Oil's impact
By cutting prices on their North Sea crude oil this week, Norway and Britain have put new pressure on the 13 member nations of the Organization of Petroleum Exporting Countries either to reduce prices or - what would be a far more difficult step for OPEC - to slash production. It seems increasingly likely that the upshot will be that oil prices will either stay about the same or start to drop.
Either possibility has immediate and long-range implications for the world in general and the United States in particular: A continuing period of either steady or falling oil prices provides a timely boost for the global economy at a time when many analysts have expressed concern that the recovery may be losing much of its initial steam, although not moving toward recession. Such a scenario provides additional breathing room for financially strapped third-world nations. And for consumers in the industrial nations of Northern Europe and the US, the possibility of a new period of steady or falling prices could not have come at a more propitious moment - the onset of winter, when energy usage tends to rise.
Whatever the actual outcome of the cuts announced this week by Norway and Britain, the challenge for US policy leaders could not be clearer: The US needs to take full advantage of any period of price stability or price reductions by renewing America's vital commitment to conserving energy. Washington needs to move ahead more expeditiously in filling the nation's Strategic Petroleum Reserve, which is designed to insulate the US from any major cutoff of oil, as happened back in the 1970s.
The 1970s! What a difference a mere decade can make, as President Reagan must surely realize, and as former President Carter can hardly forget. A part of the prosperity of the current global recovery is built on falling oil prices. Alternative energy sources are coming on line. Businesses, families, and individuals have made enormous gains in energy conservation.
Whereas the world of the 1970s was caught up in the prospect of shrinking energy supplies, which in turn seemed to suggest increasing global economic limitations and stringency, the outlook in the mid-1980s suggests oil sufficiency, if not short-term glut. It also suggests economic expansion. And back in the '70s, the conservation movement (geared toward leaving the land alone) was riding a political crest. Today, it is the developer, the entrepreneur - even the energy entrepreneur - who wins accolades in corridors of power.
To take notice of this irony is not to fault the leaders of the 1970s or '80 s. National leaders always operate within a set of assumptions that may or may not be borne out by subsequent events. But it serves as a useful reminder of the need not to base long-range policy on short-term assumptions. Many experts still believe that the world could face more energy shocks. That is why it is so important for the US to move forward on the conservation front, continue to develop alternative energy sources, and fill the nation's petroleum reserve.