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    "ocrText": "Digitized from Box 7 of the White House Press Releases at the Gerald R. Ford Presidential Library\nFOR IMMEDIATE RELEASE\nJANUARY 23, 1975\nOFFICE OF THE WHITE HOUSE PRESS SECRETARY\nTHE WHITE HOUSE\nPRESS CONFERENCE\nOF\nFRANK ZARB\nADMINISTRATOR, FEDERAL ENERGY ADMINISTRATION\nALAN GREENSPAN\nCHAIRMAN, COUNCIL OF ECONOMIC ADVISERS\nAND\nROBERT MONTGOMERY, JR.\nGENERAL COUNSEL, FEDERAL ENERGY ADMINISTRATION\nTHE BRIEFING ROOM\n4:25 P.M. EST\nMR. NESSEN: While we are waiting for Frank and\nthe cameras to get set up, I will tell you a little bit\nabout the President's meeting with the Governors, although\nhe probably told you about it himself.\nQ\nWhy did they go so late?\nMR. NESSEN: I will tell you that.\nThe President opened the meeting with the\nGovernors by telling them why he felt it was important to\nbegin now on a program to conserve energy. He pointed\nout that foreign imports now amount to 38 percent of\nAmerican energy use, and by 1977, that will go to 50\npercent, that whereas foreign oil cost the United States\n$3 billion only five years, ago, it will reach $32 billion\na year in 1977.\nHe said, \"This is intolerable for our- national\nsecurity and independence.\" He said he is going to sign\nthe proclamation, which he has now done, but he said he\nis taking steps to solve what he called the \"unique\nproblems of New England,\" one, by allocating more domestic\noil to them and, secondly, by changing the fees on.\nimported products.\nIn fact, there will be no increase in the fee at\nall this first month of February. He promised to study\nother steps to relieve what he called the \"unique problems\nof the Northeast.\"\nMORE\n(OVER)\n- 2 -\nHe also told the Governors that in order to join\nthis plan of his for energy independence by 1985, they should\nconcentrate on building more nuclear plants in their areas.\nHe said, \"We must start building and stop canceling nuclear\nplants.\" He said that 30 percent of America's energy must\ncome from nuclear plants by 1985.\nQ\nEnergy or electricity?\nMR. NESSEN: Energy. He said that there needs to\nbe Outer Continental Shelf drilling, more conversion of\nplants in New England to coal and the construction of more\noil refineries in New England.\nThe President said, \"We will bend over backwards\nto help you.\" Then, the various Governors expressed their\nviews, and in response, the President said, \"We have looked\nat every option, and they were piled high, and my plan was\nthe best one we could devise.\" The President said we were\n\"at the threshold of a possible disaster. We have got to\nrespond. Congress has not acted, and we just have to have\nsome action.\nThe President also said that the impetus for\nCongressional action must come from strong Presidential\naction.\nWith that brief report on the meeting, I am going\nto turn you over to Frank Zarb, who will tell you about some\nof the technical details of the proclamation that was signed\ntoday, as well as some of the steps that were taken by the\nPresident to alleviate the special problems of the Northeastern\nStates, and Alan Greenspan, also.\nQ\nRon, when did it begin and when did it end?\nMR. NESSEN: The meeting with the Governors began\nfairly promptly, at 2:45 p.m., and it lasted until\nabout five minutes before he went in to sign the proclamation,\nSO we will get the exact times for you.\nFrank Zarb and Alan Greenspan will answer your\nquestions.\nMR. ZARB: I have about a 60-minute statement\nhere, which I will read, if that is all right with everybody.\n(Laughter.)\nMORE\n- 3 -\nWhen I first took the assignment as Administrator\nof the Federal Energy Administration, I had a good friend\nwho counseled me that I was undertaking a \"no win\" proposition,\nand I would like to share with you an incident which helps\nto sustain me during periodswhere that sometimes may appear\nto be SO.\nIt was with a meeting with the labor leaders\nrecently where one of the more colorful labor leaders --\nwho, it turns out to be, is a hero to me -- pointed his\nfinger at me, and he said, \"Young man, the thing you have\nto do is to take the knee pads off our knickers because\nI am tired of kneeling for American oil.\"\nI think therein lies the essence of the spirit\nwith which we must go forward. The President has signed\nthe proclamation. We have been talking about it for a week.\nI think you understand the substance of it.\nWith respect to the Northeastern areas of the\ncountry, you should know this: the basic burden of petroleum\nconsumption in the Northeast is by way of product. A good\npart of that is imported product. Eighty-five percent of\nthe fuel used to fire utilities in New England is residual\noil. Most all residual oil, as far as utilities, is also\nimported, so you can see the dimensions of the difficulty\nwith respect to the Northeast.\nRecognizing that, we have done two things. An\nentitlements program was initiated in January, this month,\nwhereby we share the value of oil\nor the lesser\nexpensive oil, not only with those refineries that have only\nnew, high-priced crude available to them, but also with\nthe residual users in New England. That is already in effect\nand does transfer the value of some of the existing old\noil to New England.\nSecondly, the President has directed that, in\nthe first month of the tariff program, there be no tariff\nor no fee on product, and residual oil product is one of\nthe main culprits with respect to the Northeast situation.\nTherefore, consumers in New England will not begin to feel\nany impact at all until well into the month of March, and\nthen it will be relatively minimal because it will be only\na portion of the first 60 cents which will go on March 1st.\nThe second 60 cents goes on April 1st, thereby\nbringing the product fee up to $1.20, while crude is at\n$3. The equalization program, plus the variation in product\nfees, and the delay, are all designed to equalize the impact\nbetween the Northeastern part of the country and the rest of\nthe country.\nMORE\n- 4 -\nWe also have some information that I think we\ncan make available -- I am not- sure it has been duplicated\nyet -- which demonstrates that, after the President's program\nis fully enacted by the Congress, New England will not be\ndisadvantaged versus the rest of the country. Those areas\nthat use a lot of motor gasoline, as compared to heating\noil, which is the opposite condition from New England, will\npick up increased costs, and New England will not be that\narea which will take the excess of burden.\nNow, with respect to your questions.\nMORE\n- 5 -\nQ\nMr. Zarb, where does Connecticut get the\nidea that it is going to cost them $300 million?\nMR. ZARB: I do not know. We had a considerable\namount of discussion about numbers. As you know, the\nnumbers and analysis which we have been using for the\nmost part have been developed over a period of almost\na year and developed through the Project Independence\nreport.\nAdditional analysis has been gotten more\nrecently with respect to specific areas, and there were\nsome questions about data which the Governors themselves\nhad accumulated about their States and the data which\nwe had available.\nAt the suggestion of either ourselves or one\nof the Governors, we have agreed to put together our\npeople who have responsibility for this kind of analysis\nand make some determinations as to how we arrived at\nour ideas. I plan that we should do that as soon as\npossible.\nI also want to point out there is a more\npermanent solution to areas such as the Northeast,\nincluding the development of the Outer Continental\nShelf, the construction of refineries, the construction\nof nuclear power, and coal conversion, where that is\napplicable.\nWe found little resistance to those notions to\nconstruct a more permanent solution so that they can\nhave access up there to more domestic and more reasonable\nsupply. It is going to take the Federal Government,\nworking with the Governors, to expedite that program, and\nwe intend to work with the Governors to see that that is\naccomplished.\nQ\nMr. Zarb, you say New England, the North-\neast, will not feel the impact until mid-March. At\nthe same time that you are giving a full rebate in\nFebruary on imported products, are you not also taking\nproducts out of the entitlement program so that there\nwill be a 60 cent impact in New England on every barrel\nof imported product?\nMR. ZARB: No.\nMR. MONTGOMERY: The 60 cents that every barrel\nof product gets. under the entitlements program represents\nand is fully reflected in the reduction in the import\nfee on product.\nMORE\n- 6 -\nSo, the reduction for the first month is not only\n60 cents, which is the equivalent of the payment they would\nhave under the entitlements program, but an additional 40\ncents, which represents the adjustment to keep the parity\nbetween product and crude on the basis of the new $1 fee.\nIn other words, during the first month, you wipe out the fee\naltogether, they get not only the 60 cents they would have\ngotten, but an additional 40 cents.\nMR. ZARB: That was a long way of saying no.\nQ Mr. Zarb, are there any exceptions to the\nprogram? When the previous fee program was announced, there\nwas a certain amount of fee-free oil, and we got one schedule\nof fees as separate from this new $1, $2, $3 and you also\nmade a commitment then that, for five years, new and expanded\ncapacity would be exempt from fees for 75 percent of that\ncapacity. How is this affected by your proclamation?\nMR. ZARB: Bob Montgomery will get to the capacity\nquestion in a moment, but there are some exceptions and,\nparticularly, those that relate to importing petroleum\nproducts, doing something with it, creating one or two\nprocesses and then exporting it. That has formerly been\nexempt and will also be exempt from this program. So, for\nexample, the exporter of petroleum chemicals will not be\naffected.\nBob, the capacity exemption.\nMR. MONTGOMERY: The capacity exemption and other\nexemptions that are currently in effect will be in effect,\nbut the exemptions will apply only to the present fees.\nThe supplemental fees, $1, $2 and $3, will not be subject\nto exemption, and the oil importer and so forth will not\nhave the authority to grant exemptions from those fees.\nQ Sir, you have given a great deal of consideration\nto New England. How about North Florida, Jacksonville in\nparticular, that is totally dependent on foreign oil? Will\nthey have any relief in that area?\nMR. ZARB: The areas such as the one you described,\nwhich are heavily dependent on residual oil for utility\nconsumption -- some partsof Los Angeles as I recall are the\nsame -- will enjoy the same benefits. Their product fees\nwill not go into effect at all during the month of February.\nThere will be a 60 percent impact or 60 percent increase in\nMarch and 60 percent in April, to a total of $1.20, rather\nthan $3.\nMORE\n- 7 -\nSo, the balancing of those who are in that\nparticular predicament will also be affected. In addition,\nthey have enjoyed the entitlements program benefit that we\nhave been able to initiate.\nQ\nThe entitlements will not be extended, but\nthe cost of a barrel of oil will only go up $1.20 to the\nelectric authority?\nMR. ZARB: For the moment, the entitlements will\nbe extended, as well as the lesser rate of fee, which\nwill be applied to all products.\nQ\nI am speaking in terms of the exemption that\nthey have received for the import tax in the past. That\nwill continue by 50 cents a barrel, and they will have\nanother $1.20 tacked on to the price of a barrel of oil,\nis that right?\nMR. ZARB: Whatever exemptions were there before\nwould continue to be exempt.\nQ\nMr. Zarb, your agency put out a rather detailed\nrationing plan today. Under what circumstances might that\ngo into effect?\nMR. ZARB: Unless there has been something put out\nfrom my agency today that I am not aware of, what we did put\nout was an analysis of the questions that have recently\nbeen raised concerning a rationing program and how it would\nbe designed and how it would affect various families within\nour society.\nThat preparation was designed in response to the\nquestions we have had in the last week, asking us how would\nit work and who would it affect and how effective would it be.\nThere is no current plan to initiate a rationing program.\nQ\nThat was not the question, Mr. Zarb.\nMR. ZARB: I am sorry.\nQ\nThe question was, under what conditions would\nsuch a rationing plan go into effect? The questioner I don't\nthink said that there was a rationing.\nMR. ZARB: I thought he said we had published a\nrationing plan. That is what I was responding to.\nMORE\n- 8 -\nQ\nI said that you put out details of how one\nwould work if you put one into effect, and I want to know,\nunder what conditions you might consider putting it into\neffect?\nMR. ZARB: I would say a national emergency,\nsuch as another embargo, would bring us very close to making\nthat decision.\nQ\nWhat else other than an embargo might constitute\nan emergency?\nMR. ZARB: That is about the only one I can think\nof right now, outside of the conditions we faced during World\nWar II, which was also an emergency.\nQ\nExcuse me if this question was asked earlier,\nbut have you done any projections, estimated projections\non the amount of reduction in fuel use that would accrue\nbecause of the President's importation increase?\nMR. ZARB: Are you talking about the $1 program\nalone, or are you talking about the whole thing, or the\nentire President's program?\nQ Starting out with what began today, the $1.\nMR. ZARB: I don't know if we have the exact\neffects. Obviously, when you consider the $1 as compared to\nthe total package, the amount of conservation will be very\nsmall, and the phase-in period is designed to create a period\nof adjustment rather than to have an immediate impact of\nurgent savings.\nWhat the program does do in its entirety, once\nenacted by the Congress -- does get us to our million barrels\nby the end of the year. There are those who have said --\nI think the Wall Street Journal said -- it was only 800,000\nbarrels by the end of the year. Our projection indicates it\nis between 800,000 and a million, with 200,000 barrels to\nbe brought onstream by Elk Hills and coal conversion.\nQ\nHow small is the phase-in period? Are you\ntalking about 100,000, 200,000, half-a-million barrels?\nMR. ZARB: If we are talking about a $3 tariff\nalone, I really cannot give you that number. I had it, and\nif I give you one now, it will be hip shooting, but we will\nget it for you.\nMORE\n- 9 -\nQ Mr. Zarb, could we get Mr. Greenspan up\nthere just for a moment.\nMR. ZARB: It will be a pleasure.\nQ Mr. Greenspan, could you tell us how you\narrived at your estimate of only a 2 percent increase in\nthe CPI from the combined effects of the President's program\nand your claim that there will be no ripple effects to speak\nof?\nMR. GREENSPAN: Let me specify, first, what it is\nthat our analysis does, and I want to, first, say that this\ntype of analysis is not something which one has an exact\nnumber. There are small ranges which I think one must\nrecognize in this sort of thing.\nWhat we did was to calculate the total amount of\noil and gas increase that would be involved in the cost\nstructure. That comes out to that figure, which we have\ntalked about, something in the area of $30 billion, and it\nis plus or minus a small amount.\nNow, if you take that and you filter it through the\ntotal economy, you come up with a figure which is approximately\n2 percent. Now, the question that has often been raised is,\nis there not a so-called ripple effect?\nNow, what that means, of course, is that, in the\nprocess of these costs working their way through the economy,\nadditional elements of cost or profit associate themselves\nwith that actual increase and, as a consequence, the aggregative\neffect then proceeds to be in excess of 2 percent.\nNow, if it is going to occur, it has to occur,\nessentially, really in only two areas. One is in increased\nwages and salaries, or in increased profits. Now, there\nare a number of contracts, with cost of living escalators in\nthem, which would be triggered in the process of the CPI\nchanging. We analyze the effect. It turns out the number\nis, in fact, quite small on an aggregate basis, because,\nas you know, there are only several million, 3 to 5 million --\nit depends on the way you are looking -- which are directly\naffected by the CPI escalators, out of a total employment\nof 85 million.\nThe real impact, however, that a lot of people\nare arguing for, is on wages other than on the automatic\nCPI cost of living escalator adjustment, and there are a\nnumber of econometric models which somehow suggest there is\na significant impact there. I have looked over these\nMORE\n- 10 -\nvarious calculations, and it is very difficult to justify.\nThese are complex calculations. I don't want to get into\nthe econometrics of it, but I do not find it very persuasive.\nSecondly, we then proceeded to look at the impact\nthat has occurred on profits, and the only evidence we had\nas a historical case, clearly, was the period around the\nembargo. And we looked at what occurred to corporate profits,\nex-oil profits, which of course went up significantly during\nthat period, and we found that they did not go up. On the\ncontrary, they went down. Now, that is not conclusive evidence,\nobviously, because there are lot of other factors involved.\nMORE\n- 11 -\nQ\nPrice controls were in effect, then?\nMR. GREENSPAN: Not during the whole period.\nThere are all sorts of cost passthroughs that were\nallowed, and we are talking about even subsequent to that\nbecause remember controls went off the end of April 1974,\nso you can still take a look at the process before and\nafter.\nWe concluded that the evidence that profits\nare affected in a positive way, increasing, is clearly\nnot there, and if anything, the evidence suggests that\nthere will be an incapacity of companies fully passing\nthrough the price increase.\nSo, if anything, on the profits side, the\nripple effect is likely to be negative.\nI do think there is likely to be some positive\neffect on the wage side, some increase, and if we put\nall the numbers together, what we conclude is that\nthere is no evidence which suggests figures of some\nof the large 3.5 or 4 percent numbers which I have seen.\nI just do not believe it. I think the evidence there is\nreally stretching what we have far beyond the validity of\nthe numbers.\nI do not wish to say the figure is 2 percent.\nI really do not know that. I am saying it is in the area\nof 2 percent. It is possible it could even be less than\nthat. My guess is it is slightly more.\nQ\nMr. Zarb, may I ask a question? Today at\nthe briefing Ron said that the $1, $2 and $3 oil fees\nwould probably raise the price of gasoline at the pump\nabout one cent a gallon for each dollar of fees.\nNow, is that going to be true across the United\nStates, and when would that come into effect?\nMR. ZARB: The calculation is nearly correct.\nLet's take the first dollar, which becomes effective\nFebruary 1. The industry has the authoirty under our\nregulations to pass costs through only in the month\nfollowing the one within which they occur.\nSo, in the case of the $1 on petroleum products,\nthey will. begin to be felt at the rate of one penny per\ndollar during the month of March. Since the total sales\nduring the month of March are not going to be equivalent\nto the total imports, the impact will be lesser.\nMORE\n- 12 -\nWith respect to product, it is even further\ndrawn out because the product fee does not go on until\nMarch 1, and then the initial impact is not felt until\na month later.\nQ\nCan the people in New England expect a\npenny a gallon more, to have to pay that more for gasoline\nin March, April and May?\nMR. ZARB: By the end of March in that product\nabout a penny a gallon would be close to right. With\nrespect to heating oil and utility rates, that would not\nbe true.\nQ\nWhat would be true?\nMR. ZARB: Not until April would they feel\nthat because the rate does not go on until March 1. They\ncannot pass it through for 30 days and then the pass-\nthrough is only a small part of the total.\nSo, the first month's action is between 30 and\n60 days away in terms of impact being felt by the individual\nconsumer.\nQ\nWhat about the rest of the country outside\nof New England?\nMR. ZARB: Outside of New England the one penny\nper gallon will have begun to be felt during the month\nof March, after the heating season.\nQ\nMr. Zarb, when the program is fully in\neffect, what percentage increase do you expect electric\nbills to show?\nMR. ZARB: A lot of that is going to depend on\nhow the electricity is generated. That is the problem,\nand you cannot strike an average that is going to be\ncorrect in each part of the country.\nWhen the total President's program is enacted,\nthe average American family will pay an average of $13\na year more for just electricity, but keep in mind in some\nareas of the country it is a lot lower than that, and\nin some areas it will be somewhat higher.\nQ\nHow about the Northeastern States?\nMR. ZARB: It will get closer to $15 or $16,\nis that correct, just the electric portion?\nMORE\n- 13 -\nQ\nPer month or per year?\nMR. ZARB: Per year.\nMR. MONTGOMERY: That adds up to the 171. That\nis the increase.\nQ\nDo you have a figure just for this procla-\nmation on what it will do to gasoline prices?\nMR. ZARB: That was the question he asked, and\nI just don't have it in front of me. I will get it\nto you.\nQ\nThe overall thing is 10 cents a gallon,\nbut this is a couple pennies less?\nMR. ZARB: I think we estimated it was between\nthree and four cents, but you better let me get you\nthe specific number.\nQ\nI thought they gave five as the figure at\nthat briefing earlier today.\nMR. ZARB: Just for the $3. I don't believe\nit is quite that high.\nQ\nMr. Zarb, you said for the rest of the\ncountry the increase would be one cent a gallon and that\nwould be felt during March for the rest of the country\nand then you stated it is after the heating season.\nHow about for gasoline for the rest of the\ncountry?\nMR. ZARB: It would be felt at the rate of\nabout one penny per gallon starting in March. Not\nentirely because the total penny impact will not be\nfelt during the month of March. It won't be until April\nthat the full one penny will be felt per gallon.\nQ\nHow will an increase in price of that\nmagnitude restrain demand?\nMR. ZARB: As I noted earlier, the constraint\nin demand is going to come from the full Presidential\nprogram. This program is designed to phase in and\nbegin the process of adjustment so that when the total\npackage is approved by the Congress, we have had a\nphase-in period.\nMORE\n- 14 -\nQ\nWhat will you do if Congress does not\napprove any of the rest of it and you end up with a $3\ntariff April 1? Is that enough to constrain demand?\nMR. ZARB: No. It really is not. It is hard\nto conceive that the Congress is not going to act. We\nwould like them to act quickly so that we can begin\nto return that. money to the economy. Those who are in\nthe lower income brackets are going to receive more back\nthan these increases that we have just talked about would\naffect them.\nQ\nIf they don't act, though, will you have\nto drop the whole tariff and come up with a whole new plan,\nor could that be coupled with something else?\nMR. ZARB: Russ, I think if they don't act we\nwill just have to review the situation and see what other\nactions need to be taken. The President is absolutely\nadamant that we need to turn this situation around and\nturn it around now.\nAn exposure of an additional two million\nbarrels per day by the end of 1977 is completely\nintolerable.\nQ\nMr. Zarb, do you have a percentage or a\ndollar figure for the cost of heating a home for the\nNorthern States?\nMR. ZARB: I will give you a rough number. It\nwould be in total about $56 a year additional. That is\noffset some because in New England there is a lot less\ndriving than there is in some other parts of the\ncountry so that in parts of the country where there is\na lot of driving, they pick up a much higher burden\nin gasoline as compared to heating oil.\nSo, in the ultimate, when you look at the\ntotal distribution of cost, you find that the imbalance\ndoes not accrue solely to Northeastern New England.\nQ Is that an average family, that $56?\nMR. ZARB: That is correct.\nQ\nIs that based upon heating the home at\nthe family's customary temperature or does that assume a\nreduction in termperature to compensate for the increased\ncost?\nMR. ZARB: That does not assume the conservation\neffect, which we hope to ultimately get through storm\nwindows and insulation.\nMORE\n- 15 -\nQ\nMr. Zarb, you and Mr. Greenspan have just\nbeen justifying your estimate of the inflation estimate\nthat you have made; that is, a one-time, 2 percent\nincrease in the Consumer Price Index. We heard the\nGovernors outside just now say their estimate is that\nit would increase inflation 5 to 6 percent, and I\npresume you discussed that disparity at the meeting.\nDo you have any explanation as to why this\nfigure is so different from yours?\nMR. ZARB: As Alan said, the most formal number\nwe have seen recently, publicly, was 4 percent, and that\nwas with university models that said the number was really\n4 percent. We look at that very carefully. Alan has\nexamined it very carefully, and found that there is no\nway to justify the 4 percent number.\nIn response to the issue where the Governors\nsay, \"Our experts have come up with somewhat different\nnumbers on the bottom line,\" we have said, and Ihave\nasked, that their experts meet with our people as soon as\nit can be arranged and go over our analysis in every\ndetail and every last line and see where there may be an\nopportunity for variation.\nQ\nBasically, you don't know right now why\ntheir figures are so different from yours?\nMR. ZARB: The first time I heard those numbers\nwas today.\nQ\nWhat figure were you settling on, Mr. Zarb\nthen -- to repeat -- for the cost on this proclamation\nfor gasoline and for heating?\nMR. ZARB: In terms of total inflation rate\nby the $3?\nQ\nYes.\nMR. ZARB: We don't have the number. It is maybe\n2 percent, 2.5 percent for the total package, so\nobviously it has to be substantially less than that with\njust a $3 tariff on imported oil alone.\nQ\nWill there be a straight percentage figure\nthere if we took the total cost of the $3 import fee and\nthe $1.20 import fee and figured out how much money that\nreally involves.\nCould we then compare that with $30 million\nfor the total package and draw our own conclusion about\nthe inflation impact?\nMORE\n- 16 -\nMR. ZARB: I think that would be fair. You\nwould have to get approval from Alan Greenspan, but\nfrom a noneconomist, it sounds correct.\nQ\nMr. Zarb, what will you do if Congress\npasses a joint resolution and delays imposition of the\nfees to roll them back or rescind them?\nMR. ZARB: That decision, what we would do\nnext, would really be up to the President.\nQ\nWhat would you recommend that he do?\nMR. ZARB: I stay out of the business of really\ntelling everybody else what I recommend to the President.\nI think we ought to just wait and see what happens if\nthose things occurred.\nIt is hard for me to believe, after recognizing\nand realizing the extent of our exposure as a Nation,\nthat we won't get some forward movement. I said before\nand I will say again that every step of the President's\nprogram has a value and the value is in barrels of\noil.\nIf one of those steps is removed, it should be\nsubstituted with another one that has an equivalent\neffect and the same value. I do believe that we made\nsome material headway here. It is kind of interesting\nand warms the cockles of my heart to sit here and talk\nto you about the national energy problem.\nIt has been six to ten days now since the\nPresident's plan has become public in full. We are\ntalking about the energy problem like we for the most\npart believe that it is serious. The Governors sat in\nthere and to a Governor endorsed the fact that we had a\nserious energy problem and should be doing something\nabout it..\nThere was no question about that. There\nwas no question about the goals that the President set\nout. There was complete agreement with about 75 percent\nof the President's package. And those other steps\naffect long-term conservation and long-term substitution\nof domestically controlled energy sources to back out\nthe imports.\nSo, if you look at that in total, we are 60\nyards downfield and the remaining portion of the 15\npercent of the President's program that we are debating\npublicly is the strategy to use to achieve short-term\nconservation.\nFrom the standpoint of progress over ten days,\nI think thatis pretty nifty.\nMORE\n- 17 -\nQ\nMr. Zarb, you gave us the figure of 2\nto 2.5 percent that you and Dr. Greenspan estimate we\nwill increase the inflation rate. Could you give us\na dollar figure per gallon of gas and the dollar\nfigure per gallon of heatingoil as a result of the\nPresident's proclamation in the areas outside of New\nEngland? That is an estimate.\nMR. ZARB: I am reminded that per gallon\nthe increase is the same everywhere. Now, there is\na variation because of the New England resid imbalance,\nso it is very hard to come up with a number for you. I\nthink you are going to have to work with the ten cents\nper gallon when the full program is implemented and\nprobably something more than ten cents in gasoline,\nsomething less than ten cents in the elastic products\nsuch as home heating oil and then just extrapolate back-\nwards using the $3 tariff, but you have to then crank\nin the $1.20 for product.\nIn New England, they import a lot of heating\noil as well as a lot of residual oil. Buildings\nin New York are heated with residual oil. That is an\nimported product. So, you have to look at all these\nvariations. That is why I hate to give you national\naverages because somebody who lives in Alaska looks\nat the national average and says, \"This guy is\nreally out of his mind.\"\nQ\nMr. Zarb, the heating oil will come under\nthe distillate, the product program which is 60 cents.\nMR. ZARB: If it is imported, that is correct,\nand a good part of it is in that part of the country\nimported. But I did try to make the point -- and after\nthe meeting I visited with several of the Governors --\nthat in the Northeast the more permanent solution is\nwhat we really ought to be after.\nGovernor Noel made the point that the situation\nas it exists now with the ultra-high dependence for\npower on oil in that part of the country is a prime\nsource of the difficulty. So, we need to attack the\nsymptoms and I think the government working with the\nNortheast group can sit down and develop a New England\nplan within the total plan that can expedite the\ndevelopment of some of the domestic sources required\nthere.\nTHE PRESS: Thank you, gentlemen.\nEND\n(AT 5:00 P.M. EST)"
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