Time Essay: How to Counter OPEC

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Can anything be done to break the tyranny of the toughest cartel in history, to prevent oil shortages and price gouging? The answer is yes—if. If the U.S. is ready. At last, the jarring events of the past few weeks have probably persuaded Americans that the crisis is real, and that the nation can meet it by making some sacrifices and changes in its lifestyle, by taking some chances and paying some costs. What is needed, of course, is to lessen immediately the country's umbilical dependence on crude oil from the cartel. Slackened demand could loosen the market, make OPEC nervous and start a rush by its members to sell. The ways to accomplish that are well known and many, for there is no single miracle stroke against OPEC.

Because nearly 40% of all oil used in the nation goes for gasoline, the first and most important step is to brake gasoline demand. Rationing would seem to be the politically expedient method. A New York Times-CBS News poll in early June found that three out of five Americans would prefer rationing to shortages and skyrocketing prices. Yet any form of rationing would tend to be inequitable and a bureaucratic nightmare. Even during World War II, when the U.S. was united as never before or since, gasoline rationing was marked by corruption, favoritism and loopholes. Today, rationing would be enforced by the same Department of Energy folks who have done so much to confuse and compound the gasoline mess. Says Treasury Secretary Michael Blumenthal: "The more I'm in the Government, the more market-oriented I become. No bureaucrats with pins at the Department of Energy, trying to figure out how much gasoline each gas station in the country should get, can set out a way to distribute gas in this country." Nor can they fairly and soundly figure out how much gas each driver needs and should get.

The House in May rejected the President's stand-by rationing plan, but it offers some clues to any future program. Car owners would get ration coupons and could sell unused coupons on a "white market" at any price; each car would be allotted about 50 gal. a month, though the totals would vary by state; no more than three cars in each household could receive coupons; extra rations would be given to police cars, ambulances, taxis, farm tractors; heavy recreational vehicles would get nothing.

Probably a more efficient measure would be to "ration by price," that is, to free the market and remove gasoline price controls. President Carter has the authority to do that, subject to congressional veto. Decontrol would cause a political storm because prices would immediately rise. Some experts warn that gasoline would soar to $2 a gal., but free market advocates argue that long-term prices would go up much less, by perhaps a few cents or a dime a gal. In any case, three facts are most significant. First, a free market unquestionably would reduce demand by raising the cost. Second, the price would still be lower in the U.S. than in any other industrial nation except Canada. Third, the Government could use taxes both to skim off any "windfall" profits and to compensate lower-income people, who might otherwise be hurt by higher gasoline costs.