Abstract
In 1973, the onset of the so-called ‘energy-crisis’ — a crisis primarily involving petroleum supplies — caught many knowledgeable observers by surprise. As late as 1970, for example, a prestigious Cabinet task force had reported that a 1980 US demand of 18.6 million barrels per day (MMb/d) could be easily supplied. The task force noted that ‘without import controls, the domestic wellhead price would fall from $3.30 per barrel to about $2.00, which would correspond to the world price. Although we cannot exclude the possibility, we do not predict a substantial price rise in world markets over the coming decade’.1 At this $2.00 price ($3 in 1976 dollars), the Cabinet Task Force predicted that approximately half of total US demand, or 9.5 MMb/d, could profitably be produced from domestic wells, while if the 1980 price was $3.30 ($4.95 in 1976 dollars) US producers could profitably produce 13.5 MMb/d in 1980.2
D. T. Teece (ed.) R & D in Energy: Implications of Petroleum Industry Reorganization (Stanford: Institute for Energy Studies, 1977).
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Notes
M. A. Adelman, ‘Population Growth and Oil Resources’, Quarterly Journal of Economics, 89 (1975) pp. 271–5.
S. Clark, Oil Industry Earnings, (Claremont College, Claremont, 1976) pp. 21–2.
W. D. Nordhaus, ‘The Allocation of Energy Resources’, Brookings Papers on Economic Activity, 3 (1973) p. 557.
P. Davidson, ‘The Relations of Economic Rents and Price Incentives to Oil and Gas Supplies’, G. M. Brannon (ed.), Studies in Energy Tax Policy, (Cambridge, Mass.: Ballinger, 1975).
P. Davidson, L. H. Falk and H. Lee, ‘Oil: Its Time Allocation and Project Independence’, Brookings Papers on Economic Activity, 2 (Summer) (1974) (Chapter 25 in this volume).
N. H. Jacoby, Multinational Oil, (New York: Macmillan, 1974).
M. A. Adelman, ‘The World Oil Cartel’, Quarterly Review of Economics and Business, 16 (1976).
P. Davidson, ‘Prepared Statement of December 18, 1974’, in The Economy and Fiscal Policy, 1974; Hearings before the Committee on the Budget, US Senate, (Washington: US Government Printing Office, 1975).
The Nobel Prize winning economist, Sir John Hicks, has suggested that the reason the US has not experienced the same higher rates of inflation as Western Europe in the last two years is due to the fact that the price-rise of imported oil, ‘while it has a large effect on the American Import price index, has not been allowed to soak through to the domestic American economy. The American oil producers have not been allowed to raise their prices’ (Hicks, ‘What’s Wrong with Monetarism’, Lloyds Bank Review, October 1975, p. 12).
P. Davidson, ‘Public Policy Problems of the Domestic Crude Oil Industry’, American Economic Review, 53 (1963) pp. 85–108;
R. G. Kuller and R. G. Cummings, ‘An American Model of Production and Investment for Petroleum Reservoirs’, American Economic Review, 64 (1974) pp. 66–79.
J. M. Keynes, The General Theory of Employment Interest and Money, (New York: Harcourt Brace, 1936) p. 159.
US Senate Committee on Interior, The Structure of the US Petroleum Industry, (Washington: US Government Printing Office, 1976) p. 89.
E. H. Chamberlain, The Theory of Monopolistic Competition, (Cambridge, Mass.: Harvard University Press, 1950) 6th edn, pp. 266–9.
Editor information
Copyright information
© 1991 Paul Davidson
About this chapter
Cite this chapter
Davidson, P. (1991). Divestiture and the Economics of Energy Supplies. In: Davidson, L. (eds) Inflation, Open Economies and Resources. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-11516-7_28
Download citation
DOI: https://doi.org/10.1007/978-1-349-11516-7_28
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-11518-1
Online ISBN: 978-1-349-11516-7
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)