result, OPEC has generated considerable adverse macroecononic side effects in the United States and elsewhere, significantly reducing real economic output and employment and causing inflation, in part through accommodating demand to management policies, to rapidly accelerate compared to otherwise existing levels. In addition, these OPEC policies have had significant adverse microeconomic consequences, as the energy consuming capital stock has had to be altered to respond to new relative prices for oil and other energy resources, as well as labor and capital. Equipment that was energy cost effective at previous oil price levels may not be cost effective at new, abruptly higher oil price levels. Conservation, including improved energy-using technology, coal, solar, or increased labor use are cost effective substitutes for oil in many fuel uses. The United States compounded the adjustment process by adding energy policy uncertainties of its own. Price controls on natural gas since the 1950s and on oil from 1971 to 1982, tax breaks, tax subsidies, allocations, entitlements, electric utility regulation/rate setting all have sent producers and consumers very confusing, and at times conflicting, signals on how to respond. Consumers continued to consume oil and gas as if it were generally available below existing market price levels. Producers were encouraged to seek other ventures that might provide a better investment. The relative prices of substitutes for oil and gas were thus kept artificially high and less economically attractive to consume and produce. The current soft oil market reflects in part a significant adjustment to those distortions, as market forces have been permitted greater freedom to work. In sum the United States “energy crisis” came about because a group of oil exporting countries colluded to raise oil prices much faster than otherwise would have occurred, and because state and federal governments were not able to deal with the situation and, as a practical matter, made matters worse. Should the current soft oil market firm up in the future, as it likely will, and should another oil price spike be met with the elaborate oil control mechanism of the 1970s, major shortages, economic dislocations and energy waste will again be imposed on U.S. energy consumers. PROSPECTIVE UNITED STATES ENERGY USE PATTERNS Against this background, how is the United States energy mix likely to change between now and the twenty-first century? Numerous studies of alternative energy futures have been made. For discussion purposes here, I have selected the results of the study of the Committee on Nuclear and Alternative Energy Systems (CON AES) produced in 1977/1978 under the auspices of the National Academies of Sciences and Engineering (3). Its scenario development spans a range of most other recent studies of energy futures. Table 1 sets forth the United States energy mix in 1978 and a range of energy mixes posited by CONAES for year 2010.* CONAES Scenario L posits very aggressive energy conservation requiring some lifestyle changes and a 2% per year real rate of growth of Gross National Product (GNP); Scenario II2 posits the same GNP growth rate, but a less aggressive conservation policy with minor lifestyle changes; Scenario III2 posits the same rate of GNP growth and only gradual energy conservation increases. Scenario III3 posits the same conservation level as III2 but real GNP *The CONAES Study also considered three other scenarios which were bounded by those set forth in Table 1. 3% GNP growth Scenarios I and II were considered, as was 2% GNP growth for Scenario IV.
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