U.s.-japanese Energy Relations: Cooperation and Competition by Charles K. Ebinger

Author:Charles K. Ebinger [Ebinger, Charles K.]
Language: eng
Format: epub
Tags: Social Science, Political Science, World, Asian, Regional Studies
ISBN: 9780865318335
Google: pyhHEAAAQBAJ
Goodreads: 4487703
Publisher: Westview Press
Published: 1984-06-20T00:00:00+00:00

CECA's first premise predicts that the United States will have to reimpose the export ban in a disruption. The group presumably believes that the U.S. government should do so. Neither proposition is convincing.

A reimposed ban cannot be justified on grounds that it would insulate the U.S. from energy shocks. It would not ease the oil supply disruption that causes world prices to rise because it would not increase the amount of oil available on the world market. For every Alaskan barrel diverted from Far Eastern refiners because of a reimposed ban, a barrel from somewhere else would be purchased by those refiners. In short, Americans would face the same price shock and dislocations whether or not the exports ban was reimposed.

Since analysis provides no reasons why the U.S. government should reimpose the export ban, considerable skepticism is warranted about whether it would do so. CECA's prediction that it would implies that the government will decide to follow a good energy policy (lifting the ban) with a bad one (reimposing it). The group's prediction ignores the U.S. government's current obligation to share oil in the event of a disruption of 7 percent or snore of the world's energy supplies.

The second premise characterizes using foreign flag tankers in a disruption as "most problematic." CECA does not explain why this is so. Emergency use of foreign flag tankers is not at all problematic from the standpoint of economic feasibility or technical availability. A supply disruption automatically increases tanker availability because there is so much less oil to move around. Tanker rates fall for the same reason. In addition, the Panama transit, for example, does not impose a technical constraint on the use of foreign flag vessels for Gulf Coast bound cargoes. If foreign flagships prove too large for the canal, or if the Panama pipeline proves unavailable, Alaskan crude can move to the Gulf Coast via Cape Horn.

Emergency use of foreign flag tankers might be problematic from a political standpoint. The maritime industry could oppose emergency legislation opening the U.S. port to U.S. port trades to foreign flagships, even though other Americans would suffer greater economic hardship as a result. In a supply disruption, however, the social cost of supporting maritime special interests would be highlighted by the energy emergency. The maritime industry would have to make the same circular argument that CECA appears to make here: We need U.S. flagships because we cannot rely on foreign flagships. The United States cannot rely on foreign flagships because the Jones Act stipulates domestic flagships must be used.

Exports and Japanese Pressure on Spot Prices. CECA correctly notes that if we permitted exports, any attempt to ban them in an energy emergency would be strongly opposed. The group nevertheless presumes that such opposition might be overcome and that the ban might be reimposed. As a result, states CECA, the Japanese will bid up spot prices "with even greater fury . . . increasing the costs that the U.S. economy would pay."69

CECA's argument misunderstands the role of the spot market.

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