The Consumer and the Energy Shortage: a Post-Embargo Assessment

ABSTRACT - The oil embargo of 1973-74 produced a sudden public awareness of U.S. dependency on foreign petroleum resources. This realization stimulated both a baseline and a follow-up study of Southeastern consumer attitudes toward energy related issues at the height of the oil embargo and six months after its end. Similarities and differences over time are presented; key categories are then analyzed and interpreted in light of the changing energy situation.

Citation:

Richard C. Reizenstein and David J. Barnaby (1977) ,"The Consumer and the Energy Shortage: a Post-Embargo Assessment", in NA - Advances in Consumer Research Volume 04, eds. William D. Perreault, Jr., Atlanta, GA : Association for Consumer Research, Pages: 308-314.

Advances in Consumer Research Volume 4, 1977   Pages 308-314

THE CONSUMER AND THE ENERGY SHORTAGE: A POST-EMBARGO ASSESSMENT

Richard C. Reizenstein, University of Tennessee

David J. Barnaby, University of Tennessee

ABSTRACT -

The oil embargo of 1973-74 produced a sudden public awareness of U.S. dependency on foreign petroleum resources. This realization stimulated both a baseline and a follow-up study of Southeastern consumer attitudes toward energy related issues at the height of the oil embargo and six months after its end. Similarities and differences over time are presented; key categories are then analyzed and interpreted in light of the changing energy situation.

BACKGROUND

From 1960 until the pivotal year of 1973, U.S. energy demand grew at the average rate of 4% per year (U.S. Oil and Gas Journal, November 10, 1975). In late 1973, however, the advent of the oil embargo and the attendant realization of the dependence of the U.S. on foreign petroleum resources (nearly 36% of all petroleum consumed domestically in 1973 was imported), resulted in a dramatic downturn in demand for petroleum, as shown in Figure 1. This lowered demand was of short duration, however, lasting only until 1975, at which point energy demand resumed its upward growth at a projected rate of approximately 3% per year (U.S. Oil and Gas Journal, November 10, 1975). Indeed, at the current rate of increase, energy requirements for petroleum are expected to exhaust the current proven oil reserves of approximately 660 billion barrels by the year 1990 (U.S. Oil and Gas Journal, November 10, 1975 and December 29, 1975). [For a highly comprehensive perspective on and analysis of the evolution of the current world energy situation and the oil embargo of 1973-74, see Anthony Sampson, The Seven Sisters (New York: The Viking Press, 1975).]

FIGURE 1

U.S. PETROLEUM DEMAND, 1966 - 1976

An additional concern specific to the U.S. is the extent of our dependency on imported oil. As stated, in 1973, prior to the embargo, 36% of our oil demand was supplied by imports. This escalated to over 37% in mid-1975, and to an astronomical 45.2% in March of 1976, with the impact of renewed economic growth following the recession (U.S. Oil and Gas Journal, March 29, 1976). Exxon corporation predicts that this growth will continue even further, approximating nearly 50% of U.S. petroleum consumption by 1980 (U.S. Oil and Gas Journal, November 10, 1975) even further increasing our dependence on foreign oil.

Yet another immediate concern with respect to oil, and more specifically gasoline, is increasing price. For example, immediately prior to the 1973 embargo, the price per barrel of oil at the Persian Gulf was slightly in excess of two dollars; it is now nearly 12 dollars per barrel. This has resulted, as can be seen in Figure 2, in an increase in gasoline prices from an average of approximately 39 cents per gallon in October of 1973, to an average price of nearly 60 cents per gallon in August, 1976. This combined increase in price and demand carries serious implications for the U.S. balance of payments situation and such considerations as our accustomed life style, traditional modes of transportation, and even the continued survival of our market system as it presently exists.

RESEARCH DESCRIPTION AND DESIGN

A preponderance of the research generated by the energy shortage was stimulated by the need to discover inexpensive fuel alternatives to petroleum in order to reduce both imports and overall consumption. Much of this research was thus grounded in the hard sciences and/or engineering, attempting to find both short- and long-term solutions to the problem of diminishing supplies of petroleum based natural resources. Simultaneously, realizing the difficulties associated with any short-term expansion of the supplies of available petroleum (particularly during the oil embargo),industry (especially petroleum companies and government agencies) began examining consumer attitudes toward energy consumption and consumption patterns, with the hope of determining areas in which the populace could be successfully convinced to initiate conservation practices.

Unfortunately, however, published reports of research on consumer attitudes toward the energy shortage are limited in both scope and availability. Organizations such as Opinion Research Corporation have collected and continue to assimilate consumer attitudinal data on a weekly basis; this information is not generally available to the public, however, being primarily disseminated to governmental decision-makers.

Relatively little energy-related consumer research has been conducted by academicians, however, primarily due to the rapidity of the onset of the problem, the infancy of energy as a major public issue (with an attendant lack of interest and focus on this problem prior to the developments in late 1973), and the lack of available data on this critical issue. A few market oriented empirical attitudinal studies have been published since the oil embargo, however.

FIGURE 2

U.S. GASOLINE PRICES 1973- 1976

One such study conducted by Becket, Brown, and Schary in 1974, focused on the derivation of a market segmentation strategy for transportation users. Consumer demographic information served as predictors for the A.I.D. technique in describing transportation behavior segments (Becker, Brown and Schary, 1976). Talarzyk and Omura have published two detailed marketing studies dealing with consumers' attitudes toward and perceptions of the energy crisis relative to consumer leisure time activities. The empirical evidence from which this research was derived was based on data collected at a single point in time (March, 1974) after the oil embargo had been lifted (Omura and Talarzyk, 1974; Talarzyk and Omura, 1975). Finally, the authors have published a number of attitudinal studies utilizing multivariate techniques to investigate relationships between consumer attitudes and different forms of energy consumption (i.e., gasoline, home heat and air conditioning), as well as trade-off analyses between energy consumption and air pollution abatement. The format of this research follows a market segmentation approach and attempts, where possible, to suggest broad marketing strategies commensurate with an increased propensity toward energy conservation (Barnaby and Reizenstein, 1975, 1976; Reizenstein and Barnaby, 1975, 1976).

Methodology

In February 1974, during the most disruptive period of the oil embargo, a survey designed to measure energy and pollution related consumer attitudes and behavior was sent to 2,500 residents of three medium-sized (100,000-350,000 population) cities in the Southeast--Columbus, Georgia, Charlotte, North Carolina, and Chattanooga, Tennessee. These sites were selected to represent three levels of the universal measure of air pollution, the average number of suspended particulates of matter per cubic meter of ambient air, since the questionnaire included issues regarding energy-air pollution trade-offs.

Mail questionnaires were distributed proportionate to the population of each of the three cities. Individuals were selected within cities using current telephone directories as the sample frame and a systematic random sampling procedure to identify potential respondents. Specially designed envelopes, colorful commemorative stamps, and a standard follow-up letter were all employed to maximize returns (Hensley, 1974; Kanuk and Berenson, 1975).

A total of 2,389 questionnaires were ultimately delivered, resulting in 922 usable responses. This response rate of nearly 40% was largely attributed to the currency and importance of the topic. Demographic comparisons of the sample characteristics with census data yielded similar profiles, with the sample slightly up-scale in terms of education and income.

Given the timing of the first survey, the resultant information provided a unique baseline from which subsequent changes in energy related consumer attitudes and behavior could be gauged. Hence, a second mail survey using the respondents from the initial study was conducted in October 1974. This survey attempted to assess the impact of the end of the embargo and ensuing changes in both gasoline price levels and availability on consumer energy consumption and conservation attitudes and practices. A total of 382 of the original set of 922 subjects returned the second questionnaire, a response rate of 41%,forming a respondent core for longitudinal analysis. A demographic comparison with census data similar to that performed for the first survey produced comparable results, with the minor exception that the second sample was slightly more upscale in both income and education than the first.

LONGITUDINAL ANALYSIS AND RESULTS

A co--,on core of items were included in both of the research instruments in an effort to measure changes in perceptions, attitudes and usage associated with energy and air pollution. Similarities and differences will be measured over time in regard to the perceived importance of national issues, attitudes toward selected dimensions of energy and air pollution (as determined by Likert and semantic differential scaled questions), and reported and projected behavior in the form of home thermostat setting and weekly gasoline consumption. After detailed analyses of these data, implications of the findings will be discussed.

Importance of National Issues

A set of national issues roughly paralleling those in the Gallup Poll were incorporated as the first question in both the February 1974 (Energy I) and October 1974 (Energy II) surveys to provide an overall comparison between Southeastern and national opinions. Results of these comparisons, shown in Table 1, reveal that the energy crisis seemingly impacted the Energy I sample less than the national Gallup sample. In February 1974, Gallup found that the Energy Crisis was the most important national issue, with 46% of all subjects selecting this item as the number one national problem (Gallup Opinion Index, February, 1974). In contrast, the Energy I sample ranked the Energy Crisis as third most important (12% ranking it as most important), after Inflation and Corruption in Government. It would seem that climatic conditions such as the traditional mildness of the Southeastern winter could provide a partial explanation for these differences.

By October 1974, however, national and Southeastern perceptions seemed more parallel as is shown in Table 1. The Gallup Poll found that Inflation was the number one issue in the U.S. (79% ranking it as most important), followed distantly by Corruption in Government (11%) and the Energy Crisis (3%) (Gallup Opinion Index, November, 1974). Although the percentages are not identical in the Energy II results, it may nonetheless be seen that the importance rankings are the same. With the end of the oil embargo, and the cessation of gasoline and other petroleum derivative shortages, the public seemingly lost the sense of urgency formerly associated with the energy crisis, concentrating its concern instead on the more pressing short-term issue of inflation. It can, finally, be noted that Pollution, an issue of greater importance than the Energy Crisis in May,1973, prior to the embargo, became so insignificant to consumers relative to other national issues during and after the oil boycott that it was no longer ranked as a separate item (Gallup Opinion Index, October, 1973 and November, 1974).

Attitudes, Interests and Opinions

A common set of 19 Likert scaled attitude, interest, and opinion energy and air pollution related statements appeared on both the Energy I and Energy II questionnaires. Table 2 indicates energy related attitude changes by showing the percentage of respondents agreeing with core A.I.O. statements on both questionnaires.

A careful investigation of significant shifts in respondents' attitudes reveals an increased perception of the energy shortage as a genuine cause for concern. There were statistically significant shifts ( .05 level) ) in respondents' attitudes toward the point of view that traditional energy resources are insufficient, that the energy shortage is a pressing national problem, and that rationing of energy sources will be necessary for at least the next five years. Respondent concern with the loss of jobs in energy related industries diminished significantly however, as did the idea that the energy crisis has been created to distract the public from other pressing national issues. Finally, Table 2 indicates an increasing number of subjects who perceive a silver lining to the energy crisis, given decreased automobile travel and consequently reduced accident rates. Thus, Energy II primarily shows increased awareness of the long-term seriousness of the energy shortage, increased awareness of its genuine nature, but a simultaneous tendency to begin to look at its more positive aspects.

Table 3 extends and amplifies the above interpretation through a presentation of energy-related attitude change by means of disagreement with a set of A.I.O. statements. Although an overwhelming percentage of respondents still disagree, at the time of the Energy II survey, significantly fewer believe that the energy shortage will not affect our way of life. Moreover, fewer are opposed to a 68 degree legal maximum on home temperature during the winter months. These significant shifts reinforce the increasing consumer awareness of the energy shortage as real, discussed in Table 2 previously.

In addition, Table 3 indicates a continuing majority opinion that special consideration should be extended to companies involved in energy production and that the focus of future fuel should return to coal. A majority of respondents maintained their belief that the oil companies did not deliberately create the energy shortage based on a profit motive. Finally, despite increased respondent perception of the gravity of the U.S. energy situation, a majority of subjects still did not view the situation as sufficiently grave to discontinue radio or TV programming after 10 p.m.

Air pollution related attitude changes are indicated in Table 4. The only significant change found in the common core of statements over time was decreasing agreement that a benefit of the energy crisis would be a reduction in air pollution due to fewer automobiles on the road and decreasing agreement that more rigid governmental controls should be imposed on companies to reduce pollution. Otherwise, there was no significant change in the majority agreement that companies that advertise efforts to reduce air pollution are perceived as being primarily concerned with public relations. Hence, these statements seem to indicate continuing majority concern with air pollution and respondent desire for pollution abatement.

TABLE 1

MOST IMPORTANT NATIONAL ISSUES

TABLE 2

ENERGY RELATED ATTITUDE CHANGE-AGREEMENT WITH A.I.O. STATEMENTS

TABLE 3

ENERGY RELATED ATTITUDE CHANGE-DISAGREEMENT WITH A.I.O. STATEMENTS

TABLE 4

POLLUTION RELATED ATTITUDE CHANGE

This desire for the reduction of air pollution is further reinforced in Table 4 by majority disagreement that we should forget about reducing pollution until our energy problems are solved. However, the majority in both Energy I and II also disagree in approximately the same proportion that the reduction of air pollution is more important than energy conservation. Hence, although air pollution control continues to be an important issue, the energy shortage is viewed as paramount in respondents' minds (an interpretation which is substantially reinforced by the importance rankings of national issues discussed previously).

Semantic Differential Descriptors

A further insight into attitudes toward the energy crisis over the February to October 1974 time span may be gleaned from a series of common semantic differential scaled adjectives included in both the Energy I and Energy II studies. Using these descriptors, changes in attitudes were examined from three different perspectives: 1) a general overview of the energy crisis; 2) perceptions of action by American business to lessen the energy crisis; and 3) perceptions of action by the government to lessen the energy crisis. These data are presented in Tables 5, 6, and 7 respectively.

Respondents to Energy II seem to perceive the energy crisis as more "true," less "concealed," and less "dishonest" than they did at the time of Energy I. In addition to the increased credibility of the energy crisis that the above results imply, a significant number of subjects seem to feel that the atmosphere of the energy shortage was more relaxed than during the oil embargo. This is further illustrated by the fact that some respondents found the energy crisis to be less "important" and less "tense" than during the period of Energy I. (It should be emphasized, however, that the overwhelming majority still view the situation as a "tense" and "important" one, even though the percentages indicate that their numbers are significantly lower.) Finally, the energy crisis at the time of Energy II was perceived as being as "near" and as "pessimistic" as at the time of the oil embargo.

Table 6 presents adjectives describing action by American business to lessen the energy crisis over the time span of the two surveys. These data seem to indicate that a more negative perception of action by American business exists on the part of respondents during Energy II than when earlier measured. For example, although subjects perceived such business actions as significantly less "uncertain," they were not viewed as any more "valuable," "important," or "controlled." Instead, these actions were seen by many as less "willing" and "decreasing." Thus, although the majority still maintained a positive perception of business responses, events of the eight-month period under study led a significant number to a more negative viewpoint.

Action by government to lessen the energy crisis did not undergo as many changes in respondents' perceptions as was previously reported from Tables 5 and 6. Table 7 indicates that subjects did not perceive any significant positive differences in governmental actions during the time under study. A minority still viewed these activities as "optimistic"; a substantial majority still perceived them as "insufficient," "slow," and "uncertain." This negative point of view is reinforced by the single change: a significant number of respondents found action by government to be less "active" at the time of Energy II than during Energy I. It is noteworthy that business seems to have a more positive image than government during the time span under study.

TABLE 5

SEMANTIC DIFFERENTIAL ADJECTIVES DESCRIBING THE ENERGY CRISIS

TABLE 6

SEMANTIC DIFFERENTIAL ADJECTIVES DESCRIBING ACTION BY AMERICAN BUSINESS TO LESSEN THE ENERGY CRISIS

Reported Energy Utilization

In addition to the attitudinal variables discussed above, several measures of reported energy utilization were incorporated in both the Energy I and Energy II studies. Of these, two, weekly vehicular gasoline consumption and home heat thermostat setting will be analyzed.

TABLE 7

SEMANTIC DIFFERENTIAL ADJECTIVES DESCRIBING ACTION BY GOVERNMENT TO LESSEN THE ENERGY CRISIS

A longitudinal comparison of weekly gasoline consumption is presented in Table 8, utilizing percentage distributions across the two samples. The major point of interest is the overall slight downward shift in weekly gasoline consumption between February and October. 1974. The most marked decline occurred in the 31 to 40 gallon per week category with commensurate increases primarily in the zero and 1 to 10 gallon categories. It would seem that the energy shortage had at least a short term impact on gasoline consumption by causing some heavy users to slightly modify their fuel consumption or automobile utilization practices. Given the more recent increases in gasoline consumption previously discussed in the background section of this paper, it would seem as if this downturn in fuel usage may have been short-lived. This statement is reinforced by the slight increase in home heat thermostat settings reported by respondents between the Energy I and Energy II surveys. Subjects indicated an average thermostat setting slightly in excess of 69 degrees F during Energy I and a modest increase to above 70 degrees F at the time of Energy II.

TABLE 8

LONGITUDINAL COMPARISON OF GASOLINE CONSUMPTION PER WEEK (FEBRUARY 1974 VS. OCTOBER 1974)

CONCLUSIONS

The above analyses and discussion lead to a number of conclusions involving the impact of energy and pollution issues on the American consumer in the Southeast during the period from February to October, 1975. These may be summarized as follows:

1. The energy crisis, although an important national issue in the Southeast at the peak of the oil embargo, was not perceived as being as critical as inflation and corruption in government. This contrasts to Gallup information showing the energy crisis as the number one priority during the same time period.

2. Among those in both the Southeastern and the Gallup national samples, pollution problems were viewed as subsidiary to the energy issue during the entire time span under study.

3. During the Energy I-II time frame, a significantly increased number of people came to realize the gravity of the energy situation, recognizing it as a real rather than a contrived problem, which will have long-term effects on our traditional life style. This was almost certainly emphasized by both rising fuel prices and our increasing dependence on foreign petroleum supplies.

4. Despite the seriousness of the U.S. energy situation, a significant number of respondents indicated that its perceived importance diminished between Energy I and Energy II, as the immediacy of the oil problem faded with the lifting of the embargo and the renewed flow of Mid-East petroleum.

5. The data indicate that respondents think that business in general has been and continues to be more responsive to the energy situation than government. This more positive image of business is even more strongly supported by the fact that the majority of respondents to both surveys did not believe that the oil companies consciously precipitated the energy crisis.

It must be emphasized that these conclusions are based on a regional sample over a finite time span. Continued attitudinal and behavioral research in this area is warranted given the environmental and political uncertainties surrounding energy issues. This information is necessary to formulate strategies to market energy conservation to various consumer segments, particularly in view of our increasing dependence on foreign petroleum supplies.

REFERENCES

David J. Barnaby and Richard C. Reizenstein, "Attitudes toward Energy Consumption: Segmenting the Gasoline Market," Advances in Consumer Research, Volume 3, B. B. Anderson, Editor (Cincinnati: Association for Consumer Research, 1975).

David J. Barnaby and Richard C. Reizenstein, "Developing Energy Attitude Segments: A Cluster Analysis Approach," Proceedings, American Institute for Decision Sciences Annual Conference (San Francisco: American Institute for Decision Sciences, 1976).

Boris W. Becket, Daniel J. Brown, and Philip B. Schary, "Behavior of Car Owners during the Gasoline Shortage," Traffic Quarterly, (July, 1976), 496-483.

Gallup Opinion Index, 100 (October, 1973), 11.

Gallup Opinion Index, 104 (February, 1974), 2.

Gallup Opinion Index, 113 (November, 1974), 30.

Wayne E. Hensley, "Increasing Response Rate by Choice of Postage Stamps," Public Opinion Quarterly, 38(2), (Summer, 1974).

Leslie Kanuk and Conrad Berenson, "Mail Surveys and Response Rates: A Literature Review," Journal of Marketing Research, 12 (November, 1975), 440-453.

Glenn S. Omura and W. Wayne Talarzyk, "Relationships between Consumers, Shopping and Leisure Activities and Their Attitudes toward the Energy Crisis: A Cross-Sectional Study," Advances in Consumer Research, Volume 2, M. J. Schlenger, Editor (Chicago: Association for Consumer Research, 1974).

Richard C. Reizenstein and David J. Barnaby, "The Impact of the Energy Crisis on Consumer Willingness to Spend to Reduce Air Pollution," Proceedings, American Marketing Association Workshop on Ecological Marketing Karl Henion, II and Thomas C. Kinnear, Editors (Chicago: American Marketing Association, 1976).

Richard C. Reizenstein and David J. Barnaby, "Perspectives on the Energy Consumer: Two Selected Discriminant Analysis Profiles," Marketing: 1776-1976 and Beyond, K. L. Bernhardt, Editor (Chicago: American Marketing Association, 1976).

W. Wayne Talarzyk and Glenn S. Omura, "Consumer Attitudes toward and Perceptions of the Energy Crisis," Marketing's Contribution to the Firm and to Society, R. C. Curran, Editor (Chicago, American Marketing Association, 1975).

U.S. Oil and Gas Journal (November 10, 1975).

U.S. Oil and Gas Journal (December 29, 1975).

U.S. Oil and Gas Journal (March 29, 1976).

----------------------------------------