Reducing U.S. vulnerability to oil supply disruptions

by Walter S. Baer

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Dependence of the United States on imported oil poses two interrelated but distinct problems: chronic economic losses to the U.S. economy, and vulnerability to supply disruptions. The synthetic fuels program, conservation measures, and phased decontrol of oil and gas prices address our long-term dependence problem, but we have neglected contingency planning to deal with supply disruptions. The paper outlines steps that can be taken to provide emergency supplies and cut demand in the event of a major oil supply disruption. Preparatory measures for emergency supplies include filling the strategic petroleum reserve, encouraging private stockpiles of oil and refined products, developing standby production and distribution capacity, and planning for emergency fuel switching for electricity generation. Standby taxes or tariffs may be superior to gasoline rationing as emergency measures to restrain demand.

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