to our
energy policy, another to our domestic economic policy, and a
third to our international economic policy.
Obviously, they must all interface and be consistent.
Q
Is that, Mr. Greenspan, what the President was
talking about when Mr. Nessen said he referred to the complexity
of the overall situations?
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- 12 -
MR. GREENSPAN: I would believe that is one, certainly.
Q
Was there any discussion about why the volunteer
effort has not been as effective as it had been considered to
be so far?
MR. ZARB: I think Alan's earlier comments are quite
right in that regard. It is too early to come to that
conclusion.
There was sizeable discussion, however, in how we
articulate both the problem and the solutions, which we
ultimately determine to be the correct solutions, to the American
people.
Q
That sounds like you feel you have not been
articulating them right. Is that acceptable?
MR. ZARB: I will speak from a personal point of view,
now, on this. This is not a report of the meeting.
I think it is fair to say the dimensions of this problem
are so complicated, particularly when you begin to talk about
short term and long term, and begin to talk about balance of
payments and the impact on the economy, that we could probably
do a better job of describing the nature of the problems to the
people.
Q
Can we assume that you are considering, in all of
this, the possibility of another Arab oil embargo?
MR. ZARB: I think you can assume that we will keep
intact our capability to react to any kind of abrupt shut-off
of our oil imports.
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- 13 -
Q
What about political implications, the
realities of what you can or cannot do with the new
Congress? Are you people considering it at your level?
Is the President getting simultaneous readouts on the
political side?
MR. ZARB: The process we have been using includes
the talents of many folks around Government to help
analyze not only the substantive impact of an alternative
but also the ability to accomplish the task through that
vehicle with consideration for what you call political --
that sometimes is a big "p" and sometimes a small "p".
It is clear that we cannot recommend a program
to the President or offer him options where we have
concluded that those options are not achievable.
We would obviously have to show them to him
and tell him our conclusions were that this option or
that is not "doable" because of one constraint or another.
Q
This effect of voluntarism, without having
any scientific polls to draw on, it seems obvious to
me personally that the country is not talking about a
change in lifestyle and certainly not the dramatic change
that appears to be required.
There doesn't seem to be any awareness that the
Federal Government is demanding this of the Nation's
citizens. Is there any consideration being given to
doing something more effective in explaining what
voluntarism requires beyond the President's speech of
October? Will there be nothing from then until his
message to Congress in January?
MR. ZARB: The answer to that question is no.
There has been a considerable amount of work done in
recent weeks in analyzing how we might do a more complete
job of relating to the public with respect to how they
can conserve, not only from the standpoint of the benefit
of the public, but also from the standpoint of the
individual family budget.
I think you will see substantially more
activity in this area, both in terms of discussion by
various Cabinet officers and in Secretary Morton's
various presentations, and the work with you we do on a
day-to-day basis.
I want to point out one other thing I think is
really important; that whatever plan, whatever strategy,
whatever technique, it will need to have the support of
the American people.
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- 14 -
I think we have all agreed that as a prerequisite
to that support, we need to offer the American people
not only a complete description of the problem, but a
complete and candid description of how we intend to
solve the problem, and that, of course, is what this
is all about.
MR. NESSEN: Why don't you say a word about
both the long-term and short-term supply, and maybe
Alan wants to say a word about long-term reliance on
imported oil, which was a fair subject of discussion
today.
MR. ZARB: The short-term supply improvement
situation can really be described in two categories.
One is called coal and coal conversion. There is
some opportunity there to get some short-term
improvement.
Burt Schorr is going to ask me about the
environmental aspects of that in a few minutes, so I
will hold off and wait for his questions.
The other is the known reserves or the naval
petroleum reserves and particularly Elk Hills. Over the
short-term, which I define between today and 1977,
that primarily is it. We are not going to make a big
impact in the nuclear contribution or in some of the other
exotic areas we have discussed earlier.
Over the longer-term, however, there are other
opportunities. We will have an opportunity to more
boldly convert to coal with the liquifaction and
gasification processes now underway. Nuclear will make
a bigger contribution, and hopefully we will have
settled some of the environmental concerns with respect
to both the environment and safety.
Of the known reserves, we have the
Alaska pipeline, we hopefully, over the longer-term, can
satisfactorily settle the question of OCS to the satis-
faction of the Nation and get on with the job of
determining where we do some additional work there.
Other questions will be resolved, one which is
now a current question, such as the surface mining
issue, will become clearer. The leasing question of public
land for the use of coal, the impact in terms of ability
to transport from the Arctic, both gas and oil, will
become clearer so that as we look toward 1985 we can
see the capability of achieving independence and making
a real impact in additional sources of energy to be
fairly optimistic, but I think you can see from earlier
comments the ability on the short-term to improve additional
supplies is fairly short.
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- 15 -
Q
How many barrels are possible from coal
conversion between now and 1977?
MR. ZARB: Bert, I don't have that in front
of me. As I recall the earlier staff work, it went
somewhere between 200,000 and 300,000 barrels a day, but
that number may be corrected because I don't recall
it specifically.
MR. NESSEN: Alan was going to talk about long-
range reliance on imported oil.
Q I want to ask about economic effect, if
that continues.
MR. GREENSPAN: One of our really basic dilemmas
on long-term energy policy is that at these prices in
the world markets it is fairly obvious that the amount
of new oil that is being discovered, potentially
exploited, then may well become available in the years
ahead is quite heavy.
At $11 or $12 for oil you begin to create vast
possibilities of exploration and development which were
nowhere near feasible at $2 and $3 and $4 oil.
It is very difficult to forecast oil supplies
over the long-term worldwide. You have very large elements
of risk in these forecasts, but there is some evidence,
at least some weighting of opinion marginally -- I emphasize
the word marginally - -- that the oil price could be down
significantly five, eight or ten years from now largely
because consumption is falling relative to real
GNP worldwide simply because of displacements of other
forms of energy and the capital facilities to change the
use of oil per unit of production.
One is confronted with the difficulty on the one
hand, this country, for example, having a basic problem.
Should it risk longer-term waiting for this event to
occur, have vast amounts of oil at lower prices, or should
it attempt to insure its industrial structure, its
mechanism of economic activity over the very long run?
A very major dilemma is obviously confronting
us, and it has confronted us for a very long. period of
time: can we depend on even low-cost oil which can be
shut off at any particular point in time for reasons
over which we have no control and which could, of
necessity, cripple our industrial structure, or
should we attempt to construct some form of insurance
which--remember, insurance means you pay a premium--you
pay a cost to try to lock in against the contingency
which you hope will never happen.
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That is what insurance is all about, and much
of our major, longer-term policies must rest on a
valuation of this very complex issue.
If we knew for certain that the oil price
would fall and fall sharply and, more importantly,
that it would be always available in adequate flows to
meet the financing, or rather the supplying of our
industrial structure, then most of what we are talking
about today makes very little sense.
Frankly, we don't believe that, and I
think it is incumbent upon us to look very closely at
the risks that are involved and to make the judgments
which are not easy, but which have to be made on
constructing a long-term energy plan for the United
States which assures our capability of maintaining
adequate industrial activity, adequate economic activity
to sustain the level of economic well-being of the
American people and not leavethem vulnerable to actions
outside of our control.
Q Mr. Greenspan, how much of the current
discussion and analysis deals with an immediate energy
crisis? It seems to me that the focus is on thelong-
range. What can the American people expect in the months
of December, and in January, or February of next year?
MR. GREENSPAN: Frank is our expert.
MR. ZARB: Before I answer that, may I add to
my colleague's comments. That is a very critical and
cutting issue, and the issue that Alan describes is
simply if the supplying countries broke their price
to $4 a barrel by the end of next year, would this Nation
do anything different than it is currently planning to
do to achieve independence. I think that is really a
very important question.
When you ask what the American people expect
in December, January and February, I think we will be in
a better position to talk to that point after the
President has made his decisions with respect to both
near-term and long-term actions.
I tried to describe earlier that supply --
except in the area of natural gas where we do have a
problem -- supply at a high price is not the problem as
it was during the course of the embargo, so that the
problem in December and in January is going to be one of
having to pay a lot of money for the energy that we use.
Thank you very much.
THE PRESS: Thank you, gentlemen.
END
(AT 1:05 P.M. EST)