One of the most depressing aspects of the recent Persian Gulf upheaval is that the United States has once again been caught virtually unprepared to deal with the threat to its supply of imported petroleum. This should not have come as a surprise. Indeed, as the 1980s unfolded, the increasing vulnerability of the US energy supply to foreign manipulation would surely have been clear to Persian Gulf adventurers in the yearly reports of our national energy and economic accounts. That Americans ignored it until this August is yet another troubling indication of the national somnolence of the 1980s.
It is true that when OPEC overplayed its hand in 1979 and sharply raised prices, the US temporarily decreased its oil consumption and domestic oil production rose. But the decrease in consumption was over by 1983—ironically just as many Americans were convinced that they were entering a period of painless national prosperity. US oil consumption has since risen by 12 percent. And the good news about energy production was over by 1985. Between 1985 and 1989 US production declined by 12 percent, and it is expected to decline another 4 or 5 percent this year. From net crude oil imports of about four million barrels a day in the mid-1980s, our oil deficit has lately been increasing—to six million barrels a day in 1988, and, according to recent projections, it will exceed seven million barrels a day this year.
A downward trend in world energy prices between 1980 and 1988—partly caused by energy conservation in other industrial countries—temporarily reversed the impact of our growing oil deficit (measured in barrels) on our trade balance (measured in dollars). Indeed, from 1980 to 1986 our annual net oil trade deficit fell by over $45 billion. But again the good news is over. Nearly all experts agree that our net oil trade deficit, after reaching a low of $29.9 billion in 1986, is bound to rise from now on. When the figures for 1989 become available, they will show that the oil deficit will exceed $40 billion.
What will it be during the 1990s? Even if we assume no increase in real energy prices—although such an increase seems highly likely—the US Department of Energy now estimates that we will have a net deficit of over $80 billion by 1995 from importing nine million barrels of oil a day (or over half our national consumption of oil and twice our imports in 1985). Even a very gradual rise in real energy prices could easily push this figure above $100 billion by 1995. Even before Saddam Hussein’s move into Kuwait, James Schlesinger, the former secretary of energy, testified that he believes that by 1995 oil imports will reach ten to eleven million barrels a day at a cost of $120 billion. Thus by 1995 the US oil import bill could well exceed our present trade deficit.
During the last decade, we often heard that there was a “glut” of oil …