Business: An Oil Crisis: True or False?

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Experts answer almost everything you ever wanted to know about energy

Oil prices are up and supplies are down, but people the world over are confused and skeptical about whether an energy crisis exists. If the crunch is for real, they wonder how bad it is, who caused it, where it is leading, and what should be done to cope with it. For the answers, TIME interviewed at length five leading independent oil experts. They are: Morris Adelman, 62, professor of economics at Massachusetts Institute of Technology; Walter Levy, 68, the dean of petroleum consultants and adviser to governments and oil companies; John Lichtblau, 57, head of the private Petroleum Industry Research Foundation; Arnold Safer, 42, an economist of Irving Trust Co.; John Sawhill, 42, president of New York University and former Federal Energy Administrator. Excerpts from from the interviews:

Is there a crisis?

LEVY: The Iranian revolution triggered a real crisis. The protests against corruption and excessive development will encourage other OPEC countries to slow oil production. There is nothing in sight that would lead to very substantial increases in oil supplies in the immediate or even medium-term future.

ADELMAN: There is no genuine supply crisis. There was an accident, Iran. We are traveling a bumpy road, and will continue to do so as long as OPEC is in charge. There is nothing we can do to make the cartel produce more. We have handed control of world oil over to a small, noncompetitive and irresponsible group.

SAWHILL: I prefer to call it not a crisis, but a problem, arising from our growing dependence for oil on a politically unstable part of the world. We have failed to curtail imports, and in the short term we are completely at the mercy of the Middle East oil suppliers.

SAFER: There are some crude shortages, but there is no crisis of physical supply. In the longer run, there is no shortage in terms of proven reserves or potentially discoverable oil.

LICHTBLAU: We are not going to run out of oil, but we may run out of suppliers who are willing to give us more, even if it is available. Oil can be denied either for political reasons or because a country simply has no economic interest in increasing production. That is the danger

Why are oil prices rising, and what will be the consequences of these increases?

LEVY: A perceived shortage of only 2% or 3% may result in price increases of the order of 20%, 30%, 40%, even before supplies actually run short. So far this year, OPEC has increased prices by about 25%. As a result, the importing world will lave to spend about $35 billion a year more for the same quantity of oil.

SAFER: The problem is not a few cents more for gasoline. The higher cost of oil will drain an additional $35 billion a year from the world's purchasing power, and only about half of this will be recycled back in increased OPEC imports. Economic policy is virtually helpless confronting the simultaneous inflation and recessionary impact of this phenomenon.

In the short term, what can the world do to cope?

ADELMAN: There is not a damn thing we can do. We have no carrots and no sticks. The President should publicly admit that we are in the hands of a group of people, the OPEC cartel, who are at the moment wholly beyond our control.