although opec production quotas have been a significant factor in price determination for a third of a century, the story since 1973 has been as much about the power of markets as it has been about power over markets. the signals provided by market prices have eventually resolved even the most seemingly insurmountable difficulties of inadequate domestic supply in the united states. the gap projected between supply and demand in the immediate post - 1973 period was feared by many to be so large that rationing would be the only practical solution. but the resolution did not occur quite that way. to be sure, mandated fuel - efficiency standards for cars and light trucks induced slower growth of gasoline demand. some observers argue, however, that, even without government - enforced standards, market forces would have produced increased fuel efficiency. indeed, the number of small, fuel - efficient japanese cars that were imported into the united states markets rose throughout the 1970s as the price of oil moved higher. moreover, at that time, prices were expected to go still higher. our department of energy, for example, had baseline projections showing prices reaching $ 60 per barrel - the equivalent of about twice that in todaya€™s prices. the failure of oil prices to rise as projected in the late 1970s is a testament to the power of markets and the technologies they foster. today, despite its recent surge, the average price of crude oil in real terms is still only three - fifths of the price peak of february 1981. moreover, the impact of the current surge in oil prices, though noticeable, is likely to prove less consequential to economic growth and inflation than in the 1970s. so far this year, the rise in the value of imported oil - essentially a tax on u. s. residents - has amounted to about 3 / 4 percent of gdp. the effects were far larger in the crises of the 1970s. but, obviously, the risk of more serious negative consequences would intensify if oil prices were to move materially higher. * * * in summary, much of world oil supplies reside in potentially volatile areas of the world. improving technology is reducing the energy intensity of industrial countries, and presumably recent oil price increases will accelerate the pace of displacement of energy - intensive production facilities. if history is any guide, oil will eventually be overtaken by less - costly alternatives well before conventional oil reserves run out. indeed, oil displaced coal despite still vast untapped reserves of coal, and coal displaced wood without denuding our forest lands

my judgment, should not have been left solely to chance. we have observed that global financial markets, as currently organized, do not always achieve an appropriate equilibrium, or at least require time to stabilize. moreover, the effects of the asian crisis on the real economies of the immediately affected countries, as well as on our own economy, are only now just being felt. opponents of imf support for member countries facing international financial difficulties also argued that such substantial financial backing, by cushioning the losses of imprudent investors, encourages excessive risk - taking. there doubtless is some truth in that, though arguably it has been the expectation of governments ’ support of their financial systems that has been the more obvious culprit, at least in the asian case. in any event, any expectations of broad bailouts have turned out to have been disappointed. many if not most investors in asian economies have to date suffered substantial losses. moreover, the policy conditionality, associated principally with imf lending, which dictates economic and financial discipline and structural change, helps to mitigate some of the inappropriate risk - taking on the part of governmental authorities. at the root of the problems has been poor public policy that has resulted in misguided investments and very weak financial sectors. convincing a sovereign nation to alter destructive policies that impair its own performance and threaten contagion to its neighbors is best handled by an international financial institution, such as the imf. what we have in place today to respond to crises should be supported even as we work to improve those mechanisms and institutions. some observers have also expressed concern about whether we can be confident that imf programs for countries, in particular the countries of east asia, are likely to alter their economies significantly and permanently. my sense is that one consequence of this asian crisis is an increasing awareness in the region that market capitalism, as practiced in the west, especially in the united states, is the superior model ; that is, it provides greater promise of producing rising standards of living and continuous growth. although east asian economies have exhibited considerable adherence to many aspects of free - market capitalism, there has, nonetheless, been a pronounced tendency toward government - directed investment, using the banking system to finance that investment. given a record of real growth rates of close to 10 percent per annum over an extended period of time, it is not surprising that it has been difficult to convince anyone that the economic system practiced in east asia could not continue to produce positive results indefinitely. following the breakdown