Representative CONABLE. If there is no competition, how do you account for the much lower retail price of gasoline in this country than in the rest of the world? I acknowledge that the rest of the world depends to a much greater degree upon Middle Eastern oil which has had a dramatic increase but for as long as I have been aware of gasoline prices abroad, they have far exceeded ours and I wonder if there is not some element of competition then in the lower American retail price of gasoline.

Mr. NADER. Yes. There are several reasons for that. One is the enormous taxation in Europe that comprises their so-called dollar a gallon of gasoline. You have to discount the taxation that increases the retail price.

Representative CONABLE. Some of them are nationalized distribution systems are they not?

Mr. NADER. Yes, but still taxation. But second, Europe is not much of an oil producer, although it is beginning to be in the North Sea. The United States is a very large producer. There are more independents in this country. It is the phenomenon of independents that explains a great deal of the difference, in reply to your question, as well as the phenomenon of much greater taxation by the European governments on gasoline.

Let me just make one point in this context as a reflection on the sincerity of the oil industry. If the oil industry really wanted to reduce demand, one thing they would do is become crusaders for automobile and usable gasoline station price posting for octane levels. Now, the Cost of Living Council under phase IV requires a particular posting of octane levels but it is on a formula which is not comparable to the information that the motorists get on buying their automobiles and looking in the manual.

Let me just give you one stunning fact here. If the people were not overbuying in octane, because they were given adequate information about what their automobile can use, they would be paying as of last summer 5 cents less per gallon of gasoline and there would be far-there would be considerably less pressure on refineries because I think the figure is the following. This comes from Oil Daily. The Oil Daily states that lowering the octane rating by a single number enables oil refiners to produce up to 5 percent more gasoline. Just by a single number. So if all the cars in this country just bought the octane level that is suitable for their car, the refineries could produce a good deal more gasoline.

Now, if the oil companies were candid and really sincere, that is where they would put a lot of their emphasis.

Representative CONABLE. Thank you, Mr. Chairman.

Chairman PROXMIRE. Mr. Nader, thank you very much. You are a marvel. I do not know how you know all of this. It shows what one mind can do when it is not engaged in the kinds of trivia that amuse the rest of us.

Thank you very, very much for a fine performance.

The subcommittee will stand in recess until 2:30 this afternoon when it meets with Fred Allvine, Joel Darmstadter, and David Freeman.

[Whereupon, at 1:10 p.m., the subcommittee recessed, to reconvene at 2:30 p.m., the same day.]

AFTERNOON SESSION

Chairman PROXMIRE. The subcommittee will come to order. This afternoon we are very fortunate, we have three really outstanding experts in this field. Mr. Fred Allvine, energy consultant, and specially an expert in the retail area, who has written a book on marketing_gasoline; Joel Darmstadter, who is also a distinguished author and expert. He works now in the Resources for the Future. David Freeman is an old friend of the committee. And, of course, he is from the Ford Foundation Energy Policy Project, formerly with the Federal Power Commission.

Very happy to have you gentlemen.
We will start off with Mr. Freeman.

STATEMENT OF DAVID FREEMAN, FORD FOUNDATION
ENERGY POLICY PROJECT

Mr. FREEMAN. Thank you. I am pleased to be here. In a sense, the situation we find ourselves in today with our lack of information about the operations of the fuels industry is analogous to the situation in the thirties.

Chairman PROXMIRE. Let me interrupt to say that we have no copies of your statement. That is understandable because this hearing was called on short notice. I would appreciate it if you could confine your remarks to 10 or 15 minutes, then we will have questions. Mr. FREEMAN. Yes, sir, I will be delighted to.

The situation today is analogous to the situation we found ourselves in in the thirties with respect to the utility industry. Then, after a massive investigation by the Federal Trade Commission, there was enacted the Federal Power Act. There was a uniform system of accounts established for the electric utility industry based on pioneering regulatory work in the State of Wisconsin, I might add. We began to get an even and steady flow of public oriented facts about the electric power industry.

Today we need such a fundamental reform with respect to our ability to extract information from the fuels industry; not only extract it but compile it, digest it and make it available to the public in a meaningful way.

If one starts in the ground, which is perhaps a pretty good starting place, we find that we don't know what is there. And it is not just the oil industry that one must point the finger toward. The Federal Government which is the owner of most of the economic fuels left in the ground, turns out to be a very, very poor storekeeper. We haven't spent the money or taken the effort to find out what the people own, not in the outer continental shelf and not out in the West with respect to the massive coal resources. We are amazingly deficient in knowledge of the quality and quantity of the fuels that the people of this country own.

And when one thinks of the hundreds of billions of dollars that are coming into the Treasury from the sales of the right to exploit these fuels in recent years, and the fact that little of that money is being spent to find out what else we have, we get some idea of the magnitude of the neglect.

After we lease the land, which is really a fancy word for selling the mineral rights therein to the oil industry, we as a government don't have a very good idea of the pace at which those leases are being developed. Our capability for evaluating the development program is meager.

The third point I want to make is we are in a situation where a lot of people believe the industry is probably making extraordinary profits, windfall profits. And yet all the years that I was in government in energy policymaking positions and even today I have been unable to find out the cost of producing oil in the United States. The Government doesn't know, as far as I can find out, and the public doesn't know whether producing oil in the outer continental shelf or anywhere else costs $2 a barrel, $3 a barrel, or $4 a barrel, or $6 a barrel. We have to guess at what the size of the profit margin is and whether the country needs prices higher or lower than the prices that are in effect in order to provide a reasonable margin to encourage exploration and development.

It is maddening in a sense to think that these are resources that the Government owns, that it sells to the industry, and that we don't even have the commonsense to extract conditions that would require the cost information be made available to the Government and of the people of the country.

We have no knowledge of the timetables for building refinery capacity in this country. The oil industry has no legal obligation to build refineries. Their legal posture is no different than the grocery business in that respect. They build, if it meets their economic criteria. The country is traveling, I think, without any real understanding, without any real knowledge of whether gasoline shortages will continue in 1975 and 1976 and 1977, no matter what the producing nations do about supplying crude. We would have had a gasoline shortage in this coming summer anyhow, and these shortages are apt to persist indefinitely unless there is some public interest oriented game plan for building refineries.

Now I can understand that an oil company might have questions about going ahead with refinery construction in view of the uncertainty of crude supply. We have to get into the issue in a much more meaningful way than simply a guessing game as to whether the oil industry is going to build or not. We have inadequate information, in my opinion, as to what the oil industry does with the money it receives. And we could go on almost indefinitely in this tale of traveling in the dark as far as policymakers and the public is concerned. This is a basic fact about the industry.

I return to my opening comment, Mr. Chairman. I believe the time has come for something much more fundamental than simply filling a gap here and there in terms of spot items of information that might be missing to some of this week's dilemma about this industry.

I believe that it is time that we have a basic bookkeeping system for the industry that will provide a basis for meaningful information, that information be channeled continuously to an agency of government with sufficient staff and public interest orientation to digest the information, make it available to the policymakers and

the general public on a continuous basis, something analogous to the Bureau of Labor Statistics.

I thank you, sir.

Chairman PROXMIRE. Thank you very much.

Mr. Darmstadter, please proceed.

STATEMENT OF JOEL DARMSTADTER, RESOURCES FOR THE

FUTURE

Mr. DARMSTADTER. Thank you, Mr. Chairman. I also have no prepared statement, but I do have some notes. I though I might contribute to a balanced presentation by touching on some of the analytical gaps in our knowledge about energy. This is not because I think the problem of current data reliability is unimportant but because some of the broader aspects of energy information deserve airing.

One way of exposing or illustrating the deficiencies in the energy data-base is to cite some of the more incessant questions being asked by people trying to understand the dimensions of the current energy crisis and policies designed to deal with it.

Of course, our basic data system shouldn't be unduly governed by random, if precipitous, events like the Arab embargo. This could drive us paranoid; on the other hand, some of the quantitative questions being asked in connection with the current oil crisis may well have a more enduring importance, so that by using the current problems in energy as a jumping off point needn't be an exclusively short-term reflex.

One question being asked these days is just what is the disposition of energy utilization in the United States? After all, if we are exhorted to reduce thermostat settings, to drive more slowly, and to dim lights, it would be of more than casual interest-to policymakers and others to know just what the quantitative importance of these components of energy use in the United States is. (It turns out, incidentally, that household lighting is probably a very minor fraction if residential energy use, let alone the national total.) I don't dispute the demonstration value of exhortations with respect even to insignificant energy sources. But I do think that a far more discreet statistical breakdown of U.S. energy usage would be most desirable. The raw materials for such a system in the form of census and other data-are probably there. But so far the Bureau of Mines has contented itself with exceedingly broad and aggregate sectoral statistics, and only a one-time study commissioned by the Office of Science and Technology a couple of years ago made any sort of a start toward development of a detailed statistical picture of energy consumption in the United States.

Another area is foreign trade statistics. Just what is our dependence on Arab oil? There is really a lot of guesswork about this. Much Arab oil reaches us indirectly through European and West Indian refineries, and given the logistical ingenuity of the oil companies at diverting, rerouting and whatever else is being done, much information simply is not captured by statistical data. More specific origin-and-destination data and more comprehensive information

about foreign operations of oil companies in general would be most constructive.

The third point is that we know next to nothing about regional energy uses and requirements. I have myself tried for the past year or so to look at the total energy picture in a large metropolitan area-in this case New York City and its environs-and here, except for gas and electric utility data, there is virtually a total void in our quantitative knowledge about energy. The interest in this kind of information is apt to be more than transitory. It impinges on such questions as pollution and emissions from different energy uses, the private-public transport mix, and saturation of energy using appliances in the region. We would gain considerable insight into the potentiality for further energy demand growth, for powerplant siting requirements and numerous other questions of essentially a regional nature.

Today, we simply don't have adequate regional energy data, and there is too much guesswork about such issues as the regional impacts of shortages, fuel and power. In other words, I'm calling for the kind of information needed for a much more enlightened policymaking on a subnational level.

What I have given you so far are examples of mobilizing essentially raw data which would be useful even without a great deal of further analytical transformation. As we get into things that have a more analytical cast, the following topics come to mind.

There is obviously intense interest right now in the employment and industrial impacts of energy shortfalls. This is the kind of question that seems to point to interindustry-input-output-analysis, except we need much more discreet information than the standard I-O coefficients now available.

We need to translate the dollar information in input-output tables into physical flows. We need to know much more about what goes on within specific cells of the input-output matrix of interindustry purchases and deliveries. In particular industrial establishments there may be far more potential for saving on energy utilization when the energy is used for space heating than when it is required. for an electrolytic manufacturing processes. The aggregation of our interindustry matrix is simply too gross to permit us to identify such distinguishing characteristics. But without the information impact analysis and allocative decisions are hampered.

The scope for substitutability between scarce and abundant fuels in particular industry groups is another property which standard I-O tables fail to disclose. Obviously, this calls for an exceedingly high degree of disaggregation and I have given no thought to the cost-benefit limits to a substantially expanded input-output effort yielding more detailed information. Again, however, the intense longer-term interest in energy conservation, self-sufficiency and resource management points to an energy slanted input-output effort as probably warranting a pretty close look.

Another analytical tack that needs to be pursued is the question of the demand response to rising energy prices-especially for electricity and gasoline. Once again this has topical as well as longer run importance. As you know our whole experience has been with

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