A Superagency for the Crisis

Moving at last to cut through the bureaucratic confusion that has bogged down the Administration's attempts to deal with the energy crisis, President Nixon this week created a new superagency, the Federal Energy Administration. It will centralize all policy planning and manage federal fuel allocation, conservation, and perhaps eventually rationing, taking over units of the Department of the Interior, the Cost of Living Council and the Office of Management and Budget.

The new unit will be headed by William E. Simon, 46, now Deputy Secretary of the Treasury, who will report directly to Nixon. Simon, a millionaire former investment banker and tough decision maker (see box), thus becomes the nation's new energy czar, succeeding John A. Love, head of the old Energy Policy Office. Love, who was often criticized for vacillation, was thunderstruck to learn of his demotion late last week, when he was called into the White House and shown an organization chart with Simon's name on top. On paper he remains a senior energy adviser, but he is seriously thinking of quitting altogether.

One of Simon's first and most urgent jobs will be getting the Administration to make up its mind about rationing. The possibility of having to ration gasoline and other fuels has been a nightmare haunting the White House since the Arab oil embargo began. The President, who abhors rationing politically, ideologically and administratively, managed to avoid even using the word when he went on television last week to outline a series of less stringent conservation and allocation measures. But by week's end the relentless press of events was sweeping the Administration closer to the dreaded decision.

Even a Cabinet-level energy emergency action group seemed to be reluctantly leaning toward rationing. At least it ruled out the most obvious alternative: piling heavy new taxes on gasoline in order to curb consumption. Members bowed to "political reality," as one put it, and concluded that such a boast could not get through Congress in an inflationary period. Treasury Secretary George Shultz, who argued to the end for the tax plan, finally agreed to have the group study a number of possible rationing plans. The leading one is the so-called "white market" system (TIME, Dec. 3), which would permit motorists to buy or sell ration coupons through official exchanges that could be set up in post offices, banks, or service stations.

No firm decision has yet been made, and no recommendation will even go to the President until the energy emergency bill clears Congress and gives Nixon the power to order rationing if he wishes. A decision cannot be put off much longer. Every day the pervasive dimensions and effects of the fuel shortage become more frighteningly clear.

Power Cuts. Last week Federal Power Commission Chairman John Nassikas warned that electric power in much of the nation will soon have to be reduced by 10%--more in the critically short Northeast--because stores of heavy residual oil to power generating plants are dwindling. Petrochemical shortages now threaten the production of such vital drugs as cortisone and penicillin, which already are in tight supply. Manufacture of the drugs requires such solvents as acetone and isopropanol, and supplies of these petroleum-based solvents are diminishing. Drug executives will journey to Washington this week to plead for greater allotments of oil to the petrochemical industry.

Watching these developments, the stock market gyrated wildly--down 29 points on the Dow Jones industrial average one day, up 22 two days later--but overall tumbled deeper into what is beginning to look like a full-scale rout. Early in the week the Dow touched a new 1973 low of 817, and closed at 822, down 165 points in a month. That plunge is one of the steepest ever in so short a time.

Administration officials insisted that Wall Street was overreacting, but their own statements gave little ground for economic optimism. Herbert Stein, chairman of the Council of Economic Advisers, predicted that the energy crisis will slow the nation's economic growth to a near halt next year. Output of goods and services, he said, will rise no more than 1%, v. 6% this year; in the first quarter it may actually decline. Unemployment, he forecast, could rise from 4.5% at present to 6%, meaning that a million workers would be thrown out of jobs. His assessment is far from the most gloomy; some businessmen think that the jobless rate could hit 6% as early as January, and continue to rise from there. Stein declined to predict the pace at which consumer prices will climb, but some other forecasters expect an inflation rate of 7% to 8% in 1974, largely because of rising fuel costs.

In order to cope with the crisis, the Administration so far is relying on the belated and hastily prepared package of conservation measures set forth by the President in his television speech last week. Nixon announced:

1 ) A 15% reduction of normal supplies of heating oil to homes, and a 25% reduction to factories and commercial enterprises such as supermarkets. This plan, which individual oil dealers will administer, was ordered under existing legislation. It assumes that average in door temperatures have been held at 74DEG, and that the cutbacks will force households to turn their thermostats down to 68DEG; offices and factories supposedly will be forced down to 64DEG. Scheduled to take effect Dec. 27, the plan has as many loose ends as a Maypole: Will a homeowner who bought only enough fuel to keep temperatures at 68DEG last year have to take a cut that will force him to turn his thermostat down to a chilly 62DEG? What allotment will be granted to owners of new homes who have not yet established themselves as customers of a local oil dealer?

To iron out such problems, the Administration has revived the famous initials OPA and created the Office of Petroleum Allocation, which will now be absorbed into Simon's superagency. But most of OPA'S regional branches have just opened and will not be able to han dle the flood of complaints and requests with any efficiency for weeks. Last week OPA Chief Eli T. Reich conceded that the effort to allot heating fuel has been marked by confusion and chaos.

2) A ban on gasoline sales from 9 p.m. Saturday to midnight Sunday, be ginning last weekend. Voluntary for now, it will be made mandatory when the President gets the necessary statu tory power. Stations on the New York Thruway and Pennsylvania Turnpike were ordered by state authorities to comply with the President's request. Those on the New Jersey Turnpike were limited to selling only five gallons to a customer. In Massachusetts, the turnpike authority specifically ordered stations to stay open. Most dealers will go along with the ban, but many are riled. Says Cecil D. Norton, Missouri vice president of the Mid-America Gasoline Dealers Assn., "We're being told how much we can sell, when we can sell it, and what we can charge for it. It is approaching dictatorship."

3) A nationwide speed limit of 50 m.p.h. for cars and 55 for trucks and buses. Traffic safety experts immediately complained that permitting trucks to go faster than cars substantially increases the risk of accidents during passing. Long-haul drivers in the Teamsters Union, once a Nixon favorite, are bitter, too. Drivers are paid by the mile and limited to working ten hours a day; slower speeds mean less distance covered--and slimmer paychecks.

4) A request for a coast-to-coast blackout of all unnecessary outdoor lighting, including Christmas displays. Compliance with this request has been spotty; some towns and cities are indeed dousing lights, but others are going ahead with dazzling Christmas displays.

The Administration also moved last week to bring some order to its so far largely ineffectual fuel allocation program, which is supposed to ensure that energy-short areas and industries do not suffer undue hardship. Love's Energy Policy Office announced its first set of nonheating priorities, to take effect Dec. 27. Public transportation and oil, coal and other fuel-producing industries will get unlimited supplies. Food processors, police and fire stations and medical services will be given as much fuel as they used last year. Mail services, trucks, trains and ships will get 90% as much fuel as they burned in 1972; so will factories in the case of fuel used to run machinery rather than heat buildings. Even as the new priorities were being announced, taxi drivers descended on Washington to seek the help of Senator Henry ("Scoop") Jackson, Washington Democrat, in making sure their gas supplies are not reduced.

Nixon also signed a new bill that for the first time brings crude, residual oil and gasoline under the allocation program. In theory, the Government can now prevent the closing of refineries dependent on foreign crude by shifting domestic oil to them. But the Administration has not yet equipped itself with the means to shift oil. It has not mobilized tankers to carry refined oil from amply supplied Louisiana and Texas to fuel-parched New England.

Most energy experts view the Administration's efforts so far as woefully inadequate and favor immediate rationing. Says Texaco Chairman Maurice F. Granville: "The U.S. must be prepared to take more far-reaching steps to bring consumption of oil products under control."

Vow Renewed. Meanwhile Congress is pushing ahead on energy-related legislation. Last week the House approved year-round Daylight Saving Time. The Senate is likely to pass a similar measure this week, and the law should take effect by January. Setting clocks ahead one hour could reduce nighttime electrical use and shave about 2% off the nation's demand for energy. The one-year energy emergency bill, which would greatly expand presidential authority to order fuel conservation, is now before the House Commerce Committee, having already passed the Senate. Despite the critical need for speed, a flood of amendments is likely to delay its passage.

No relief from the squeeze is in sight. At a summit meeting in Algiers last week, the Arab leaders renewed their vow to withhold their oil until Israel is forced by world pressure to give up conquered Arab territory, including some sections of Jerusalem. In addition, the Arabs imposed oil embargoes on three more nations--Rhodesia, Portugal and South Africa--charging that they were not only pro-Israel, but antiblack.

In Europe, where the first big snow fell last week, the reduction in shipments of Arab oil is beginning to hurt. The British government began issuing coupon booklets as the first step toward probable gasoline rationing. Sweden announced that it will impose gas rationing on Jan. 7. A Sunday ban on driving began in West Germany, and officials openly predict a recession next year if the oil crisis intensifies. Electricity was shut off in many Italian towns for as long as 24 hours.

For the U.S., time is running out. If the nation is to avoid a devastating energy crunch this winter, the Administration must fashion a comprehensive, closely coordinated policy to deal with the encroaching emergency. The creation of Simon's new agency is a promising step in that direction.

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