ECONOMIC

important that the higher costs be reflected in the prices paid by consumers,to ensure that they economize on energy use.Another way to achieve the capability for self-sufficiency is to give domesticenergy producers assurance that import prices would not fall below certainlevels. Variable tariffs could be used to ensure that prices of importedoil and natural gas do not fall below such levels. This would ensure competitionamong domestic producers and would encourage development ofthe lowest-cost domestic sources of energy. The price of all energy sourceswould reflect their value to consumers and would therefore encourageefficient use.An important factor in selecting an appropriate policy is the responsivenessof domestic supply to changes in price. Restricting energy imports mayappear to be an attractive option if it is believed that the long-run domesticprice will be, say, $5 per barrel of crude oil. But if the cost is expected tobe triple that amount, import restrictions appear decidedly less attractive.Role of ImportsAt least until 1980 the United States will continue to depend on oil importsto supplement domestic production. As domestic energy output expands, itwill be possible gradually to reduce this dependence. If imports can be obtainedat a sufficiently low price, however, without posing a threat to ournational security, they can continue to play a role in our long-term energypolicy.The risks associated with petroleum imports could be substantially reducedby means of a storage program. Petroleum could be stored both in salt domesand in the form of oil fields with shut-in production capacity. In the eventof an unexpected curtailment of oil imports, the salt dome storage wouldbe immediately available to offset the loss of foreign supplies; and the shut-incapacity would be available within a few months to supply petroleum untilit is possible to produce from new wells. On the basis of the level of importsand an assessment of the risk of an actual or threatened reduction in foreignsupplies, the Government could determine the appropriate amounts of storageand shut-in capacity.Energy Research and DevelopmentThe principal object of a Federal energy research and developmentprogram is to develop new technologies that permit the productionand use of energy at a lower cost to society, either by reducing the cost(including the environmental cost) of providing a given amount of energyor by reducing the quantity of energy needed to produce a given output ofgoods and services.Until recently, most energy research and development has been conductedby the private sector. There is now a need for the Government to play amore active role, partly because of the long-term nature of many energyresearch and development projects and partly because of the fundamentalnature of much of the research that is needed. There are other reasons. The124