ADDRESS BY ADM. STANSFIELD TURNER TO THE ALLIANCE TO SAVE ENERGY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP99-00498R000200120002-8
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 5
• Document Creation Date: December 20, 2016
• Document Release Date: March 28, 2007
• Sequence Number: 2
• Publication Date: October 17, 1979
• Content Type: REPORT

Approved For Release 2007/03/29: CIA-RDP99-00498R000200120002-8
Address by Admiral Stansfield Turner
Director of Central Intelligence
The Alliance to Save Energy
Washington, D. C.
Wednesday, 17 October 79
Gas lines have disappeared. Oil stocks are being rebuilt. To.
the average citizen, the pressure to conserve is dissipating rapidly.
Yet, the international oil market remains precariously balanced. It
is highly vulnerable to supply or demand disruptions. A coal strike
or harsh winter, for instance, could cause temporary shortages and
push oil prices higher. Further, political disruptions in OPEC
countries like Iran could not only cause longer term shortages, but
could create a psychological panic that would have more than psycho-
logical repercussions.
Even if there are no such untoward events, the outlook for oil
supply is dim. The emerging economic recession is welcome, perhaps,
only because it will moderate oil demand. The next upswing of the
business cycle will cause demand to rise again. When it does, we
cannot count on increased supplies being available. Beyond the mid
1980s, it would be unwise to count on any substantial increases in
world oil output.
Senator Percy referred to our 1977 publication on the world
energy outlook. That was the beginning, incidentally, of a new
policy on the part of the Central Intelligence Agency to release as
much information as we can in an unclassified form, not only on energy
issues but on other issues of national import. We hope our studies,
the research that we do on the country's behalf, will help to improve
the quality of national debate on important subjects. That oil study
in 1977 concluded that--and I quote--"In the absence of greater energy
conservation, projected world demand for oil will approach productive
capacity by the early 1980s. In these circumstances, prices will rise
sharply to ration available supplies."--end quote. We were widely
criticized for being overly pessimistic. As it turned out, we were
right on target. Witness the 60 percent increase in oil prices since
1978, and the prospects for continued serious oil market problems in
the foreseeable future.
It has become conventional wisdom to blame this situation on
the events in Iran last winter which removed 3 to 4 million barrels
of oil per day from the world market. If we survey the outlook for
oil production in the Middle East today, however, the situation has
worsened everywhere, not just in Iran. Plans for increasing produc-
tive capacity in the 1980s have been trimmed; production ceilings
have been imposed at levels below today's capacities.
In Saudi Arabia, policy is to limit output to 8-1/2 million
barrels a day, except when they believe circumstances make it necessary
to mitigate this policy to prevent severe market disruption. Current
production of about 9-1/2 million barrels a day is close to their
 Approved For Release 2007/03/29: CIA-RDP99-00498R000200120002-8
sustainable capacity, and little or no increase in capacity is in
prospect. There once were plans to increase productive capacity to 16
million barrels per day by the mid-1980s, but those plans are uncertain
today.
Iraq and Kuwait have both indicated a strong preference to cut
back production rather than increasing it. In Iran, the slowdown of
maintenance activities will soon eliminate the option that might exist
to raise output on short notice even if the government in Tehran wanted
to do so. Basically, these policies reflect a strong preference for
production profiles that stretch out reserves over long periods. They
also reflect an aversion to even a small risk of impairing ultimate oil
recovery; and a concern, in the wake of the Iranian revolution, with
the disruptive effect of rapid economic development spawned by massive
inflows of oil money.
I also believe that these oil producing nations think that we
in the oil consuming world have insatiable appetites. They sense that
the greater they make their productive capacity, the more they will
be subjected to pressure to utilize it. The more they can protect
their interests by simply not having the capacity, the more they will.
On top of this, a lesser proportion of Persian Gulf production will be
available to the industrial countries in the future simply because -
these countries themselves are industralizing and will need more for
domestic requirements.
If then we cannot hope for substantial increases in OPEC oil
production, what if we look elsewhere? If we start with the OECD
countries, the industrally developed countries, we cannot expect much
improvement in oil production there either. North Sea production
will peak around 1982-1983 at 1.5 million barrels per day more than
today. That will help. But, at the same time, most private sector
analysts expect US oil production to resume its downward trend now that
the Alaskan pipeline is full. US oil output has exceeded additions to
reserves by about a two-to-one margin every year since Prudhoe Bay was
added. The Department of Energy projects US output remaining about
stable, apparently in the belief that improved incentives due to price
decontrol and other measures will greatly increase oil drilling and
recovery. I know that this is a controversial matter, I am simply
suggesting that industry consensus is on the side of a decline in US
output.
Looking beyond the OECD countries to the non-OPEC, lesser developed
countries, production there is growing fairly rapidly, especially in
Mexico. But most of the increase, except in Mexico, will be consumed
locally as industrialization increases. Mexico, by 1982, should be
producing about 2.5 million barrels of oil per day of which about 1.1
million barrels will be available for the international market that is
not there today. In the longer term, Mexican oil resources should
permit greatly increased production and exports, but it is likely that
Mexico will follow cautious, conservationist policies: Therefore, it
would be unwise to count on large increases in Mexican oil exports
during the 1980s.
 Approved For Release 2007/03/29 :_CIA-RDP99-00498R000200120002-8
Next we can look at the Communist countries. What can they contrib-
ute? Unfortunately, our prediction of a decline of Soviet oil production
and a consequent shift in the position of the entire Soviet Bloc from
being net exporters to net importers still is our position. It was
controversial when we annunicated it in 1977, but nothing has occured to
cause us to change our opinion since. We continue to expect Soviet oil
production to peak this year or next and to decline soon thereafter.
Developments during the past two years reaffirm this 1977 estimate and
we find growing support among other analysts for these broad conclusions,
if not for the particular numbers we project.
Soviet oil production has been nearly flat in the past year. This
is below the Soviet plan. Development trends in the Soviet industry
point to an impending decline. Production in the older basins, especially
in the Urals has been falling. The entire increase in production in
recent years has come from West Siberia, and about 60 percent of that
from its supergiant field, Samotlor, alone. Moscow had hoped to get
large increases in production from the newer, smaller fields in West
Siberia in the past year or two, but their development is considerably
behind schedule.
To keep production rising, the Samotlor field has been pushed well
above planned levels. Once that field hits peak production, which
it may have. already, it will probably not be able to sustain that level
very long. With production dropping in the older areas and in the
Samotlor field, the Soviets can keep total production from falling only
by developing new fields at a far greater rate than in the past. The
Soviets are pouring large investments into West Siberia, but they face
severe constraints such as the remoteness and difficult conditions of
the area, including its severe climate. In addition, there are real
limitations on what the Soviet oil equipment industry can produce for
exploration and development.
This is not to overlook the large unexplored areas of the Soviet
Union which may hold substantial deposits of oil and gas. Soviet
reserves may be large. But, exploratory drilling has been stagnant for
years because of continuous pressure to raise oil output through further.
development of known fields. In any event, it would take a decade or
more to develop any large new fields that may be found whether they be
on-shore, in remote tundra-covered areas, or off-shore.
The Soviets are, of course, searching for alternative energy
sources. Moscow has been pushing gas production with considerable
success, but plans for exploiting coal resources are not being met.
On balance the outlook is for greatly reduced growth in the total
energy production.
This forces them to look at whether and how much energy conservation
could help them. The Soviets' problem is different from ours and
we believe that they will have a difficult time achieving greater energy
conservation. Very little oil is consumed by private automobiles.
Transportation relies mostly on rail so is already energy efficient.
Much heat of homes and buildings is already supplied by cogeneration, or
 Approved For Release 2007/03/29: CIA-RDP99-00498R000200120002-8
the efficient use of waste heat from the generation of electricity.
Overall, the bulk of energy in the Soviet Union is used in heavy industry.
Reductions in this area of high priority to them would be difficult and
costly.
The Soviets, therefore, will face painful choices in allocating
their oil and other energy supplies. I might add that one of the great
strengths of our country is that part of the responsibility for
that kind of decision rests with the individual citizen. We have
capacity in this country for groups like this, for individuals, for
corporations to affect oil consumption in a major way. In the Soviet
Union those decisions all have to be made by a central authority.
They could cut their oil exports to the West about a million or
a million and a half barrels a day right now. Or they could increase
oil imports from the Middle East. You recognize, however, that their
ability in either of these directions is limited by their hard currency
position, and today almost half of the dollar value of total Soviet
exports is earned by their oil exports. A different direction for
relief would be to cut their exports to Eastern Europe about a million
and a half barrels a day right now. From what we can understand,
their current plans are to keep that production at about its present
level through 1985 or so. They also must recognize that substantial
cuts in-these deliveries in energy to Eastern Europe would compound the
already serious economic problems those countries are having, and they
would also have to be concerned with the effect such cut-backs might
have on the political stability in that tender area. Another option
for Moscow would be to force even greater reductions in an already
declining rate of economic growth. It-is impossible to predict which
combination of these options Moscow will follow. Part of the oil
shortfall will probably impact on the Soviet economy and part on
the balance of payments.
Where does all this leave us? These trends in production--in the
OECD, in the non-OPEC lesser developed countries, in the Communist
countries, and in OPEC all add up to a prospective decline in the supply
of oil available to 'the OECD countries. Any decline in oil supply for
the OECD nations is an alarming prospect. Traditionally, economic
growth has been accompanied by a growth in energy consumption. Now, we
do not fully understand the nature of the relationship between economic
growth and the growth in energy consumption. It may be flexible to some
extent as was evident after the 1973-74 price rises. But, we do
estimate that OECD economic growth will be constrained to no more
than 2 to 2-1/2 percent by the supply of energy that we believe will
likely be available to OECD in the next 3 to 4 years. As we grapple
today with incipient recession and accept such unpleasant measures as
high interest rates, we must be concerned at the prospect that the next
economic recovery may ultimately be limited by a lack of accompanying
growth of energy supply.
All of the calculations and predictions that I have shared with you
this evening may well be challenged in their particulars. I think the
key point I would like to leave with you, whether or not the specific
 Approved For Release 2007/03/29: CIA-RDP99-00498R000200120002-8
predictions are correct, is that we are living in a era of great fragility
in the supply of energy. First, the situation is fragile because we
are so dependent on one area of the world, the Middle East, an area
that is so vulnerable to political turmoil today, and an area which is
experiencing a revival of traditonal religious tenets. Yet at the same
time, it is experiencing, particularly through the impact of vast new
oil wealth, the often antithetical changes which Westernization and
modernization of society bring with them. There is also the danger
of unpredictable and erratic, but nonetheless influential, national
leaders on the scene. If you look at the panoply of problems in that
region today, it is easy to conclude that it is almost inevitable that
some form of turmoil will beset this area within the next few years
that will affect the availability of oil supply.
A second key factor is that even if there is not some physical
upheaval in the Middle East, a major change of the last six years
is a clear recognition by leaders of these countries that it is not
necessarily in their best interests to produce as much oil as the
OECD would want.
Against this situation, with the fragility of supply and the
increasing pressures for protection of reserves, the role of conservation
becomes more prominent. This role, which you advocate so well, is the
only practical remedy for the next few years. The alternative, substan-
tially slower economic growth, would be distinctly more unpleasant.
Nothing else can be as certain to help bring supply and demand into
balance in the immediate years ahead. It is also the case that if the
OPEC nations are ever to be induced to increase production beyond what
they may consider to be in their economic best interests, the earnest
of extensive and successful US conservation will almost certainly be
necessary. Today I received an intelligence report on the attitude of
one important OPEC leader toward US conservation. It said that this
man has been unsympathetic to US pleas for price restraint by OPEC,
charging that such restraint merely enables the major importers to put
off the task of conservation. He believes the US record on conservation
is particularly poor. Only with a firm signal on conservation from
the United States could the OPEC nations possibly be induced to increase
production enough to permit a future economic upswing to continue rather
than be stymied for lack of energy supplies.
Thus, there is every reason to encourage you to continue encouraging
our nation to move boldly in the near term to eliminate the wasteful
consumption of energy.
I can only applaud the foresight, the patriotism, the determination
of Senator Percy, Senator Cranston and those of you who have supported
them and this alliance. As I have already said, the strength of
America lies in part in the fact that we as individual citizens, that
you as an alliance, can band together and help to solve our nation's
problems, not relying only on central governmental direction. I
certainly commend and encourage the fact that you are exerting this
leadership. It is critical to our country and to our future.
Thank you very much.