-3-

TODAY I WANT TO DISCUSS THESE ISSUES AND
THE PROPOSALS WHICH MY GOVERNMENT OFFERS TO DEAL WITH
THEM. BUT FIRST, LET ME REVIEW WITH YOU THE PROGRESS
WE HAVE MADE.

THE FIFTEEN MONTHS SINCE THE WASHINGTON ENERGY
CONFERENCE WAS CONVENED COMPRISE A DRAMATIC AND
IMPRESSIVE CHAPTER IN THE HISTORY OF INTERNATIONAL
COOPERATION. WE RECOGNIZED AT WASHINGTON THAT THE
ENERGY CRISIS WAS THE MOST SEVERE CHALLENGE TO INDUSTRIAL
CIVILIZATION SINCE THE SECOND WORLD WAR. FOR A GENERATION
AMERICA, EUROPE AND JAPAN INCREASINGLY NEGLECTED THEIR
OWN ENERGY PRODUCTION IN FAVOR OF INEXPENSIVE OIL IMPORTS.
IN 1950 THE INDUSTRIALIZED WORLD PRODUCED 95 PERCENT OF
ITS REQUIREMENTS. IN 1960, 83 PERCENT. IN 1972 61
PERCENT.

AT THE WASHINGTON ENERGY CONFERENCE WE RECOGNIZED
HOW VULNERABLE WE HAD BECOME. THE SUPPLY AND PRICE OF

-4-

THE CENTRAL ELEMENT IN OUR ECONOMIES WERE NO LONGER
UNDER OUR CONTROL. OUR WELLBEING AND PROGRESS HAD BECOME
HOSTAGE TO DECISIONS IN WHICH WE COULD NOT TAKE PART.

WE SAW THAT ONLY COLLECTIVE ACTION COULD FREE OUR
ECONOMIES FROM EXCESSIVE DEPENDENCE ON IMPORTED OIL
AND OUR POLITICAL AND SOCIAL SYSTEMS FROM A SENSE OF
IMPOTENCE, FOR SEPARATELY WE COULD NEVER CREATE CONDITIONS
FOR LOWER OIL PRICES. NOR COULD ANY ONE OF US, EXCEPT
AT EXORBITANT COST, DEFEND AGAINST A NEW EMBARGO. OUR
SECURITY, OUR GROWTH, OUR ROLE IN THE WORLD WAS AT RISK.

WE SAW THAT TO REGAIN CONTROL WOULD REQUIRE NEW
DISCIPLINE IN ENERGY CONSUMPTION AND INVESTMENT, AND THE
REGENERATION OF OUR OWN ENERGY INDUSTRY.

NOTHING SO EFFECTIVELY DEMONSTRATES THE COOPERATIVE
VITALITY OF WHICH THE INDUSTRIAL DEMOCRACIES ARE CAPABLE
THAN THE SPEED AND IMAGINATION WITH WHICH THIS AGENCY

-5-

ACTED ON THESE CONCLUSIONS. WITHIN A YEAR, ONE BY ONE,
THE ELEMENTS OF A COMPREHENSIVE PROGRAM TO OVERCOME THE
ENERGY CRISIS HAVE BEEN BROUGHT INTO PLACE:

- TO MEET ANY NEW ENERGY EMERGENCIES OVER THE
SHORT-TERM WE COMMITTED OURSELVES TO BUILD
STOCKS OF OIL, TO CUT OUR CONSUMPTION BY THE
SAME PERCENTAGE IN THE EVENT OF AN EMBARGO AND TO
SHARE AVAILABLE OIL. FOR FINANCIAL SOLIDARITY,
WE AGREED ON A FUND OF $25 BILLION TO PROTECT
AGAINST FINANCIAL DESTABILIZATION FROM SHIFTS,
WITHDRAWALS OR CUTOFFS OF FUNDS BY THE PRODUCERS.
THESE ACTIONS TO COUNTER OUR IMMEDIATE VULNERABILITY
ARE WELL UNDERWAY.

- TO PREVENT AN INCREASE IN OUR VULNERABILITY OVER
THE NEXT FEW YEARS, WE SET CONSERVATION GOALS
AND AGREED ON PROCEDURES TO VERIFY THEIR
EXECUTION.

-6-

-- TO LESSEN AND ULTIMATELY REMOVE OUR VULNERABILITY
OVER THE NEXT 5 TO 10 YEARS AND ASSURE MORE
EQUITABLE ENERGY PRICES, WE AGREED ON THE FRAME-
WORK OF AN AMBITIOUS POLICY TO DEVELOP NEW
SUPPLIES.

-- TO ASSURE THAT WE CAN MEET ALL OUR ENERGY NEEDS
BY THE END OF THE CENTURY WE ESTABLISHED A FAR-
REACHING PROGRAM OF COOPERATION IN ENERGY RESEARCH
AND DEVELOPMENT.

-- FINALLY, WE SAW THAT A NEW LONG-TERM RELATIONSHIP
OF MUTUAL BENEFIT AND EQUITY BETWEEN CONSUMERS
AND PRODUCERS WOULD BE INDISPENSABLE TO A HEALTHY
INTERNATIONAL ECONOMY FOR THE FUTURE. WE COMMITTED
OURSELVES TO SEEK THE COOPERATIVE SOLUTIONS NEEDED
TO TRANSFORM TENSION AND THREATENED CONFRONTATION
INTO A NEW EQUILIBRIUM WHICH WOULD BE RESPONSIVE

-7-

TO THE ASPIRATIONS OF BOTH CONSUMERS AND
PRODUCERS,

FROM THE START, WE RECOGNIZED THAT OUR COUNTRIES
HAVE VERY DIFFERENT ENERGY OPTIONS AND POTENTIAL. SOME
OF US HAVE MAJOR OIL, GAS AND COAL RESERVES TO BE TAPPED.
OTHERS MUST RELY ALMOST ENTIRELY ON NUCLEAR ENERGY AND
THE FRUITS OF NEW TECHNOLOGY TO REDUCE NATIONAL DEPENDENCE
ON IMPORTED OIL.

HOWEVER, OUR VERY DIVERSITY HAS BECOME OUR **STRONGEST** BOND OF COOPERATION. OUR COMMON PROGRAMS RECOGNIZE THAT, BECAUSE OF OUR IRREVERSIBLE INTERDEPENDENCE, WE ALL HAVE A DIRECT INTEREST IN EACH OTHERS SUCCESS. THE ACTIONS EACH TAKES--TO STOCKPILE OIL FOR AN EMERGENCY, TO CONSERVE, TO DEVELOP NEW SUPPLIES, TO INTENSIFY RESEARCH AND DEVELOPMENT--REDUCE OUR COLLECTIVE VULNERABILITY AND STRENGTHEN EACH OF US INDIVIDUALLY.

-8-

MOREOVER, THE DECISION TO CARRY OUT THESE PROGRAMS WITHIN AN OVERALL FRAMEWORK OF COOPERATION ASSURES AN EQUITABLE SHARING AMONG US OF COSTS AND BENEFITS. WE CAN SATISFY OURSELVES THAT OUR RELATIVE CONTRIBUTIONS ARE EQUAL. WE ALSO GUARANTEE THAT THE SACRIFICES OF ONE ARE NOT SIMPLY OFFSET BY THE FAILURE OF OTHERS.

ALL ELEMENTS OF THIS STRATEGY ARE LINKED. EFFORT IN ONE AREA CANNOT BRING LASTING RESULTS UNLESS ALL DO. THEY ARE MUTUALLY REINFORCING.

THUS, WE POSSESS A COHERENT AND EFFECTIVE PROGRAM TO END OUR ENERGY VULNERABILITY. NOW WE MUST CARRY IT OUT.

LET ME START WITH WHAT WE CAN DO TO IMPROVE OUR ENERGY SITUATION IN THE NEXT SEVERAL YEARS.

## CONSERVATION:

ANY ENERGY PROGRAM WE ADOPT MUST LIMIT THE GROWTH

-9-

OF OUR CONSUMPTION, ENERGY PRODUCTION WITHIN OUR ECONOMIES, NO MATTER HOW GREAT, CANNOT SUPPORT THE EXTRAVAGANT ANNUAL CONSUMPTION INCREASES OF THE 1960'S. WE MUST CURB CONSUMPTION TO SUCCEED.

CONSERVATION IS PARTICULARLY CRITICAL IN THE NEXT FEW YEARS. FOR UNTIL NORTH SEA AND ALASKAN OIL BECOMES AVAILABLE IN QUANTITY, IT IS THE ONLY MEANS WE HAVE TO LIMIT OUR VULNERABILITY.

IF WE DO NOT FULLY IMPLEMENT OUR CONSERVATION PROGRAM NOW, WE MUST FACE THE POSSIBILITY THAT OPEC'S MARKET POWER MAY GROW IN THE NEAR FUTURE. DURING THIS SPRING'S DECLINE IN DEMAND FOR OIL, THE OIL PRODUCERS HAVE ABSORBED THE PRODUCTION CUTS REQUIRED TO KEEP SUPPLY IN LINE WITH DEMAND, LEAVING THE BASIC PRICE STRUCTURE INTACT. AS GROWTH RESUMES IN THE INDUSTRIAL ECONOMIES, AND WITH A NORMAL OR COLD WINTER, PRODUCERS

Couldn't this be used to prove that conservation won't work. Are we saying that

1. At some point conservation *will* work

2. At any rate reduces pressures. If so, be a little more explicit.

-10-

WILL ENJOY A STRONGER MARKET DURING THE NEXT TWO YEARS.

INDEED, WE ALREADY HAVE BEEN WARNED OF NEW PRICE INCREASES.

THESE WOULD BE ECONOMICALLY UNJUSTIFIED, FOR MUCH SURPLUS
PRODUCTION CAPACITY IS AVAILABLE, INFLATION IS SLOWING,
AND PRICES ALREADY ARE AT HISTORIC HIGHS. YET, WE CANNOT
DENY THAT THE PRODUCERS MAY HAVE THE MARKET POWER TO
ENFORCE SUCH INCREASES OVER THE SHORT AND EVEN MID-TERM,
IF WE DO NOT ACT NOW.

IN FEBRUARY WE AGREED THAT THE IEA COUNTRIES AS A
GROUP SHOULD SAVE 2 MILLION BARRELS A DAY BY THE END OF
THIS YEAR. THE RECESSION HAS PUT US AHEAD OF THAT
TARGET. BUT THE RECESSION ALSO HAS DELAYED--IN AMERICA
AND ELSEWHERE--THE CONSERVATION MEASURES THAT WILL ASSURE
US OF SAVINGS IN THE FUTURE.

IN JANUARY PRESIDENT FORD SET A U.S. GOAL OF SAVING
2 MILLION BARRELS A DAY BY THE END OF 1977. LATER TODAY

-11-

THE PRESIDENT WILL ANNOUNCE ADDITIONAL ACTION TO DISCOURAGE THE CONSUMPTION OF IMPORTED OIL. WHEN ADDED TO MEASURES ALREADY TAKEN, THIS ACTION WILL BRING THE TOTAL ESTIMATED SAVINGS FROM U.S. CONSERVATION MEASURES TO 1.2 MILLION BARRELS A DAY IN IMPORTED OIL BY THE END OF 1977. THE PRESIDENT CONTINUES TO HOPE THAT JOINT ACTION WITH THE CONGRESS WILL BE FORTHCOMING TO ASSURE THE REMAINING SAVINGS NEEDED TO MEET THE GOAL. BUT IF IT IS NOT, HE IS PLEDGED TO USE THE POWERS AVAILABLE TO HIM TO OBTAIN THE FULL SAVINGS.

WE BELIEVE THE IEA SHOULD DEVELOP CONSERVATION GOALS FOR 1976 AND 1977 WHICH WILL PREVENT OUR VULNERABILITY FROM INCREASING IN THIS CRITICAL PERIOD. BECAUSE THE U.S. HAS HALF THE TOTAL OIL CONSUMPTION, IT IS COMMITTED TO HALF THE SAVINGS. IF TOGETHER WE CAN SAVE 4 MILLION BARRELS A DAY BY THE END OF 1976, OUR COLLECTIVE IMPORTS

-12-

OF OIL WILL BE NO LARGER THAN THEY ARE NOW. THIS MUST
BE OUR GOAL.

## ALTERNATIVE SOURCES

OVER THE LONGER TERM, BEGINNING FIVE TO TEN YEARS FROM NOW, OUR DEPENDENCE ON IMPORTED OIL IS DESTINED TO GROW UNLESS WE RAPIDLY, AND ON A LARGE-SCALE, DEVELOP NEW CONVENTIONAL ENERGY SOURCES--OIL, GAS, COAL, NUCLEAR POWER. AND IF WE FAIL TO DO SO, THE PRODUCERS WILL RETAIN THE ABILITY TO APPROPRIATE THEM FOR POLITICAL PURPOSES. INDEFINITELY EXCLUSIVE CONTROL OVER PRICES. PRICES WILL REMAIN HIGH AND THE COST OF HIGH PRICES TO OUR ECONOMIES WILL INCREASE. NOW WE ARE PAYING OUT ONLY A FRACTION OF OPEC'S INCREASED INCOME IN GOODS AND SERVICES.

IF CURRENT REAL PRICES HOLD, BY THE END OF THE DECADE OIL WILL COST US AT LEAST ONE PERCENT OF OUR NATIONAL OUTPUT MORE PER YEAR THAN IF THE CARTEL DID NOT EXIST. AND HIGH PRICES WILL SLOW OUR GROWTH IN THIS

-13-

PERIOD. THESE ARE ENORMOUS COSTS TO ACCEPT AT A TIME
WHEN WE ARE UNCERTAIN OF RESTORING GROWTH AND CANNOT
MEET OUR SECURITY AND SOCIAL NEEDS FULLY. THE FACT
THAT THESE COSTS BY THEN WILL BE UNTRACEABLE TO OIL--
INDEED WILL BE DISGUISED AS EXPORT GAINS--MAKES THEM
NONETHELESS REAL. WE CANNOT ACCEPT THIS PERMANENT
TAX ON OUR GROWTH.

AND SUBSTANTIAL DEPENDENCE ON A FEW COUNTRIES CAN
ONLY INCREASE THE TEMPTATION TO USE OIL AS A POLITICAL
INSTRUMENT. IT WILL HEIGHTEN TENSION AND INCREASE THE
POTENTIAL FOR INSTABILITY AND CONFLICT.

WHAT WILL DETERMINE WHETHER PRICES WILL CONTINUE TO
BE FIXED UNILATERALLY BY THE PRODUCERS? ESSENTIALLY
THE PROPORTION OF OUR ENERGY NEEDS THAT WE CAN COVER
FROM OUR OWN PRODUCTION. AS THAT PROPORTION INCREASES,
THE PRODUCERS' MARKET WILL BEGIN TO FALL, FIRST RELATIVELY,

-14-

THEN IN ABSOLUTE VOLUME. THEY WOULD HAVE TO ABSORB BIGGER AND BIGGER CUTBACKS TO KEEP PRICES UP. AMBITIOUS DEVELOPMENT AND OTHER SPENDING PROGRAMS WOULD BECOME HARDER TO FUND. INDIVIDUAL PRODUCERS WOULD BEGIN TO REDUCE PRICES TO INCREASE THEIR SALES. AT SOME POINT, THE CARTEL WOULD LOSE EXCLUSIVE CONTROL OVER PRICES.

WHEN THE CARTEL CAN NO LONGER SET PRICES, WE WILL HAVE RESTORED THE ESSENTIAL INVULNERABILITY OF OUR ECONOMIES TO AN OIL SUPPLY INTERRUPTION. FOR THE TWO GO TOGETHER; IF THE PRODUCERS CANNOT CUTBACK PRODUCTION ENOUGH TO SUSTAIN PRICES, THEY WILL HAVE DIFFICULTY IN IMPOSING AN EFFECTIVE EMBARGO. MOST OF US, INCLUDING THE UNITED STATES, WILL CONTINUE TO IMPORT OIL ON A LARGE SCALE. BUT AT THIS POINT THE OIL PRODUCERS' NEED FOR IMPORTS FROM US WILL BE AS GREAT AS OUR NEED FOR IMPORTS FROM THEM.

-15-

WE CANNOT NOW BE SURE HOW MUCH DEVELOPMENT OF NON-GPEG ENERGY WILL BE NECESSARY TO GIVE US THE LESSENEO VULNERABILITY WE SEEK. BUT THE SHIFT MUST CLEARLY BE LARGE ENOUGH TO LEAVE THE PRODUCERS WITH A SUBSTANTIALLY SMALLER MARKET THAN THE 27 MMBD OF 1975.

THREE ACTIONS ARE NEEDED TO INCREASE OUR ENERGY PRODUCTION CAPABILITY:

FIRST, WE MUST REMOVE MORE OF OUR PUBLIC POLICY CONSTRAINTS TO ENERGY PRODUCTION. ENERGY DEVELOPMENT IS ENCUMBERED EVERYWHERE BY LEGAL, ENVIRONMENTAL, AND REGULATORY RESTRICTIONS. SOME PROGRESS ON REMOVING OR MODIFYING THESE RESTRICTIONS HAS BEEN MADE. BUT WE SHOULD USE THIS ORGANIZATION TO REVIEW OUR NATIONAL OBSTACLES AND SHARE INFORMATION ON TECHNIQUES TO SOLVE THEM.

-16-

SECOND, WE MUST REMOVE FINANCIAL CONSTRAINTS TO ENERGY DEVELOPMENT. ENORMOUS AMOUNTS OF CAPITAL WILL BE REQUIRED--PERHAPS A THOUSAND BILLION DOLLARS IN THE NEXT 10 YEARS. EACH COUNTRY MUST DECIDE WHETHER THE DEVELOPMENT OF NEW ENERGY SUPPLIES JUSTIFIES PREFERENTIAL ACCESS TO CAPITAL MARKETS. IN VIEW OF PROSPECTIVE CAPITAL SHORTAGES THROUGHOUT THE INDUSTRIAL ECONOMY--NOT JUST IN ENERGY--DIFFICULT QUESTIONS OF ECONOMIC AND SOCIAL POLICY ARE INVOLVED. BUT IN THE MEANTIME, WE SHOULD PROCEED TO ESTABLISH AN IEA FRAMEWORK FOR PROJECT-BY-PROJECT COOPERATION. AS NEEDED AND CAN DESIRED, WE/USE THIS FRAMEWORK TO PROVIDE JOINT GUARANTEES OR OTHER FINANCIAL ASSISTANCE TO LARGE COOPERATIVE PROJECTS.

THIRD, WE MUST INSURE THAT OUR ENERGY INVESTMENTS ARE PROTECTED AGAINST DISRUPTIVE COMPETITION BY IMPORTERS

-17-

OF OPEC OIL. FOR MUCH OF THE PERSIAN GULF, PRODUCTION COSTS ARE LESS THAN A DOLLAR A BARREL. MOST OF THE MAJOR DEVELOPMENTS WE ARE COUNTING ON--NEW ALASKAN NORTH SLOPE OIL, THE U.S. OUTER CONTINENTAL SHELF, NEW NORTH SEA OIL, NUCLEAR POWER EVERYWHERE--WILL BE MANY TIMES MORE COSTLY TO PRODUCE. INVESTORS MAY CANCEL OR DELAY PROJECTS IN THESE AREAS IF THEY FEAR FUTURE COMPETITION FROM SOURCES OF CHEAP IMPORTED OIL. THE MINIMUM PROTECTED PRICE MECHANISM, ON WHICH WE HAVE AGREED IN PRINCIPLE, IS INTENDED TO PROVIDE ASSURANCE AGAINST SUCH DISRUPTIVE COMPETITION. IT NEED NOT, INDEED SHOULD NOT, REMOVE ALL RISK FOR PRIVATE INVESTORS. BUT IT SHOULD BE FIXED AT A LEVEL TO ENSURE THAT INVESTMENT IN CONVENTIONAL ENERGY IS IN FACT COMMERCIALLY ATTRACTIVE WHEN MEASURED AGAINST INVESTMENT IN OTHER ACTIVITIES WHICH WILL BE COMPETING FOR SCARCE CAPITAL. IT IS NOT A GUARANTEED

-18-

PRICE TO OPEC MEMBERS WHOSE SELLING PRICE TO US COULD FALL WELL BELOW THE PROTECTED LEVEL. BUT BY REDUCING RISKS TO INVESTORS, IT WILL GIVE US ASSURANCE THAT THE INVESTMENT ON WHICH OUR EVENTUAL INVULNERABILITY DEPENDS WILL IN FACE OCCUR.

## NUCLEAR POWER

IN THE STRUGGLE TO ACHIEVE IN VULNERABILITY, NUCLEAR POWER WILL PLAY A CRITICAL ROLE. BY 1985 THE EUROPEAN COMMUNITY HOPES THAT NUCLEAR STATIONS WILL GENERATE ABOUT ONE-QUARTER OF ITS ELECTRICITY; JAPAN A THIRD; THE U.S. PERHAPS A THIRD. BUT THERE ARE MAJOR CHALLENGES ASSOCIATED WITH THE ORDERLY, SAFE AND PRUDENT INTRODUCTION OF THIS IMPORTANT NEW TECHNOLOGY. LET ME TURN TO THEM NOW.

IN ALL OUR COUNTRIES THE GROWTH OF NUCLEAR POWER RAISES BOTH HOPE AND ANXIETY. WE SEE IT AS THE ONLY

-19-

POTENTIAL LARGE-SCALE ENERGY REPLACEMENT FOR THE INEVITABLY DECLINING SUPPLIES OF OIL AND GAS IN THE LAST DECADES OF THE CENTURY. YET DOUBTS ARE EXPRESSED THAT SUFFICIENT NUCLEAR FUEL WILL BE AVAILABLE WHEN NEEDED. ENORMOUS AMOUNTS OF CAPITAL WILL BE NEEDED TO BUILD REACTORS, PLACING SEVERE STRAINS ON EXISTING CAPITAL MARKETS. WE ARE CONSCIOUS OF RESERVATIONS BY THE PUBLIC AND LEGISLATORS REGARDING THE WIDESPREAD CONSTRUCTION OF NUCLEAR FACILITIES OF ALL TYPES.

WE MUST, AS A MATTER OF URGENCY, MOVE DECISIVELY WITHIN THE IEA ON THE FOLLOWING:

- ENSURE THAT NEEDED URANIUM ENRICHMENT FACILITIES ARE CONSTRUCTED ON SCHEDULE. IN THIS REGARD, THE PRESIDENT ASKS ME TO ANNOUNCE THAT TO SERVICE EXISTING AND EXPECTED FOREIGN AND DOMESTIC ORDERS

-20-

STARTING IN 1982, THE UNITED STATES GOVERNMENT PLANS TO CONSTRUCT AN ADDITION OF 5 MILLION UNITS TO EXISTING GASEOUS DIFFUSION CAPACITY.

THIS WILL ASSURE ENRICHMENT SERVICES FOR THE LIFETIME OF SOME 50 NEW 1000 MEGAWATT NUCLEAR POWER PLANTS. THE UNITED STATES WILL ALSO LOOK IN THE FUTURE TO THE CONSTRUCTION OF COMMERCIAL CENTRIFUGE PLANTS BY PRIVATE ENTERPRISE. SEVERAL SUCH PLANTS ARE IN THE PLANNING STAGE AND ARE EXPECTED TO BE OPERATIONAL BY THE EARLY 1980's.

IT WILL BE THE POLICY OF THE UNITED STATES GOVERNMENT TO ENCOURAGE FOREIGN FINANCIAL PARTICIPATION IN BOTH THE GOVERNMENTAL AND PRIVATE ENTERPRISES.

DEVELOP AGREED ESTIMATES OF THE FUTURE DEMAND AND SUPPLY OF FUEL, INCLUDING ASSESSMENTS OF THE AVAILABILITY OF URANIUM RESOURCES.

-21-

-- PROJECT THE CAPITAL REQUIREMENTS OF THE NUCLEAR SECTOR FOR THE NEXT TEN YEARS AND GIVE URGENT CONSIDERATION TO WAYS THAT OUR GOVERNMENTS, ACTING BOTH INDIVIDUALLY AND COOPERATIVELY, CAN ASSIST IN MEETING THESE REQUIREMENTS.

WE SHOULD ALSO:

-- EVALUATE THE ECONOMIC NECESSITY, PLANT REQUIREMENTS, AND SAFETY IMPLICATIONS OF PLUTONIUM REPROCESSING, RECYCLING AND STORAGE.

AND WE SHOULD:

-- DEVELOP BALANCED INFORMATION PROGRAMS TO BRING PERCEPTIONS OF THE RISKS AND BENEFITS OF NUCLEAR ENERGY IN LINE WITH REALITY. THESE MUST BE REINFORCED BY CONTINUED INTENSIVE EFFORTS ON OUR PART TO IMPROVE THE SAFETY AND SECURITY OF NUCLEAR MATERIALS, EQUIPMENT, AND OPERATION.

-22-

IN PROPOSING THIS EXPANDED PROGRAM OF WORK IN THE NUCLEAR FIELD, I AM FULLY AWARE THAT SEVERAL OF THE TECHNICAL ISSUES INVOLVED ARE ALREADY BEING DEALT WITH BY/OECD'S NUCLEAR ENERGY AGENCY. THAT WORK SHOULD CONTINUE; THE IEA SHOULD NOT AND NEED NOT DUPLICATE IT.

BEYOND THE NEXT DECADE, THE ISSUE WILL NO LONGER BE HOW TO ACHIEVE ENERGY INVULNERABILITY. IT WILL BE HOW TO CREATE THE NEW, NON-CONVENTIONAL ENERGY SOURCES NEEDED TO MEET A GROWING PROPORTION OF OUR ENERGY DEMAND. IT IS IN DEVELOPING THESE NEW SOURCES THAT IEA'S COOPERATION PROGRAM MAY MAKE ITS MOST IMPORTANT AND LASTING CONTRIBUTION.

## RESEARCH AND DEVELOPMENT

THE LONG-RANGE ENERGY FUTURE OF THE WORLD DEPENDS NOT ON THE PERSIAN GULF, OR THE NORTH SEA, OR ALASKA, BUT ON WHAT WE DO IN OUR LABORATORIES. OVER THE PAST YEAR-AND-A-HALF IEA MEMBER COUNTRIES HAVE EXPANDED NATIONAL

-23-

PROGRAMS IN ENERGY RESEARCH AND DEVELOPMENT. IN THE UNITED STATES WE WILL SPEND MORE THAN TWO BILLION DOLLARS IN THE FISCAL YEAR BEGINNING NEXT MONTH. U.S. INDUSTRY WILL CONTRIBUTE AN EQUIVALENT AMOUNT. THE U.S. PROGRAM INCLUDES EMPHASIS ON INCREASING THE EFFICIENCY OF ENERGY GENERATION, TRANSPORTATION, AND USE; ON IMPROVED RECOVERY OF OIL AND MORE USE OF COAL; AND ON THE CONVERSION OF COAL TO SYNTHETIC OIL AND GAS. THESE ELEMENTS OF OUR DOMESTIC RESEARCH AND DEVELOPMENT EFFORT CAN HAVE A MAJOR EFFECT ON ENERGY USE AND PRODUCTION IN THIS CENTURY. BUT FOR THE PERIOD BEYOND THE YEAR 2000, THERE ARE JUST THREE KNOWN POTENTIAL SOURCES OF ENERGY THAT ARE, FOR ALL PRACTICAL PURPOSES, INFINITE. THEY ARE THE BREEDER REACTOR, NUCLEAR FUSION, AND SOLAR ENERGY. ACCORDINGLY, THESE HAVE A HIGH PRIORITY IN THE U.S. PROGRAM.

BUT NO ONE OF US HAS ALL THE NECESSARY PROFICIENCY TO INSURE THE WORLD'S ENERGY FUTURE. TOGETHER WE CAN SUCCEED.

-24-

THUS, IN THE IEA, WE HAVE DECIDED TO LINK OUR NATIONAL RESEARCH AND DEVELOPMENT PROGRAMS THROUGH COORDINATED PLANNING, INTENSIFIED INFORMATION EXCHANGE, AND--MOST SIGNIFICANTLY--BY JOINT PROJECTS, POOLING OUR CAPITAL, INDUSTRIAL SKILLS, AND TECHNOLOGY. THE EARLY RESULTS ARE PROMISING. WE HAVE MOVED FORWARD IN JOINT PROJECTS RANGING FROM ENERGY CONSERVATION AND NUCLEAR POWER. IMPORTANT PROGRAMS IN COAL PROCESSING INVOLVING SUBSTANTIAL JOINT INVESTMENTS OF MONEY AND MANPOWER ARE ABOUT TO BEGIN.

WE BEGAN THIS COOPERATION ON RESEARCH AND DEVELOPMENT BY IDENTIFYING THE TEN EXISTING AND POTENTIAL ENERGY TECHNOLOGIES THAT WILL HAVE A CRITICAL IMPACT ON OUR FUTURE ENERGY ECONOMY. NOW WE MUST ESTIMATE WHEN THESE TECHNOLOGIES CAN BE REALIZED, AND WHAT THEIR PRODUCTION POTENTIAL IS, WE MUST IDENTIFY WHICH OF THEM LEND THEMSELVES BEST TO LARGESCALE JOINT PROJECTS, AND WHICH ARE

-25-

BEST PROMOTED BILATERALLY OR MULTILATERALLY. ALSO,
NATIONAL AGENCIES MUST RECOGNIZE THAT AS WE EXPAND OUR
COOPERATION IN THIS AREA, SOME OF THE MORE PROMISING
PROJECTS WILL NECESSARILY OPERATE AT THE FRONTIER OF
TECHNOLOGY AND THAT COOPERATION CANNOT BE LIMITED BY
ATTEMPTS TO RETAIN OUR MOST PROMISING PROJECTS FOR
NATIONAL IMPLEMENTATION.

THEREFORE, I BELIEVE THAT WE SHOULD AGREE TODAY THAT
OUR LEADING RESEARCH AND DEVELOPMENT OFFICIALS SHOULD MEET
IN EARLY AUTUMN AT A SPECIAL SESSION OF THE GOVERNING
BOARD. THEIR GOAL WOULD BE TO COMPLETE THE DESIGN OF A
JOINT ENERGY RESEARCH AND DEVELOPMENT PROGRAM THAT WILL
RECEIVE HIGH PRIORITY IN ALL OUR NATIONAL POLICY AND
BUDGET DECISIONS.

THE AGREED DEADLINE FOR ELABORATION OF THE OVERALL
ALTERNATIVE SOURCES PROGRAM IS JULY 1. WE MUST MEET THAT

-26-

DEADLINE. PRESIDENT FORD HAS ASKED ME TO UNDERLINE THE
URGENCY WITH WHICH THE UNITED STATES APPROACHES THIS
TASK. WITHOUT CLEAR INCENTIVES TO MAJOR NEW ENERGY
INVESTMENTS, IEA COUNTRIES CAN NEVER HOPE TO REDUCE THEIR
VULNERABILITY.

## RELATIONS WITH PRODUCERS

THE FINAL ELEMENT OF OUR ENERGY STRATEGY IS THE
DEVELOPMENT OF A COOPERATIVE RELATIONSHIP WITH PRODUCERS.

PRODUCERS AND CONSUMERS HOLD GREAT POWER OVER EACH OTHER.

THE PRODUCERS CAN DETERMINE NOW AND FOR SOMETIME IN THE
FUTURE THE SUPPLY AND PRICE OF OUR OIL. BUT WE CAN

DETERMINE BY THE DECISIONS WE MAKE NOW ON CONSERVATION

AND ALTERNATIVE SOURCES HOW BIG THE PRODUCER'S MARKET

WILL BE IN THE FUTURE, AND WHETHER PRICES IN IT WILL BE
SET BY POLITICAL DECISION OR ECONOMIC COMPETITION.

-27-

YET THERE EXISTS NO INSTITUTION, NO AGREED FRAMEWORK, IN WHICH THE EXERCISE OF THESE AWESOME POWERS CAN BE SUBJECT TO DISCUSSIONS AND MADE MUTUALLY TOLERABLE.

SINCE ITS START, IEA HAS BEEN COMMITTED TO SEEK A NEW RELATIONSHIP WITH THE PRODUCERS WHICH WOULD TAKE INTO ACCOUNT THE NEEDS AND ASPIRATIONS OF BOTH PRODUCERS AND CONSUMERS. THE SOLIDARITY WE HAVE ACHIEVED AS MEMBERS OF THE IEA IS A NECESSARY CONDITION FOR BUILDING THAT BROADER STRUCTURE.

BEFORE THE LAST PREPARATORY CONFERENCE, WE AGREED ON SEVERAL AREAS IN WHICH PROSPECTS FOR JOINT ACTION BY PRODUCERS AND CONSUMERS COULD BE APPEALING TO BOTH. THESE REMAIN AS SUBJECTS IN WHICH A SERIOUS DIALOGUE COULD CLEARLY BE MUTUALLY BENEFICIAL.

-28-

FIRST, WE CAN DISCUSS COOPERATIVE APPROACHES TO FINANCIAL RECYCLING. THE OIL PRODUCERS UNDERSTAND THAT THEIR NEW ASSETS MAY REQUIRE NEW MANAGEMENT MECHANISMS. AT THE SAME TIME, THE INDUSTRIAL NATIONS KNOW THAT WORLD ECONOMIC STABILITY REQUIRES THE PRODUCERS' PARTICIPATION.

SECOND, WE CAN JOINTLY EXAMINE INTERNAL INVESTMENT POLICIES OF THE INDUSTRIALIZED COUNTRIES. THE OIL PRODUCERS NEED PRODUCTIVE OUTLETS FOR THEIR REVENUES; THE INDUSTRIAL DEMOCRACIES, WHILE THEY WILL WELCOME NEW INVESTMENT, WILL WANT TO RETAIN CONTROL OF ESSENTIAL SECTORS OF THEIR ECONOMIES.

THIRD, WE CAN EXPLORE POSSIBLE STEPS TO COOPERATE IN ACCELERATING THE DEVELOPMENT PROGRAMS OF PRODUCER COUNTRIES. NEW INDUSTRIES CAN BE ESTABLISHED, COMBINING THE TECHNOLOGY OF THE INDUSTRIALIZED WORLD WITH THE ENERGY AND CAPITAL OF THE PRODUCERS.

-29-

FOURTH, THE OIL PRODUCING COUNTRIES AND THE INDUSTRIAL CONSUMING COUNTRIES SHARE RESPONSIBILITY TO EASE THE PLIGHT OF THE POOREST NATIONS. TECHNOLOGY AND CAPITAL MUST BE COMBINED IN AN INTERNATIONAL EFFORT TO ASSIST THOSE MOST SERIOUSLY AFFECTED BY THE CURRENT ECONOMIC CRISIS.

BUT IT IS NOW CLEAR THAT WE CANNOT CARRY FAR OUR EFFORTS AT DIALOGUE WITH THE PRODUCERS AND PROGRESS IN AREAS OF MUTUAL CONCERN WITHOUT ADDRESSING THE BASIC PROBLEMS OF THE RELATIONSHIP BETWEEN DEVELOPING AND DEVELOPED COUNTRIES AS A WHOLE. THAT IS THE MEANING OF THE FAILURE OF THE PREPARATORY MEETING TO SUCCEED IN APRIL. WE TAKE THAT AS GIVEN.

TO BEGIN A PROCESS OF DIALOGUE, WE MUST MAKE CLEAR THAT WE ARE READY TO SEEK NEW WAYS OF ADDRESSING ISSUES OF CONCERN TO DEVELOPING COUNTRIES. I RECENTLY SET FORTH OUR IDEAS ON WAYS TO BEGIN DISCUSSION OF RAW

-30-

MATERIALS AND COMMODITIES PROBLEMS--WITH MULTILATERAL TRADE NEGOTIATIONS, IN INDIVIDUAL COMMODITY GROUPS, IN THE WORLD BANK--IN THE EXPECTATION THAT THESE IDEAS WOULD BE A BASIS FOR PROGRESS TOWARD MEETING MANY OF THE CONCERNS RAISED AT THE PARIS MEETING. I WILL HAVE FURTHER IDEAS TO PUT FORWARD AT THE OECD TOMORROW.

To SHAPE THE DIALOGUE I PROPOSE THAT THE PREPARATORY MEETING RECONVENE IN THE SAME FORMAT AS BEFORE. I WOULD HOPE THAT IT COULD AGREE SWIFTLY TO CREATE TWO SUB-MINISTERIAL OR MINISTERIAL COMMISSIONS: ONE ON ENERGY, ONE ON DEVELOPMENT ISSUES, INCLUDING RAW MATERIALS, FOOD AND THE PROBLEMS OF THE POOREST. EACH COMMISSION WOULD COVER THE RANGE OF ISSUES UNDER ITS HEADING: FINANCE, INVESTMENT, TRADE, PRODUCTION, DISTRIBUTION. THE COMMISSIONS COULD MEET CONSECUTIVELY OR SIMULTANEOUSLY BUT WITHOUT AN ARBITRARY DEADLINE. THEY WOULD NOT ATTEMPT

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TO SUPPLANT THE ALREADY SUBSTANTIAL WORK DONE OR WHICH WE MAY PROPOSE BE DONE ELSEWHERE. RATHER THEY WOULD MONITOR, SUPPLEMENT AND ORIENT EXISTING WORK AND GIVE IT THE IMPETUS NEEDED TO MOVE FORWARD EXPEDITIOUSLY AND EFFECTIVELY.

MEMBERSHIP IN THESE COMMISSIONS WOULD, OF COURSE, HAVE TO BE LIMITED IF THEY ARE TO BE EFFECTIVE. I WOULD SUGGEST THAT OBJECTIVE CRITERIA BE ESTABLISHED FOR EACH. IN ENERGY, FOR EXAMPLE, COUNTRIES EXPORTING OR IMPORTING MORE THAN A CERTAIN VOLUME OF ENERGY IN THE WORLD MARKET COULD BE INCLUDED. IN DEVELOPMENT ISSUES, COUNTRIES REPRESENTATIVE OF THOSE WITH THE LOWEST PER CAPITA INCOME COULD BE INCLUDED, ALONG WITH TRADITIONAL AND NEW DONORS, AND THE PRINCIPAL EXPORTERS AND IMPORTERS OF FOOD AND NON-OIL RAW MATERIALS.

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IF YOU AGREE WITH THESE CONCEPTS, I WOULD SUGGEST THAT WE COORDINATE IN THE IEA OUR CONTACTS WITH THE PRODUCERS AND DEVELOPING COUNTRIES WHO ATTENDED THE APRIL MEETING AS WELL AS WITH FRANCE TO DETERMINE WHEN AND HOW THE PREPARATORY MEETING COULD BE RECONVENED.

## CONCLUSION

OUR ULTIMATE GOAL IS A COOPERATIVE ECONOMIC FRAMEWORK IN WHICH ALL THE WORLD'S PEOPLE CAN ACCOMMODATE THEIR DIFFERENCES AND PURSUE THEIR ASPIRATIONS.

NOW WE MUST BE CONCERNED WITH MAKING CONCRETE PROGRESS; THIS WILL REQUIRE DETERMINATION, AND THE READINESS TO LOOK BEYOND THE NARROW AIMS OF THE PAST TO THE BROADER NEEDS OF ALL MANKIND.

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WE NOW KNOW THAT THE PROBLEM OF ENERGY LIES AT THE VERY HEART OF INTERDEPENDENCE. IF WE PERMIT DELAY OR DIVISION ON THIS MOST ESSENTIAL ISSUE, THE PROSPECTS OF ALL ELSE WE HAVE IN MIND TO ACCOMPLISH WILL BE DIM INDEED.

WE HAVE DONE A LOT IN A VERY SHORT TIME. THE PROGRESS WE HAVE MADE IN THESE FIFTEEN MONTHS GIVES US NEW HOPE FOR THE FUTURE. THE EXAMPLE OF ORDER, JUSTICE AND PROGRESS WHICH OUR NATIONS HAVE GIVEN THE WORLD SINCE THE INDUSTRIAL REVOLUTION IS STILL ALIVE. TO SUSTAIN AND EXTEND IT WILL REQUIRE US TO DRAW UPON THE ANCIENT STRENGTHS OF OUR COMMON CIVILIZATION, YET MARRY THEM TO THE NEEDS OF OUR TIME.

GOETHE SAID THAT "THE WEB OF THIS WORLD IS WOVEN OF NECESSITY AND CHANGE." WE STAND AT A POINT WHERE THOSE STRANDS INTERTWINE. WE MUST NOT REGARD NECESSITY

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AS CAPRICIOUS NOR ASCRIBE REASON TO CHANCE. BUT BY
RECOGNIZING THE LIMITS AND OPPORTUNITIES IN EACH WE CAN
STRENGTHEN THE WEB THAT BINDS THE WORLD'S PEOPLE TOGETHER
AND CREATE THE FABRIC FOR A NEW HISTORICAL ERA.