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In November, ministers from the U.S., Canada, Japan, all members of the Common Market (except France), four other European nations and Turkey signed an agreement to form the International Energy Agency, which Henry Kissinger had proposed. Provided their legislatures approve, each member would build up a stockpile of oil equal to 90 days of imports; if any OPEC members embargo oil or reduce shipments, the IEA nations would reduce consumption and later share what they have with one another. The IEA agreement will soon come up before Congress, which would do well to approve it.
The Western nations will have no real bargaining strength until they show that they are taking strong measures to conserve. By significantly reducing demand, the big buyers of oil might force OPEC into production cuts that some cartel members may eventually find intolerable. Cutbacks would be particularly rough for Iran and Iraq, both of which plan substantial production increases hi the next few years to finance their grand development programs. Rather than reduce output, other populous countries with ambitious development schemes—Nigeria, Venezuela, Indonesia—might be tempted to buck the cartel by selling below the fixed price. Ecuador, which badly needs development money, is already in some trouble. High prices have cut demand for its oil by one-third since 1973.
At very best, however, the State Department reckons that OPEC would not break up for another two to four years—and probably not even then. It has not been at all damaged by a world oil surplus of one to two million bbl. a day, which has shown up because high prices reduced consumption last year. In the non-Communist world, consumption fell from 48 million bbl. a day in 1973 to 46.5 million bbl. last year; in the U.S., it declined from 17 million bbl. to 16.2 million bbl. Partly hi response, OPEC is now producing at 20% below capacity with no visible problems. Again, it is Saudi Arabia that holds the key. The country has accumulated so much money that it could stop production for two or three years and still have more than enough cash to import food, provide free medical care and education, finance new industry and subsidize other Arab nations. But unless and until the industrial nations get together, much of the non-Communist world could not long function without Saudi Arabia's 8.5 million bbl. per day. As Saudi Arabia's Harvard-educated Oil Minister Ahmed Zaki Yamani told TIME Correspondent Karsten Prager: "How much can the consumers reduce consumption? By 10%? And how much can the producers reduce without financial pain? By at least 33%—minimally. The people who ask for a price reduction of $2 to $4 are simply not being realistic."
Even so, the consumers must conserve to show OPEC that they are serious and to hold down their payments to the cartel. Kissinger has urged that they hold their oil imports essentially flat over the next decade. For the U.S., that would mean a decline in the annual rate of increase in energy from 4.3% in the past ten years to 2% or 3% in the next decade. The Trilateral Commission has called for limiting the annual growth in energy use during that period to 2% in the U.S. and Canada, 3% in Western Europe and 4% in Japan. Certainly the U.S. can and