Can Putin Survive?
The Lessons of the Soviet Collapse
From 1947 to 1973 the shift of power is exponential. In 1947 the United States ceased to be a net exporter of oil; the basing point for oil prices moved from the Gulf of Mexico to the Persian Gulf, and with it the underlying leverage. Although the Organization of Petroleum Exporting Countries (OPEC) was formed in 1960, its membership was so disparate that at first it did little to exploit the shift. With prices low, U.S. dependence on imported energy grew to 14 percent of energy consumption in 1972. Europe's dependence on energy imports grew from 33 percent in 1960 to 65 percent in 1972; Japan's from 43 to 90 percent in the same period. By the late 1960s OPEC members were acting more masterfully to turn the increased dependence to advantage; prices began to move up. The 1973 October War revealed OPEC's full power.
It is important to be precise about the implications of this shift for the industrial countries. First, the cartel action continues to pose a short-term problem of economic management. The sharp jump in oil prices accounted for about a quarter of the average 14 percent inflation experienced in 1974 among the member-countries in the Organization for Economic Cooperation and Development (OECD). Industrial dislocation and unemployment caused by the 1973-74 embargo, and conservative demand-management policies in Europe and Japan designed to overcome oil-caused balance-of-payments deficits helped trigger the present recession. No doubt the effects of the continued high price of oil on internal demand will make it more difficult to design policies to return the industrial economies to a high rate of growth. All of these difficulties are important and costly, but they are-or can be made-transitional.1
Second, there is a medium-term problem of financial management. Most recent studies suggest that the accumulation of financial assets by OPEC will peak in the late 1970s or early 1980s at levels perhaps in the range of $200 to $250 billion in 1974 dollars. This is an enormous total by present comparison-official holdings of financial assets by all the OECD countries totaled $118 billion at the end of 1974-but it is less than was estimated a year ago. Although the political and financial implications of the expected accumulations cannot yet fully be judged, recycling of oil dollars has proceeded more smoothly than feared, and this problem appears manageable.2
Third, however, there is a major long-term transfer of real income, which has only begun. The exact time-path of the transfer is difficult to determine, since it depends in part on how rapidly the financial assets OPEC is accumulating are converted into imports of goods and services and how long the high price is sustained. In 1974 OPEC increased its imports of goods and services from OECD countries by about $8 billion in real terms (equivalent to somewhat more than 0.2 percent of OECD's 1974 gross national product). Into the future, OPEC imports from OECD countries, financed by its accumulated financial assets, will continue to grow for some time after its export revenues peak. It is possible that they will reach $110 billion by 1980 (in 1974 dollars), as opposed to about $30 billion in 1973 (in 1974 dollars). The $80 billion gain, equivalent to more than 1.7 percent of the expected GNP of the OECD group in 1980, can be taken as an estimate of the peak value of the real annual cost of the cartel action to the industrial world.
These costs, imposed at a time when most of the industrial countries are having increasing difficulty in meeting the social, economic and security requirements of their people, are of major significance. It is important to realize that these are not one-time costs; they accrue each year.
Fourth, and perhaps most important of all, there are the political and strategic implications of vulnerability to a new interruption in supply. Existence of the cartel, and the high price for oil that it has imposed, are coordinate with that vulnerability; one presupposes the other. As long as the cartel is effective, the central element of energy in the industrial economies will be subject to manipulation, both as to prices and availability, by supplying countries which do not have, and may well not develop, an inherent interest in their prosperity. We must be ready for the exercise of this power in a new Middle East conflict; whether and how it would be used in other circumstances we do not know. But clearly the threat to the maintenance of stable economic conditions is significant.
As long as the cartel is effective, it will also impose a permanent tension among the consuming countries because of the wide disparity in their dependence on imported oil. Canada, the United States, and soon Britain have options that Japan, Spain, and Italy do not have. Competitive offers of special economic and political terms to secure petroleum supplies are widely recognized as likely to degrade the bargaining position of the consumers as a group. Such protective mechanisms as oil-sharing in an emergency and financial solidarity can provide a counterweight, and these have now been effectively agreed upon, largely through the International Energy Agency (IEA), formed a year ago.3 But over the long term the impulse will be strong to substitute producer/consumer lines of force for those now existing among the industrial countries of Europe, America and Japan. If that occurs, the internal contradictions between the security and the economic interests of the industrial countries will grow and their political coherence will dissipate.
So far, the short-term problems of economic and financial management have received the greatest public attention in the industrial countries. Exaggerated fear of their difficulty has given way to relief that they are not intractable. But the real costs of the cartel-the longer-term transfer annually of goods and services, and the potential deterioration of the security and political position of the industrial countries-have yet to be fully faced.
The real-income losses of the consumers are the gains of the producers, but in other respects the effects of the cartel action are not reciprocal. Producers share with consumers an interest in effective management of the short-term economic and financial problems. Return of the industrial economy to a high rate of growth strengthens demand for oil and thereby strengthens the cartel, and the protection of financial assets now is essential to future real transfers and growth. It is only by de facto integration into the industrial economy, through massive increases in trade, industrial investment and technological transfer, that the producers can realize their real-wealth gains. Four-fifths of OPEC's imports now come from the OECD group; as they rise, the interpenetration of consumer and producer economies will become a central datum of the international structure.
In politics, the lines of potential development lead in different directions. When the October War revealed its power, OPEC was the loosest of coalitions, harboring at least four contenders for leadership (Iran, Saudi Arabia, Algeria, and Venezuela) and a spectrum of traditional state rivalries. But to consolidate its gains and survive this year's slump in oil demand, OPEC has had to develop more coherence. Saudi Arabia, which some believed a year ago might play the maverick and use its vast producing capacity to bid the oil price down, has swung into a supportive role. The Saudis engineered the most recent overall price increase at Abu Dhabi in November, then created conditions for, or acquiesced in, production cuts deep enough to balance OPEC supply with demand. (Saudi production in April was less than 6 million barrels a day [MMBD], down from 9 MMBD at the peak last summer; meanwhile Saudi capacity has reached more than 11 MMBD.) Leadership competition among the major states was muted. An informal system emerged in which states wishing to increase exports could do so by shaving quality differentials and lengthening credit terms, while the basic government take of $10.12 per barrel remained intact.
This growing cohesiveness of OPEC has given it an opportunity to bid for the leadership of the whole developing world. The raw materials doctrine developed by Algeria-that the market power of consumers has long kept down raw material prices and thus the economic development of producers, and that cartel action is needed to "revalorize" earnings, along with "indexation" to protect the new wealth by increasing oil prices in proportion to increases in the prices of OPEC imports-served first as a defense against the resentment of other less-developed countries whose growth prospects have been damaged or halted by high oil prices. Increasingly, the doctrine is becoming a means by which the oil producers cement their own unity and that of the LDC bloc as a whole.
At the same moment that their economic integration into the industrial world is accelerating, OPEC members are asserting their political identity with a coalition of developing states intent upon challenging the industrial world. In doing so OPEC is making negotiation of stable new institutional ties with the industrial countries far more difficult, as the failure of the producer/consumer preparatory meeting this April showed. In time, the oil producers will expose themselves to escalating demands from the LDCs. And the tension between OPEC's economic and political interests will eventually increase.
It is in the interest of the industrial countries-indeed, of all consuming countries-that conditions be created in which OPEC loses and cannot subsequently regain the power to set oil prices at artificially high levels. What are these conditions? Essentially, that the market for OPEC oil be compressed to, and held at, a volume at which the mechanism for allocating production cuts within OPEC can no longer function.
It is possible to imagine a number of scenarios in which individual producers break ranks and slash prices. But none of these has much plausibility in view of the great economic and political interest all OPEC members have in high prices, and because of the political pressure from their colleagues to which many are vulnerable. In order to predict with some confidence that several major members will cut prices in attempting to increase their market share, the following conditions must be present:
-Such a group of countries must have significant unused capacity, and practical possibilities for shifting production cuts onto the "low absorbers" such as Saudi Arabia must have been exhausted;
-They must be unwilling to accept a stretch-out of their development and military spending programs;
-They must be in payments deficit on current account;
-They must have reached the limits of drawing down accumulated financial reserves and of borrowing within or outside OPEC;
-Relief through increases in the real price of OPEC oil must have been exhausted.
We know that there is little chance that these conditions will occur or can be created between now and the end of 1977. As a result of the second mild winter in a row, the recession, drawing down of inventories, and price resistance, the OPEC export market will be down to an average of 27 MMBD this year from 30 MMBD in 1973. With the end of the recession, the steady decline of oil and gas production in the United States, and a return to normal winters-all of which seem overwhelmingly likely-oil export demand will return to or exceed pre-embargo levels by 1977. If real prices are maintained, OPEC exports might reach the $125 billion range (in 1974 dollars) in 1977, reflecting an export demand that might by then have risen to 31 MMBD.
As to the amount of the real income transfer, OPEC import expenditures have risen faster than expected: 27 percent by volume in 1974. They may do so again in 1975, although limitations on port facilities and resultant demurrage and delay in the Persian Gulf are already significant and growing. Thereafter constraints on internal transport and distribution are likely to take over. The current account surpluses of OPEC as a whole are likely to remain large-on average about $50 billion a year (in 1974 dollars) in the period 1975-77-but some individual producing countries will probably go into deficit: Algeria and Indonesia this year, Ecuador in 1976, Venezuela in 1977. These countries now have some excess capacity, but the volume is small enough (perhaps 0.5 MMBD that they would like to use) so that others in OPEC could accommodate it by reducing their production. Intra-OPEC loans (a possibility Algeria has already broached) would be another means of adjustment. Some slowdown in Algerian and Venezuelan development spending is also likely.
In the period 1978-1980 a major change is likely to occur in the OPEC export market as North Sea, Alaskan, Mexican and Chinese oil come on in quantities. As a rough guess, net OPEC exports might then fall to 25 MMBD or even less. With a constant real price of oil and continued import increases, Iran and most OPEC members other than Saudi Arabia and Kuwait would move into balance-of-payments deficit on current account. Drawdown of accumulated assets would provide some cushion; but there would be strong contradictory pressures-on OPEC countries collectively to raise the real price of oil and on some individual members to improve their market share by shaving prices. Hence this could be a period of substantial stress on OPEC, from which it might emerge either with a higher real price and renewed discipline or in disorder and with substantially lower prices.
In the period 1981-85 the swing element, insofar as can now be estimated, will be the U.S. Outer Continental Shelf (OCS) and Naval Petroleum Reserve No. 4 (NPR-4) in Alaska. On the basis of geological surveys these regions are now roughly estimated to provide 5-7 MMBD in this time frame. If they do, the overall OPEC market may stabilize at about the 25 MMBD level, and the pressure on OPEC cohesion, already substantial, would increase. (This is similar to the forecast in the long-term energy assessment of the OECD, published this year.) If on the contrary these regions prove unproductive (so far only two dry wells have been sunk in NPR-4), or if for economic or other reasons they are not fully exploited, pressure on OPEC would ease substantially.
What are the chances of substantial deviations from these forecasts? Economic stagnation in the OECD and large-scale new finds like the Mexican fields would compress the OPEC market below these predicted levels.4 On the other hand, boom conditions or failure to solve the rate, financing, and citing problems of nuclear-fueled electrical utilities and thus to achieve the high rates of nuclear-power growth expected (from 20 gigawatts in 1973 to 200-240 in 1985 in the United States) could lead to a significantly larger OPEC market.
There are three conclusions to draw from this analysis:
First, there is a likelihood of strong stress on the cartel toward the end of the decade.
Second, maintenance of that pressure thereafter depends critically on the exploitation of the OCS and NPR-4.
Third, the potential swings become very high in the 1980s. If the cartel loses its power to set prices in the 1978 to 1980 period, and successful exploitation of the OCS and NPR-4 maintain conditions in which it cannot be reconstituted, OPEC's annual export earnings might fall from the assumed 1977 peak of $125 billion (in 1974 dollars) to half that or even less. If OPEC were able to maintain its price-setting power and thus offset the declining market by higher real prices, the income could stay at the $125 billion level, and the higher real price would have a dampening effect on economic growth in its major markets. In both cases the real transfer through actual imports would adjust with a lag. The swing between the two cases ($60 billion or more in 1974 dollars), plus the negative impact on growth, could exceed 1.5 percent of the real OECD gross national product annually. And, of course, the political leverage of OPEC hinges almost wholly on which case applies.
How can the consuming countries increase the possibility of an outcome in their favor? And at what cost?
First, by conservation. If President Ford's conservation proposals of January 1975 were fully adopted, and if they were matched by similar European and Japanese programs, they could be decisive. These measures were originally designed to reduce U. S. imports by 1 MMBD by the end of 1975, 2 MMBD by the end of 1977, and over 4 MMBD in 1985 (below what they would otherwise be).
Through the actions announced by the President on May 27-increased import fees and the proposed decontrol of "old" domestic oil prices-the United States can still make progress toward his goals.5 However, what Congress will finally do, as well as the actual impact on consumption, may not be clear for some time. Meanwhile Europe and Japan have moved faster than the United States to take effective conservation measures, but the combined bulk of their savings is not yet large.
Although the controversy has not been settled, the balance of evidence is that savings of the magnitude proposed by the President will not have growth-depressing effects. In the United States the amount of energy used per dollar of GNP fell from 107,000 BTUS to 90,000 in the years 1947-1973, a period of rapidly rising income growth. High prices will accelerate the decline in this ratio.
Second, by stimulus to the development of alternative sources. Here three sorts of action are required:
1. Relaxation or removal of existing policy constraints. Almost every form of energy enterprise in the industrial world is encumbered: U.S. and Canadian gas and oil by price controls; nuclear power everywhere by inadequate or outmoded utility rate structures and by citing restrictions; coal by environmental limits; new hydrocarbon exploration by legal restrictions. The relaxation of these constraints is above all a domestic political question, although it can be spurred by international review and analysis.
2. Provision of financing. Estimates of financing required over the next decade for energy development in the industrial countries center in the trillion dollar range (in 1974 dollars), equivalent to a fifth or a fourth of expected total capital formation. The question posed is whether energy investment should receive some form of priority access to capital markets, through the use of government guarantees or government-sponsored intermediaries. For such costly developments as oil from shale, tar sands, or coal liquefaction (which may come in in the range of $15 a barrel), substantial government financing, including such devices as the sharing of initial "front-end" costs, must be employed. Such projects lend themselves to international cooperation, with possible deals combining funding with access to technology and, in an emergency, access to product. On the other hand, many governments have so far hesitated to provide assistance to conventional energy enterprises, believing it disadvantageous to substitute political priorities for economic calculation. But some support is inevitable even in this area.
3. Protection against "downside risk" for private capital investment. To the extent that the financing of new energy sources is provided through government channels, such capital investment need not be seriously affected by changes in the overall price of oil, or of energy in general. As suggested above, government financing is likely to be the preponderant mechanism for most of the "non-conventional" energy sources such as solar and geothermal power, oil shale, or the Canadian tar sands.
The real problem concerns the major expansion of "conventional" sources, for which private investment must be the principal mechanism, but for which the anticipated costs are significantly higher than the price level to which OPEC oil might conceivably fall over the next ten years. New North Sea oil (less the share taken directly by governments) comes in in many cases at $5 or even $6 a barrel. Conventional nuclear facilities, coal, and the vital OCS and NPR-4 may all be in the $6 to $8 range for their energy-equivalent output. All of these investments are price sensitive both at the outset and as they go along: they may not be undertaken, or may be delayed, if there is an actual or perceived risk that international prices will fall to or below that range in the course of development.
Such downside risk is closely linked to the future viability of the cartel. If, for example, the cartel were to lose its ability to maintain a high price in the stress period of 1978-80, the development of OCS, NPR-4 and North Sea oil could all be retarded or stopped. That in turn would result in a substantially higher OPEC export market than would otherwise occur, and conditions for renewed cartel action could be created. Put the other way around, by protecting against downside risk it is possible to be fairly certain that expected major energy investments will occur, and thus increase the odds that in the early 1980s the cartel will lose its power to set the oil price and not regain it thereafter.
The problem of downside risk for investment in conventional energy sources is widely recognized. But there is much controversy over its solution. Broadly speaking, two main concepts have been put forward.
The first of these may be labeled that of "deficiency payments." Under this approach, private firms engaged in the development of energy sources would receive a subsidy from their national governments if the overall oil price falls, possibly set to cover the difference between some base price and the market price.
The advantage of this approach is that any drop in price is passed on to the consumer. The major disadvantage, however, is that under this approach it would almost surely be impossible to meet national self-sufficiency targets. In the event that overall oil prices fall, consumption is bound to be restimulated, and by substantial amounts. Thus, in contrast with the forecast that demand for OPEC oil by 1980 might be in the range of 25 MMBD at present oil prices, the demand for OPEC oil can be estimated to rise to 35 MMBD if the overall oil price were to drop to, say, $4 per barrel (in 1974 dollars). Even a remotely comparable rise in consumption would leave the industrial world still highly vulnerable to embargo and would in turn lead to new cartel action, as surely as the low prices and high dependency of the 1960s and early 1970s stimulated it in the first place.
Other drawbacks of the deficiency payment approach are the high costs to the taxpayer and the uncertain credibility of a system dependent on annual subsidy appropriations for energy companies by the American Congress or by the parliaments of OECD countries.
The second approach to the problem can be described as "border protection." The object of this approach is to prevent imported oil from being sold to the consumer within the industrial economies at disruptive price levels, i.e., at levels below the amounts required to offer the prospect of a fair return to the investors in expanded energy sources. The means required to implement this approach could be varied according to the national choice of the individual consuming countries; tariffs, import quotas, or variable levies might be used separately or in combination to produce the intended result. But the price levels maintained to assure adequate domestic investment, it may be emphasized, would be fixed only in terms of price levels to the consumer. The price actually paid to the OPEC producer would continue to be determined by the international market situation-in effect, by the relative bargaining power of consumers and producers. This is not, in short, a system for guaranteeing the return to the OPEC countries; indeed, its basic objective is to permit market forces to operate, eventually in favor of the consuming countries.
The major advantage of this approach is that national self-sufficiency goals can be protected. Through the stimulation of the necessary investment in expanded conventional sources, this approach provides high odds that OPEC's market will in fact be compressed to a volume inconsistent with continued cartel action.
The principal disadvantage of the approach is that the citizen as consumer does not receive the full benefit of whatever price drops may result over a period of time; on the other hand, the citizen as taxpayer in the consuming countries should have a very much lower burden under most of the possible techniques for achieving the basic goal. As for the question of continuing credibility, the "border protection" approach cannot be described as 100-percent credible, since Congress or parliaments would be under substantial pressure to remove protection and to favor the consumer when and if prices fall. However, the credibility of this approach should be greater than that of the deficiency payments approach because border protection can be legislated or decreed in advance. Once in place, and once investments have been made with reference to it, the system would develop a political constituency that would tend strongly to validate it.
Any policy of downside protection, however, will be of limited help and may disadvantage the countries that adopt it if only a few do so. Here, as in every other aspect of the energy problem, it is important to develop a new calculus of interest:
-Energy-poor countries are interested in low prices to their citizens, but also in seeing energy-rich industrial countries develop their resources. For only if they do will demand on the international market fall and oil prices come down.
-Energy-rich countries like Britain, Canada, and the United States are interested in seeing energy-poor countries like Italy and Japan adopt the same level of protection. For the main burden of investment must fall on the energy-rich, while the primary advantages of lower prices caused by the resulting compression of OPEC's market will accrue to energy-poor countries that import much of the energy they need. Without a common level of protection, this would leave the former locked into a high-cost energy economy, and at a competitive disadvantage.
-All industrial countries have an interest in putting OPEC in the position of residual supplier of oil, with a market kept small enough to prevent renewed cartel action.
Recognizing the basic common interest that underlies this calculus, the industrialized consuming countries, meeting in the International Energy Agency, have already reached a preliminary agreement in principle. On March 20 of this year, they agreed on a minimum safeguard price system, under which each country would use means of its own choosing to prevent oil from being sold in its domestic economy below an agreed common price. The system is to be elaborated by July 1, 1975.
The question that remains is, of course, the level to be adopted for the agreed common price. Here the divergent interests of the energy-rich and energy-poor members of IEA must be reconciled. Broadly speaking, a high level for the agreed common price would benefit energy enterprise and thus countries with important energy resources. A low level would favor consumers, and thus countries that must import most of their oil.
The costs and benefits of a given system and price level can be analyzed as follows. If the level of protection is set unnecessarily high, the result will be that more investment would be undertaken than turned out to be required. With an annual investment bill estimated at roughly $100 billion per year, the real cost of any excess investment would be some relatively small part of this amount.
The opposite risk is less easy to measure precisely. If the level of protection is set too low, the result would be not enough investment to deprive OPEC of its ability to set prices. Broadly speaking, what would then be lost to the consumer countries would be the difference between the level of their real-income transfers to the producer countries at cartel-set prices and the level of the same transfers if the cartel fails; in addition, the growth-retarding effect of higher prices must be weighed. As analyzed above, it does not seem excessive to estimate this potential difference at as much as $60 billion or more a year (in 1974 dollars). More important, the cartel would retain its power to disrupt the industrial economies by embargo, and the risk that its economic power over the consumers will be transmuted into political power would grow.
In short, the level of protection chosen must be evaluated, in effect, like the premium on an insurance policy. The penalty for guessing wrong and doing too little is incommensurately heavier than the costs of doing too much.
An exponential increase in the power of any group of countries, occurring rapidly and initially at the expense of others, is never easy for an international system to absorb. Obviously, the nations fortunate enough to have major oil resources will be able, in any event, to maintain a greatly improved power status and to advance the lot of their people immensely in the years to come. Only the degree of change is now at issue, and with it the broader question of a lasting accommodation that will make the adjustment bearable to oil consumers-poor countries even more than rich-and that will evolve toward a world economy in which all may advance together.
Because of the interdependence of their trade and investment, the industrialized countries hold vast reciprocal power over each other's well-being. But a structure of economic, political, and security institutions governs the exercise of that power and makes its possession tolerable. No such structure exists between the oil-producing and oil-consuming states. Its creation will ultimately be in the interest of both producers and consumers: for the producers, because their dependence on the industrial economies is growing inexorably as they convert oil earnings into real imports and new industries; and for the consumers, because oil imports and oil-related financial transactions will play a major role in their economies, whether or not OPEC retains its capacity to set prices.
But for three reasons it is too early seriously to address the design of that structure.
First, we still do not know how rapidly and how forcefully the consumers will act to change the underlying market balance. In 1974 the industrial countries moved fast to draw the consequences of the embargo, establish a common strategy in the International Energy Agency, and draw up domestic energy programs. But by the time their response was ready at the start of this last winter, the recession had replaced energy as the dominant economic issue. The consequence has been to delay and to dilute energy action. As the industrial economies pull out of the recession and rising demand for oil creates conditions for new oil price increases, the politics of energy within the industrial countries will again change. It will not be possible to judge the full scope of their response until next year.
Second, it is not yet clear how far the producers will press their bid for leadership of the developing world. Should this become a permanent, dominant aim of their foreign policy, chances of successful negotiation of a new economic and ultimately a political framework between producers and consumers will be low.
Third, the future internal structure of OPEC is not yet knowable, for it depends on the way in which bargaining over production cuts develops. At one extreme would be a structure in which each OPEC member insisted that cuts be proportional to base-year output or capacity. In this case, Saudi Arabia and Kuwait would accumulate much of the OPEC financial surpluses, the industrial development of other OPEC members would be slower, and the cartel would be more fragile. At the other extreme, Saudi Arabia and Kuwait might take up most of the necessary production cuts, with the result that the industrial development of the group would accelerate, while the accumulation of financial assets by all OPEC members would be less. If developments approximate the first case, the real institutional problem between consumers and producers will be the management of the huge financial assets of a small number of countries. If events fit the second case, the problem will extend to all producers and cover a far wider range of economic and industrial problems.
The inability of the preparatory meeting called by President Giscard d'Estaing in April to agree on a concept for future discussions between producers and consumers reflected these uncertainties. But bilateral contacts to organize a new meeting are already under way, and the search for that concept will go on, for there can be no equilibrium in the world economy or in world politics until a more balanced relation of power between oil producers and industrial countries is reached, defined, institutionalized.
1 See Hollis B. Chenery, "Restructuring the World Economy," Foreign Affairs, January 1975.
2 Compare Khodadad Farmanfarmaian et al., "How Can the World Afford OPEC Oil?" Foreign Affairs, January 1975.
3 See Henri Simonet, "Energy and the Future of Europe," Foreign Affairs, April 1975.
4 Such new producers as Mexico may, of course, join OPEC, and in any event conform their price policies to those of OPEC. The point is that their need for export outlets will still affect the market available to OPEC as a whole.
5 With much of 1975 already gone, the White House currently estimates that the effect of the May 27 actions would be a reduction of 0.1 MMBD by the end of 1975, 0.7 MMBD by 1977, and 2.5 MMBD by 1985. The impact of the President's total legislative program, however, including measures to stimulate production as well as conservation, would be a reduction of 0.7 MMBD in 1975, 2.2 MMBD in 1977, and 7.2 MMBD in 1985. White House Fact Sheet, The New York Times, May 28, 1975, p. 20.