Europe. Coal and natural gas will also become considerably more expensive in real terms,
Because of their predominance in oil, natural gas, and uranium, the Middle East and Africa will develop an even larger surplus in their energy trades, probably running into the hundreds of billions of 1972 dollars by the turn of the century. The corresponding deficits will be primarily in the industrial countries (except Canada), U.S. invisible items of trade are now quite strong and are supporting the nation’s current account. A good part of this flow represents oil company earnings in the world market, which partially offset the high costs of oil imports. In addition, new conservation efforts, new oil finds, and a high propensity to import by OPEC help keep the U.S. external position from deteriorating too much. In the United States the energy trade deficit will be somewhat reduced by the expected growth in exports of coal or uranium if such exports are permitted. If the United States were to limit uranium exports there would be a correspondingly larger demand for U.S. coal. The main reason uranium would normally be preferred by importers is its lower transportation cost.
These projections do not take account of the trade in nuclear power plants and related facilities (and possibly other advanced energy technologies), which may offset a large part of the industrial nations’ energy trade deficits but will add to the deficits of many countries that do not produce oil. In the absence of political constraints, worldwide investment in nuclear power between now and 2010 could add up to about $1 trillion (1972 dollars), and much of this will be supplied by North America, Europe, and Japan. Needless to say, other nonenergy exports will also have to expand to cover the growing energy trade deficits of these and the non-OPEC developing countries, and this may present serious problems for international trade. To the extent that economic growth in the industrial countries is slower than in the recent past there will be more political resistance to allowing manufactured imports from developing countries at exactly the time when such imports are most necessary to finance their energy purchases.
The world energy picture sketched in the previous section is hardly reassuring from either an economic or a political point of view. Let us now consider what difference certain U.S. policies might make.
Conservation in the United States beyond what is induced by higher world oil prices would reduce the growth in world demand for OPEC oil and thus reduce the cartel’s power to raise the price and limit production.