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Portents of U.S. oil vulnerability.

The recent three-year glut of oil in world markets -- and the decrease in oil prices that it has fostered -- have all but erased the 1970s Arab-oil embargo from memory. However, a new energy paper from the Washington, D.C.-based Worldwatch Institute warns against complacency. In it, the institute's Christopher Flavin cites data suggesting that the industrialized world may be no more than 10 or 15 years away from a dependency on Mideast oil producers -- and their control of world oil prices -- that rivals or surpasses any experienced in the mid-1970s.

The three factors most responsible for the oil glut that has released the Organization of Petroleum-Exporting Countries' (OPEC's) economic stranglehold over the developed world are an investment in energy conservation of unforeseen magnitude, a flooding of world oil markets with non-OPEC oil--most notably from Mexico and the North Sea--and the biggest global recession since World War II.

But these factors are not likely to persist, according to the report. Almost all the low-cost conservation measures that could be employed have been, Flavin says. Any additional conservation will come largely from investments that have already been made. Projections of an economic recovery also portend an increasing demand for oil.

Perhaps most important, as the table above shows, within 10 to 15 years the reserves of those major oil producers that have increased their output most to destabilize OPEC's market control--like the United Kingdom and Mexico -- will be nearly exhausted. So too will U.S. reserves. And when that happens, Flavin says, OPEC's Mideast members could become more powerful than ever.

Ironically, he adds, today's relatively low oil prices tend to discourage investment in technologies that might reduce oil dependence 10 years from now.

"[Flavin's] thesis is a generally sound one," says Barbara Kates-Garnick, research director at Cambridge (Mass.) Engergy Research Associates. William Quandt, a senior fellow at the Brookings Institution in Washington, D.C., adds that Flavin's reasoning "is pretty close to the conventional wisdom in oil-watching circles."

Less conventional is one of his recommendations for reducing the vulnerability of major industrial nations: that special tax breaks and subsidies that encourage certain types of energy use and in effect discourage energy conservation be gradually removed so that all domestic energy sources can "compete on the same level playing field." Flavin also recommends financial incentives for manufacturing and purchasing products that use every efficiently. Finally, he calls for import taxes on oil and gasoline--like the seemingly ill-fated proposal recently drafted and advanced by the Republican leadership in the U.S. Senate.
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Author:Raloff, Janet
Publication:Science News
Date:Aug 3, 1985
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