116. Memorandum From Secretary of State Rogers to President Nixon1

    • Petroleum Developments and the Impending Energy Crisis

During the last year and a half my staff has conducted a comprehensive examination of the changing energy situation. We have reviewed various studies conducted by other government agencies and private organizations and have held extensive consultations with oil experts in and out of government, with officials concerned with energy matters in allied capitals, and with senior executives of the oil industry.

Our conclusions to date are as clear as they are disturbing. Unless present trends are reversed, the United States by 1980 will be producing little more oil than its produces today while consumption will rise from 15.8 million barrels per day in 1971 to 24 million barrels per day in 1980. At that time we will be forced to import half our petroleum needs, largely from the Arab States, which contain at least two-thirds of the non-Communist world’s oil reserves.

Our NATO allies and Japan are in an even more precarious position. They are already heavily dependent on the Arabs for a large share of their total energy consumption. In 1980, by all accounts, this dependence will be still greater.

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The bargaining strength of the Arabs and the other oil producers is increasing. Most of these governments are now organized in a de facto producer cartel (OPEC) and their revenues and foreign exchange reserves will increase enormously in the years ahead. There is a strong trend toward nationalization in many of the producing countries which, they have stated openly, they expect to achieve in a short time.

While dependence on the Eastern Hemisphere for much of our energy is almost certainly bound to grow whatever we do, this dependence can be significantly reduced if we move now to reverse production and consumption trends in the non-Communist world, particularly in the United States.

Since September 1970 we have had almost constant conversations with our allies and our oil companies on this matter. We have kept them as fully informed as possible on developments in OPEC and on threats to our security. We have urged common action by consumers in the OECD and we have urged our European allies to raise the levels of their strategic stocks of petroleum to give them at least some degree of flexibility in dealing with the producing governments.

We are also taking the following actions which we believe could help alleviate our situation:

  • —We are continuing our efforts to work out an energy agreement with Canada. The discovery of large quantities of oil and gas in the Canadian Arctic may convince the Canadian Government that the natural market for these hydrocarbons is in the United States.
  • —We are examining a proposal for an energy agreement with Venezuela which would now allow some and would ultimately permit all Venezuelan oil to come freely into the United States, provided Venezuela will give us, in the form of an executive agreement or a treaty, assurances that the investment needed to develop Venezuela’s very large reserves of heavy oil will be secure.
  • —We will ask our allies—notably Canada, Japan, the UK and the EC countries—to examine with us the feasibility of vastly increased cooperation in the development of both traditional and nonconventional energy forms.

It is clear, however, that the energy crisis will be solved primarily by domestic action, not by action taken abroad. I hope the Oil Policy Committee or the Domestic Council will be able to draw up concrete plans for your consideration and, if you approve, for early implementation.

I am enclosing the current draft of a paper we have been working on which discusses the impending energy crisis.2 It includes a list of [Page 286] suggested actions which we might take to reduce our dependence on foreign oil. These are not definitive recommendations but are being put forward for discussion and consideration by the Oil Policy Committee and the Domestic Council.

Jack Irwin has discussed this or an earlier draft with most of the key Administration officials who have an interest—Messrs. Connally, Morton, Laird, Schlesinger, Lincoln, Flanigan, Peterson, David, Stein and Nassikas.3 They may differ with us somewhat on approach but they all agree with our analysis of the seriousness of the problem and the necessity of taking action.

William P. Rogers
  1. Source: National Archives, RG 59, Central Files 1970–73, PET 1 US. Secret. Drafted on March 9 by Akins and cleared in E, E/ORF, D, and U.
  2. The paper, “The U.S. and the Impending Energy Crisis,” March 9, is not printed but a copy is ibid., Nixon Presidential Materials, NSC Files, Box 321, Subject Files, Energy Crisis Part 3. The NSC Staff’s assessment of this paper, including an analytical summary, is Document 128.
  3. See Document 109.