Oil-Risk Insurance:

Choosing the Best Buy

Jan 1, 1988

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This article, which appeared in the GAO Journal, No. 2, Summer 1988, discusses the ways the United States can insure itself against the risks of uncertain oil prices and supplies through energy efficiency. Since 1973, the United States gained 3.5 times as much new energy from savings as it lost from the decline in domestic hydrocarbon output and 78 percent more oil and gas than it lost in domestic output. Better use of energy-savings technologies would save about three-quarters of all the oil now used. Even with good foreign relations, stockpiling, and diversification of suppliers, price and supply risks still remain. Taxing foreign oil or protecting domestic oil so that it depletes the supply is not the solution, but using what is available more efficiently to buy time to build a sustainable postpetroleum energy system is a viable option. The oil that coal and nuclear plants save could also be saved through the use of efficient lights, motors, appliances, and building components, without spending billions of dollars on building, maintaining, and operating the powerplants. Efficient oil use is not just a sound insurance policy and profitable investment, but is essential for a smooth transition beyond oil.