LETTER TO THE HONORABLE CLARENCE J. BROWN FROM STANSFIELD TURNER

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80M00165A001800020026-6
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 10
• Document Creation Date: December 20, 2016
• Document Release Date: August 21, 2006
• Sequence Number: 26
• Publication Date: June 10, 1977
• Content Type: LETTER

JDJ-
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Washington, D. C. 20505
10 JUN 1977
The Honorable Clarence J. Brown
House of Representatives
Washington, D.C. 20515
Dear Mr. Brown:
Nice to have breakfast with you Wednesday
morning, and I appreciate the opportunity to
debate again the merits of the Central
Intelligence Agency Study on Oil. Let me only
assure you that I am most conscious of the
importance of our being objective and accurate,
and of taking many efforts to check the validity
of our predictions.
One of those efforts was to ask my staff to
review each of the other studies that is avail-
able and to prepare a comparison of them with
ours. I thought you might enjoy having a copy
of that comparison in order to see where our
work is in dispute and where it is not. I am
enclosing a copy of that review.
If there is any way I can be helpful in
this situation, please do not hesitate to call
on me.
rvvb
tIJg Y
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Comparative Analysis of 1985 Oil Demand Projections
.A comparison of the CIA projections of worldwide energy/
oil supply and demand projections with recent forecasts of
other organizations reveals few major differences outside
the Communist area. These are largely because of a lack of
understanding of Soviet oil production problems. Most private,
oil industry, and government forecasters generally agree that
demand for OPEC oil will exceed OPEC's ability or willingness
to produce by 1985 or shortly thereafter. In addition to the
studies analyzed below, informal discussions with other
observers indicate that the CIA analysis is looking stronger
after nearly two months of reflection.
A large number of major worldwide energy supply and
demand forecasts have been published during the past six months
or so. The attached tables compare the principal findings in
the CIA 1985 projection with nine representative studies.
Comparable details are not available for several of the studies,
although estimates of required OPEC production (so-called
"bottom line") are indicated for each.
The CIA projection and methodology are most closely
paralleled in studies prepared by Exxon, the OECD and FEA.
The energy demand forecast in each of these studies is determined
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by projecting economic growth, and then allowing for
conservation. On the supply side, the CIA projections are
based on an analysis of available non-OPEC energy supplies
(oil, natural gas, coal, nuclear, and hydro), including the
net trade position of the Communist countries. OPEC
countries supply the residual amount of oil necessary to
meet world demand. CIA's forecast of required OPEC
production in 1985 is higher than most other studies,
primarily reflecting our more pessimistic assessment of the
Soviet oil balance. The difference in the Soviet estimate
alone is as large as 3.9 million to 5.5 million b/d in 1985.
Two studies -- by Walter J. Levy Associates and the
International Energy Agency -- conclude that required OPEC
production in 1985 may well exceed.OPEC willingness to produce
at the required level. The Levy and IEA studies each assume
the Communist countries will be small net exporters in 1985.
The SRI World Energy Study was presented in a preliminary
form and is heavily caveated. For example, summary results
distributed at the second conference of participating clients
held at SRI on April 21 are carefully labeled "preliminary
Work (to be revised)" and state that "numbers are for
illustrative purposes only." Nevertheless, people are
quoting the study as definitive when they contrast it to
the CIA analysis.
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The SRI study consists of a highly complex econometric
model of energy demand by end-use sectors as well as an
interfueh competition model which balances supply and demand.
Its design is determined by its long-term nature; the goals
of SRI's work include forecasting energy supply, demand, and
price 50 years in the future. Because of this, results for
any point along the way, such as 1985, are not necessarily
comparable to studies such as the CIA report or oil company
estimates which look at nearer-turn developments.
Because of its extreme complexity and the large number
of assumptions and interactions which come into play, we are
unable to explain some of the results of the SRI model. In
addition, in present form it obviously contains some inconsistant
data. For example, SRI projects that Mexican oil production
in 1985 will be lower than it is today (see table). On the
demand side, the small volume of apparent US oil consumption
(production plus imports) is difficult to explain, since SRI
projects US and Canadian 1985 oil consumption lower than
US consumption alone last year.
The Report of the Workshop on Alternative Energy Strategies
(WAES), sponsored by MIT, is the most recent study published
and generally agrees with CIA's analysis. The WAES study
forecasts energy supply and demand for the period 1985-2000
and therefore focuses its attention on long-term issues.
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WAES concludes that an oil supply/demand crunch will occur
most probably between 1985 and 1995, even if prices rise
substantially.
The CIA forecasts the crunch will come earlier than
WAES. Our estimate for world oil demand and OPEC oil production
in 1985 is about 10 million b/d higher than WAES. The,
differences appear in several assumptions: (1) CIA uses
slightly higher economic growth rates than WAES; (2) WAES is
much more optimistic on nuclear energy supplies; (3) WAES
projects oil demand in non-OPEC LDCs 2-3 million b/d less than
the CIA study; (4) WAES assumes the Communist countries will
have no net effect on Free World supply and demand; (5) WAES
assumes future government policies will vigorously encourage
energy supply, development and conservation consuming countries.
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CIA
SRI2
Oil Production:
United States & Canada
11.3-12.5
9.9
Mexico
3.0-4.5
0.9
Western Europe
4.0-5.0
2.5
USSR
8.0-10.0
13.4
OPEC
46.7-51.23
33.2
Oil Imports:
United States & Canada
13.6-16.8
7.0
Western Europe
11.4-13.6
12.3
Japan
8.0-8.7
6.7
China
-2.4
USSR/Eastern Europe
3.5-4.5
-2.1
Comparison of CIA and SRI 1985 Oil Production and Import Projections
(Million b/d)1
SRI data converted from quadrillion BTUs using SRI conversion
factor: 5.85 million BTU per barrel of crude oil.
SRI data characterized as being "for illustrative purposes
only."
Required OPEC production to balance unconstrained demand.
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Comparison of 1985 Oil Demand Projections
(Million b/d)''
CIA Exxon OECD1 FEA1 Levy
(Apr 77) (Mar 77) (Jan 77) (Feb 77) (Sep 76)
IEA/SLT SRI2 WAES3 Citibank
(Mar 77) .(Apr 77) (May 77) (May 77)
Free World Oil Demand 68.3-72.6 68 64.9 70.3 67.74 N.A. N.A. 58-63 N.A.
United States 22.2-25.6 N.A. 21.3 19.8 23.7 N.A. 16.95 20.1-23.35 N.A.
Canada 2.9-3.5 N. A. 2.5 N. A. N. A. N. A. N. A. N. A. N. A.
OECD Europe 15.8-18.2 N.A. 19.0 20.6 19.6 N.A. 14.8 13.5-14.8 N A.(
Other Free World 26.0-26.7 N.A. 22.1 29.95 24.445 N.A. N.A. 23.2-27.6 N.A.
Non-OPEC Oil Supply 24.5-26.3 25 25.3 25.8 23.2 N.A. N.A. 21.7-24.4 N.A.
United States 10.0-11.0 . 115 11.6 12.2 13.0 N.A. 9.95 11.9-14.05 N.A.
Canada 1.3-1.5 N. A. 1.4 1.4 N. A. N. A. N. A. N. A. N. A.
OECD Europe 4.0-5.0 5 4.4 4.0 5.0 N.A. 2.5 4.1 N.A.
Other Free World 8.5-9.5 9 7.9 8.2 5.2 N.A. N.A. 5.7-6.3 N.A.
Net Communist Exports (3.5-4.5)6 1 0.7 (0.4)6 N.A. N.A. 4.5 N.A. (1.5)6
USSR/Eastern Europe (3.5-4.5)6 N.A. (0.5)6 (1.2)6 N.A. N.A. 2.1 N.A N.A.
China 0 N. A. 1.2 0.8 N. A. N. A. 2.4 N. A. N. A.
Required OPEC
Production
1. Reference Case.
46.7-51.2 42 39.3 45.6 44.84 42-49 33.2 36-39 39.0,
2. Data labeled as preliminary and for illustrative purposes only.
3. Range derived from Cases C and D.
4. Assumes. OPEC domestic consumption of 2.9 million b/d.
5. Includes Canada.
6. Parentheses denote negative numbers.
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Comparative Studies
1. The International Energy Siutation: Outlook to 1985
CIA ER 77-10240 U, April 1977
2. World Energy Outlook - Exxon Corporation, March 1977 (U)
3.. World Energy Outlook - Organization for Economic Co-
operation and Development (OECD), Paris, January 1977 (U)
4. National Energy Outlook - Federal Energy Administration
(FEA),preliminary draft circulated for review, Feb 1977 (U)
5. An Assessment of US Energy Policy - W.J. Levy, Consultants
Corp, New York, September 1976 (Client Private)
6. 2nd World Energy Study Conference - (preliminary work to
be revised), Stanford Research Institute (SRI), Menlo
Park, California, April 1977 (Client Private)
7. SLT Report on the Review of Energy Programs in the IEA
Countries - International Energy Agency, Standing Group
on Long-Term Co-operation (IEA/SLT), Paris, March 1977,(OUO)
8. Energy: Global Prospects 1985-2000 - Workshop on Alter-
native Energy Strategies (WAES), McGraw Hill, May 1977 (U)
9. Testimony of Harold Cleveland, Vice President, Citibank,
N.A., New York before the Ways and Means Committee of. the
US House of Representatives (U)
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 r ved
App #
UNCLASSIFIED ~Ca)1VFIDFNTIAL
OFFICIAL ROUTING SLI Executive Registry
A
SECRET
TO
NAME AND ADDRESS
DATE
INITIALS
1
DDI
2
OLC
3
DCI
4
5
6
ACTION
DIRECT REPLY
PREPARE REPLY
APPROVAL
DISPATCH
RECOMMENDATION
COMMENT
FILE
RETURN
CONCURRENCE
INFORMATION
SIGNATURE
Remarks :
The Director:
The attached is per your request
by noon, 9 Jun 77, for an unclassified
version of the memorandum on
comparative analysis of 1985 oil
demand projections for passage to
Representative Clarence Brown.
Sayre Stevens
DDI
FOLD HERE TO RETURN TO SENDER
FROM: NAME, ADDRESS AND PHONE NO.
DATE
OD/OER
Jun 77
UNCLASSIFIED CONFIDENTIAL
SECRET
Use previous editions
FORM N0. 237
1-e7
Distribution:
Original - Addressee
1 - ER
1 - DDI
1 - OD/OER
1 - D/I
OD/OER:I
](9 Jun 77)
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MEMORANDUM FOR THE RECORD
SUBJECT: Unclassified Version of Memorandum
on Comparative Analysis of 1985 Oil
Demand Projections
The DCI requested by noon, 9 June 1977, an
unclassified version of the memorandum on comparative
analysis of 1985 oil projections, which he will pass
to Representative Clarence Brown.
Deputy Director
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