ECONOMIC

Electric PowerUntil recently it was widely expected that nuclear power would be amajor factor in meeting the increased demand for electricity in the early1970's, but construction of nuclear reactors has fallen far behind schedule.Technical problems in their design and construction have been partly toblame, but there have also been unexpected delays associated with the sitingof new power plants. To some extent both the construction delays andthe siting delays are attributable to time-consuming litigation resultingfrom increased public concern about nuclear hazards and thermal pollutionof water by these reactors.Meanwhile the demand for electricity has continued to grow rapidly. Sofar the increased demand has been met largely by the use of fossil-fuelpower plants, but in some regions the new construction of these plants hasbeen insufficient to meet demand at existing prices. To some extent thissituation may have come about because the delays in the construction anduse of nuclear reactors were largely unforeseen. There is also evidence thatsome electric utilities underestimated the rate at which demand would rise;the rapid growth in the number of electrical appliances was not fullyanticipated. At present, however, an even more serious problem for the electricutilities than the shortage of power plants is the shortage of naturalgas and residual fuel oil, together with environmental restrictions on the useof coal.THE ENERGY CRISISThe energy crisis originated in a large number of circumstances none ofwhich was sufficient in itself to disrupt the economy seriously. Their convergencein 1972—73, however, touched off a dramatic change in the domesticenergy supply-demand balance.During most of the 1960's the United States retained the capability tobecome rapidly self-sufficient in energy production, but this capabilityquickly disappeared in the last part of the decade. The natural gas price waskept below the market-clearing price, thereby creating a shortage and leadingto an increased demand for oil. The demand for oil was further increasedby environmental restrictions on the use of high-sulfur coal as well as bydelays in the construction of nuclear reactors. Domestic refinery capacity wasunable to meet the rapid expansion in demand for petroleum products.Although the domestic price of crude oil was supported above the price ofimports, the price was not sufficiently high to discourage a rapid growth indemand or to encourage an adequate expansion in domestic production.Preventing a rapidly growing dependence on oil imports would haverequired maintaining a higher domestic price. Because the enormous oil reservesin the Persian Gulf area were expected to be available to us at a verylow price, a decision w r as made to permit exceptions to the limitations onimports of petroleum products rather than allowing further increases in thedomestic crude oil price. Partly because of this increased reliance by the117