The level of oil imports into the major industrial countries has been a question of concern ever since the 1973-74 embargo and the rise in oil prices. Both individually, and collectively within their common membership in the International Energy Agency (IEA), the industrial countries have frequently repeated their resolve to hold down oil imports. As recently as December 1979, IEA members firmly committed themselves to limiting oil imports in 1980 and reduced 1985 oil import plans from an old (June 1979) target of 26 million barrels a day (mbd) to a new target of 24.5 mbd.
Specifically, the United States agreed to hold oil imports through 1985 at about 8.5 million barrels a day (mbd), only slightly above 1977 import levels. The major European oil importers have made a similar commitment. Japan's imports will rise.
Net oil imports for selected countries, 1973-79. Source: Organisation for Economic Cooperation and Development/International Energy Agency, Oil Statistics, various issues; and International Energy Trends, November 12, 1979.
The record since 1973. How do these commitments relate to past developments in oil imports? What does the record show? At first sight, there has been considerable success. Since 1973, net oil imports into the major oil-importing industrial countries—the United States, Japan, France, Germany, the Netherlands, Italy, and the United Kingdom—have remained virtually constant; this is in striking contrast to the 11 percent average yearly increase in the years before 1973.
Can this leveling off in demand for imported oil be sustained? The trend has continued long enough—at least through mid-1979—to suggest that it is more than a temporary phenomenon. But because it coincided with a slowing in economic activity, there must remain some uncertainty about how long the improvement can be sustained under higher economic growth rates. Net oil imports for selected countries, 1973-79. (Source: Organisation for Economic Co-operation and Development/International Energy Agency, Oil Statistics, various issues; and International Energy Trends, November 12, 1979.)
Another reason for concern is the unevenness of experience among countries (see the figure). The leveling off in total oil imports into this group of countries is the result of two widely divergent trends—an overall increase in net oil imports into the United States, and an overall decline in net oil imports into the other countries, particularly Western Europe. Neither the increasing nor the decreasing trend has been steady but, despite year-to-year variations, it seems clear that the experience between the United States, on the one hand, and the other industrial countries, on the other, differs significantly.
Why are U.S. oil imports higher while imports are lower in European countries? What accounts for these divergent trends when other factors, such as the rate of economic growth and the price increase in petroleum products, were very similar in both areas? As a rough illustration of the orders of magnitude involved, if U.S. oil imports had declined to the same extent (over 20 percent) as those of the European countries, U.S. imports in 1979 would have been running at about 4.5 mbd, instead of the estimated total of 8.1 million. A potential surplus of this magnitude (over 3 mbd) could have been a critical factor in the world oil market at the present juncture.
Oil imports represent the difference between domestic oil production and consumption. In the United States, rising imports were the result of stagnating production and rising consumption; and in European countries, falling imports derived from rising domestic production and declining consumption.
The reasons for the divergent production trends seem clear enough. In Europe, North Sea oil was being brought rapidly on-stream, greatly increasing net European production, while in the United States, increased output from Alaska was sufficient only to offset declining production from other areas within the country. The reasons behind the divergent trends in consumption are more complex. In Europe, oil has played a declining role in total energy supplies (falling from 59 percent of total primary energy consumption in 1973 to 55 percent in 1978). In the United States, despite some year-to-year fluctuations, the share of oil in total energy consumption has not fallen.
Admittedly, the scope for substituting other forms of energy for oil is more limited in the United States than in Europe. Almost 40 percent of total oil supplies in the United States—compared with just over 20 percent in Europe—is used in road transport, a sector in which there is no substitute for liquid fuels. This high proportion of motor fuels has a secondary effect on oil consumption, as highly refined products such as gasoline require higher energy inputs—in practice, largely oil inputs—in the refinery operation.
But even in those sectors—industry and thermal power generation—where substitution is practicable, the United States in 1977 at least had apparently made less headway than the European countries. The share of oil in industrial energy consumption, for example, fell from 55 percent in 1973 to 49 percent in 1977 in Europe, but it rose from 33 percent to 37 percent in the United States. In Europe, the decline in oil consumption in this period was offset primarily by increasing gas usage. Conversely, in the United States the rising role of oil was attributable mainly to falling gas consumption and concerns about environmental restrictions on the use of coal. In addition, the price structure of competing fuels is less favorable to substitution for oil in the United States than it is in Europe.
Future concerns. Despite the leveling off of oil imported by the group of industrialized countries that has been achieved since 1973, there are major questions of future concern. The first is, what will happen to oil imports under conditions of more rapid economic growth? The second and perhaps more important is, does the slight decrease in U.S. oil imports since 1979 represent a short-term deviation from the previously well-established pattern of sharply increasing imports? In other words, have measures to stem the over reliance of the United States on foreign oil taken hold? The answers to these questions are of vital importance to the international oil market.
A version of this article appeared in print in the January 1980 issue of Resources magazine.
