Cooperate or Else

Acting in concert, oil-exporting countries have raised petroleum prices 480% since 1970. Reacting individually, oil importers have had no alternative but to pay--and eventually they may be un able to do even that. In a lucid and frightening analysis in the July issue of Foreign Affairs, Oil Economist Walter Levy contends that the importers must choose, in the words of his title, "World Oil Cooperation or International Chaos."

This year, Levy calculates, consuming nations will pay $100 billion to import oil, v. $20 billion in 1972. For poor countries, the oil bill will more than offset all the foreign aid they get. Even industrialized nations, says Levy, must either cut oil imports enough to cause recession or run gargantuan trade deficits financed by borrowings that eventually will pile up an insupportable debt. Though Levy does not use the words global depression, he contends that the world economy "cannot survive in a healthy or remotely healthy condition if cartel pricing and actual or threatened supply restraints of oil continue."

To meet the threat, Levy contends, the major oil-importing nations must: 1) coordinate research and development of alternate sources of energy and agree to guarantee profitable prices to people who produce, say, oil from shale or tar sands; 2) work out a common program to build six-month stockpiles of oil and share imports among themselves if the exporters again curtail or shut off supplies; 3) agree that they will not try to get the cash to pay for oil by unduly pushing exports to and curtailing imports from each other; 4) especially important, develop coordinated programs to conserve energy. If the world continues to increase energy consumption by 5.6% a year, as it did between 1968 and 1972, Levy argues, it will remain unhealthily dependent on Middle Eastern oil. But if energy consumption can be held to an increase of 3.3% a year--which will mean real "austerity" for the U.S., Japan and some other nations--oil imports can be held to a level that by 1980 could be paid for out of increased sales of goods and services to the Arabs.

Even that program, Levy maintains, is insufficient; the importing nations must also band together to persuade the oil exporters to cut prices and grant the poor countries deferred-payment terms for their oil. Acting together, he contends, the oil importers could convince the producers that it was not in their own interest to bankrupt their customers and "that their own independence could not safely be assured if the United States and its allies were to be fatally weakened vis-`a-vis the Soviet Union." (In plain words, governments of oil-producing nations might be overthrown by Communist revolutions from which the West could not protect them.) But if even one or two major importers break ranks, the oil producers will be encouraged in the illusion that they can get indefinitely any price that they ask.

The difficulties in the way of Levy's program are obvious. It would require a degree of unity and surrender of national sovereignty that the oil-burning nations were unable to muster even during the energy-crisis atmosphere of last winter. Levy concedes the problem but has a starkly simple answer: the oil consumers literally cannot afford the price of continued disunity.

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