Limits of Conservation: Implications For Energy Policy

Robert G. Weeks, Mobil Oil Corporation
ABSTRACT - There are severe limits imposed on conservation by the behavioral patterns of consumers and by the nature of our free society. Conservation can still make a valuable contribution to the national energy effort. But conservation is not a realistic alternative to developing the nation's rich energy resources.
[ to cite ]:
Robert G. Weeks (1977) ,"Limits of Conservation: Implications For Energy Policy", in NA - Advances in Consumer Research Volume 04, eds. William D. Perreault, Jr., Atlanta, GA : Association for Consumer Research, Pages: 322-323.

Advances in Consumer Research Volume 4, 1977   Pages 322-323

LIMITS OF CONSERVATION: IMPLICATIONS FOR ENERGY POLICY

Robert G. Weeks, Mobil Oil Corporation

ABSTRACT -

There are severe limits imposed on conservation by the behavioral patterns of consumers and by the nature of our free society. Conservation can still make a valuable contribution to the national energy effort. But conservation is not a realistic alternative to developing the nation's rich energy resources.

NATURE OF THE ENERGY PROBLEM

The role of energy conservation, in my opinion, is widely misunderstood by much of the general public, media and government alike. Conservation has its place but it also has its limits. Before getting deeper into that, I'd like to lay some essential groundwork by talking about the nature of the nation's energy problem.

There is no energy crisis or shortage now, but it's clear that Americans have a serious energy problem. The nature of the problem is simply that the nation relies too much on foreign oil. This is bad because we live in an insecure world, a world in which we cannot control the cost of such oil or insure its continuity of supply.

Although we have too little domestic supply of oil, the U.S. is far from energy poor. There are abundant energy resources. Hundreds of years of fossil fuel supplies remain. And there is virtually unlimited energy potential from nuclear, solar or perhaps fusion power. What is at issue is the cost and the commitment needed to bring these resources into production.

Let me stress, there are no quick and easy solutions. Energy development requires long lead times. So we need enduring programs and commitments. We need to explore and test new ways to produce and save energy. And we also need patience to overcome the disappointments of technological dead-ends, and to endure the short-term setbacks caused by the everyday ups and downs of the world we live in.

CONSERVATION AND THE CONSUMER

I'd like now to talk about conservation from the perspective of the American consumer. Certainly, we all agree that waste should be eliminated. But I do not see any good reason to compel each American to conserve beyond the point of eliminating waste as long as our energy resources are plentiful. Energy availability is practically unlimited in the U.S. as long as we are willing to pay the price to develop it.

In a free society like ours, the public ultimately decides the kinds and amounts of energy it will use. What then do the people want? Some say Americans favor a radical change to a far less materialistic life-style, one that would greatly reduce energy consumption. Proponents of this theory get some people to agree with them by presenting a false dilemma. For example, in some opinion polls people are told their only choices are to either reduce consumption or to face the grim prospect of continued inflation and repeated recessions. They are not told about other and more attractive choices if we develop our energy resources. But rather than get bogged down in theoretical debate, let's look directly at how Americans have reacted recently to much higher energy prices and the threat of energy scarcity.

It's now about two and a half years since the end of the last Arab embargo. Total domestic oil product demand for 1976 to date is still below record high 1973 levels (2.5% less). This demand picture is not altogether representative for, very likely, the relatively low consumption levels of post-embargo 1974 and 1975 can be attributed to the recession as well as to higher prices and conservation. And now that the economy is recovering, petroleum consumption is on the way up again, and is running about 31 higher than 1975. Despite this apparent return to normalcy, the energy situation has changed consumer attitudes and behavior.

First off, the consumer is reacting to higher energy prices, and perhaps to a conservation ethic, in a selective fashion. For example, consumers are cutting energy use around the home. Statistically, post-embargo residential electric power use has only been increasing about one-half the historical rate. Residential natural gas use is down about 5% versus pre-embargo levels, although the number of homes using gas heat has increased by about 10%. Opinion polls agree that consumers are making a determined effort to cut down on the use of electricity and heating fuel. More people are turning off lights, turning thermostats down, using major appliances less frequently and insulating their homes.

On the other hand, Americans are being far less frugal when it comes to their cars. Motor gasoline consumption has increased by about 4% versus 1973; and total mileage is up about 5%. Car dealers report their 1976 intermediate and big cars sold out prior to the end of the model year, while lots of little 1976 cars remain in their showrooms. And whatever happened to compliance with the 55 mph speed limit?

Although drivers haven't cut down much, they have become far more price conscious. The proof of this is evident in my own business. Many low volume service stations have had to close because they can't compete at today's lower profit margins. Moreover, self-service, which cuts costs and thus prices, is booming.

It is also interesting to note that complaints to Mobil about high prices have dropped off dramatically since 1974, when pump prices rose sharply to cover the increase in crude costs imposed by OPEC. This is not surprising. What is surprising is that price complaints are now running only about 50% of pre-embargo levels. It may be that drivers are now reconciled to higher gasoline prices. It also may be due to the fact that the big surge in driving costs is due to cars, not fuel. According to a Hertz Corporation study, only 234 of each dollar increase in driving costs over the past three years is attributable to fuel. On the other hand, 284 was caused by depreciation, and the balance, 494 was laid to insurance, repairs and other non-fuel related factors.

One other point. I don't believe that the continuing American propensity to use energy at high levels can be ascribed to a lack of public understanding or an attitude problem. Polls indicate a substantial majority (85% or more) of Americans regards the need to save energy as very or fairly serious. Further, they believe the need to save energy over the near future will increase or be the same as now, and they agree the U.S. should develop enough new energy sources so we don't have to depend on foreign oil.

ACHIEVING CONSERVATION

So, in the two and a half years since the embargo, I believe Americans have made their intentions quite clear. They do not want to alter, at least measurably, their life-style to save energy. At the same time, they understand the problem and are willing to reduce consumption in some ways.

So how do we go about getting people to conserve more?

One approach is for government to mandate conservation measures directed at eliminating waste and improving efficiency. This has potential, but there are some major problems with its application. To start with, it's extremely difficult to design effective standards that are going to work since proper criteria varies across a great range of energy uses and conditions. There are also serious administrative difficulties connected with monitoring and enforcing. Then, of course, there is always the human factor. Future mileage standards for automobiles provide a good illustration. Let's say the automobile industry successfully develops highly efficient cars that are acceptable to the consumer. What's to prevent people from turning this efficiency into more driving miles rather than saved energy? Do we then counter with regulations that ration gasoline or limit driving in other arbitrary ways?

This illustration leads to a very important point. To the extent measures are taken that force people to alter their life-styles or otherwise do things they don't want to do, we are not practicing conservation, but coercion. Americans would lose freedom of choice because government would be stepping in and making decisions people once made themselves. Some countries have no other options, but Americans do.

Here's a related and also undesirable situation. Let's say we put all our eggs in the conservation basket and adopt plans for phasing in tough energy saving measures. But when the time comes to implement these measures we find they're not feasible because of their disruptive impact on the economy, or because of technological problems, or simply because the public won't accept them. Obviously, such plans are worthless. Meanwhile, we would have wasted valuable time by needlessly delaying the development of domestic energy resources, while our dependence on insecure foreign oil had grown to increasingly dangerous proportions.

CONSERVATION IN PERSPECTIVE

Thus far I've talked about limits imposed on conservation by the public's preference for a high energy type of life-style, and by the nature of our free society, I'd like to conclude by talking about the limits imposed on conservation in terms of its potential contribution towards solving our energy problem.

Say that Americans do a good job of conserving energy and are able to reduce energy demand growth to an average of 2% per year. That's about one-half the pre-embargo growth rate. By 1985, the nation would still need about 20% more energy than it uses now. That means a net increase of 6 million barrels of crude equivalent per day. But this is only part of the story. By 1985, a lot of our current energy sources will be used up and will need to be replaced. So even with zero demand growth we will need to replace a decline in fossil fuel production (oil, gas and coal) equivalent to about 10 million barrels per day of crude equivalents. Our combined growth and replacement needs amount to about 16 million barrels of crude equivalents per day, or about 45% of our total current energy consumption. I think this makes it very clear that the big task facing this country is developing our energy resources.

This is not to say that conservation cannot make a valuable contribution. Certainly, conservation which reduces waste will make the nation healthier. It would help in the fight against inflation by making more efficient use of high cost energy supplies, and by reducing our dangerous and expensive over-dependence on foreign petroleum. But to suggest that conservation is an alternative to developing our virtually unlimited resource base flies in the face of reason. Proponents of such a course fail to comprehend the consequences. Where will we get the energy to clean up the environment, or to provide productive jobs for a work force still growing at the rate of about 1.5 million a year? And what about the personal aspirations of the poor, and of nearly all Americans seeking to improve their standard of living? To ignore the supply side and attempt to bring supply and demand into balance mainly through conservation puts energy priorities upside down. It also brings Americans down a very high risk and solitary road. For if an energy policy primarily dependent on conservation is not successful and I submit it cannot be, the inevitable result will be widespread shortages, economic stagnation, threatened national security and massive government intervention in our everyday lives.

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