ECONOMIC

TABLE 30*—Wholesale prices, all industrial commodities and selected fuels, selected periods, 1950-73[1967=100]PeriodsAllindustrialcommoditiesCoalCrudepetroleumGas fuelsElectricpower195019601970 .78.095.3110.083.395.6150.383.298.6106.10) 87.2103.60) 101.2105.91972 _1973117.9127.0193.8218.1113.8126.0114.1126.7121.5129.3December:19721973119.4137.1205.5240.7114.7146.2119.2137.6122.9135.9* Not available.Source: Department of Labor, Bureau of Labor Statistics.During 1973 the United States also experienced threats of shortages ofpetroleum and natural gas, and in some areas of the country electric powerbrownouts and blackouts. Shortages of petroleum intensified late in the year,following an October decision by several Arab nations to cut back crudeoil production and to curtail shipments to the United States. By the end of1973 our once abundant and secure energy supplies seemed to be seriouslythreatened; and what appeared earlier in the year as a problem turnedinto a crisis. To conserve scarce petroleum, a variety of restrictions previouslyunknown to peacetime America had to be adopted. They focusedattention on the dependence of the economy on energy, the importance thatoil imports have assumed, and the vulnerability of the economy to arbitraryacts by foreign states.The energy crisis has its roots in events dating back a decade or more.To understand the present situation, it is necessary to examine the factorsthat have influenced energy supply and use in the United States.Natural GasSince 1954 the Federal Power Commission (FPC) has regulated thewellhead price of all natural gas sold to interstate pipeline companies. TheFPC maintained prices at approximately the same level throughout the1960's. In response to increased exploration costs and constant prices, producerscut back on exploration, so that the ratio of reserves to annual productiondeclined rapidly from over 20 in 1960 to 10.5 in 1972. At the sametime, the use of natural gas was expanding rapidly. With a growing gap betweenproduction and desired consumption, producers called for deregulationto permit higher prices and to stimulate exploration.Beginning in 1969, the regulated price was permitted to rise. The naturalgas shortage continued to intensify, however, as demand received an additionalstimulus from environmental limitations imposed on the use of highsulfurcoal and high-sulfur oil. The FPC estimated that in 1973 the shortagereached 7 to 10 percent of demand at the prevailing price. To restrict con-114