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which I have prepared or to speak before your committee. The concept includes industry, automobiles, households and businesses.

Sincerely,

LOWELL W. CULVER, University Professor, College of Business and Public Service.

P.S.-You may not remember my name, but we met at the U.N.-Goldberg dinner held at the Olympic Hotel in Seattle several years ago. I was then a professor at Pacific Lutheran University in Tacoma.

THE ENERGY CRISIS AND THE LESS AFFLUENT: THE CASE FOR A TWO-TIER SYSTEM OF ENERGY RESOURCE ALLOCATION

(By Lowell W. Culver, University Professor, College of Business and Public Service, Governors State University

Seldom has our nation in peacetime been faced with an issue of such far-reaching potential for disruption of our economy and lifestyle than the present energy crisis. The kinds of action taken by the national government in the coming months will, in large measure, determine the extent to which these disruptions can be minimized. One possible strategy is a two-tier system of energy resource allocation.

Shortages of scarce commodities and the resulting inflation tend to affect different income levels unequally. The greatest sufferers will be the poor and those with moderate incomes, who also require fuel for heating, electricity for lighting and cooking and gasoline for their automobiles, if they in fact own one, unless a system which causes a sharing of the burden is developed. Without such a system, those that can afford gasoline, electricity, fuel oil and natural gas at any price will continue to obtain what their lifestyles require, as others are priced out of the market. In effect, those who have contributed most to the energy crisis through their phenomenal consumption of energy resources would suffer least. The free market becomes a very unfair allocator of scarce basic resources, when some must suffer while few restrictions are placed on others.

A two-tier allocation system, similar to that operating for gold, would allot a certain portion of the energy resources at a price all can pay, with any excess beyond this available at prices determined by the free market. Let us assume that a determination is made which allots 40 gallons of gasoline to each family per month at a price of 40 to 45 cents per gallon for regular blend (with the basic price depending on the locality) and a somewhat higher price for premium. Beyond this would be a secondary market for which price would be the only regulator. The price of gasoline in this secondary market would be close to the basic price in the initial phase of rationing, unless the initial price included a heavy federal tax. Otherwise, the price would be allowed to fluxuate with the availability of gasoline. Prices in this secondary market could conceivably rise to $1.00 per gallon, while the basic rate remained relatively stable. In effect, the secondary market would subsidize the first, so that all elements of society would be able to afford at least the basic allotment, and a growing shortage would not be a detriment to the less well-off. The basic allocation could, of course, be altered according to changing circumstances. Moreover, consideration would have to be given to travelling salesmen, families in which these are two or more full-time employees, doctors and farmers who would conceivably be granted larger basic allotments. Since gas would be available "at a price," no black market should develop. Moreover, if the less affluent wish to sell their gas coupons at a profit. so much the better for them if they are able to add to their limited income in that way. A major problem might develop if there is insufficient gasoline for the second market. Some form of regulation of the petroleum industry will be necessary to insure that artificial shortages are not created. Gradually, people will shift to smaller automobiles and alternative systems of transportation, more efficient systems will be developed for industry, appliances will become more efficient and, hopefully, new sources of energy will be forthcoming.

The alternatives to a two-tier system are not pleasant. Gradually rising prices for gasoline will eventually deny certain elements of our society use of their automobiles. Moreover, serious dislocations in business and industry will occur if only the affluent can afford to drive automobiles. Thousands would be laid off in the auto, tire and auto parts industries; shopping centers geared to the automobile, drive-in theaters and the fast-food trade, among others, would be severely

hit if alternative systems of transportation are not made available. Indeed, not only the less affluent have a stake in a system which affords an equitable distribution of the fuel shortage burden.

A similar pricing mechanism should be extended to other energy sources: fuel oil, electricity and natural gas. A determination would be made of the basic energy needs of a specific household, based on location, size of family, type of heating and cooking, etc., for which a basic rate would be paid. In most cases this basic rate would be that which is presently in existence in the locality in question. Any use of energy beyond this basic determination would be paid for at gradually increasing rates, rather than the increasingly lower rates as is now the practice, which provides no incentive to conserve energy. The surcharge would not accrue to the utility initially, except to pay for increases in the cost of fuel at its source. A fund would be established from the increased revenues to stabilize the basic rate over a period of years. Such a system would, for the first time, create definite incentives to the more efficient use of our limited energy resources through disincentives to the wasters of energy, and at the same time insure that all share in the burden of the energy crisis.

[Hand delivered telegram]

AMERICAN CAN CO.,
November 13, 1973.

Hon. HENRY M. JACKSON,

Chairman, Senate Interior Committee,
U.S. Capitol, Washington, D.C.:

Understand Oregon Senator Hatfield will attempt to amend emergency energy bill today to impose restrictions on non-returnable beer and soft drink cans and bottles. The can industry, one of our Nation's most important, would be devastated if the Hatfield amendment should be adopted. 60.000 jobs and $10 billion would be taken out of our Nation's economy by the Hatfield amendment. It is therefore crucial to the canmaking industry and to the food and beverage packers we supply, that you oppose the Hatfield amendment when your emergency energy bill is under Senate consideration. Senator Hatfield suggests that banning nonreturnable containers will save energy-he is wrong. American consumers rarely return returnable containers more than two to four times. A returnable container will conserve energy only if it is returned fifteen times.

The study cited by Senator Hatfield is based on a fifteen trip return ratea trippage return rate that exists in only a few places in the United States. Also, the energy consumed in the process of returning containers to the marketplace offsets the perceived energy savings in the returnable system. Please oppose the Hatfield amendment. Senator Hatfield's bill can be the subject of hearings before the Senate Commerce Committee next year. It would be disastrous to decimate the can industry through an amendment to emergency legislation. H. S. HOWARD, Jr., President.

SKYLINE CAVERNS, INC.,

Front Royal, Va., November 12, 1973.

Hon. HENRY JACKSON,
U.S. Senate,

Washington, D.C.

DEAR SENATOR JACKSON: In the November 5th issue of Travel Trade there appeared an article concerning your sponsorship of S. 2589 which proposes certain measures to combat the oil shortage.

Of concern to the travel industry is the statement in the news article that included in S. 2589 is a provision to ban "advertising to induce increased energy consumption." While the travel industry can and will support a national 50 MPH speed limit and other provisions of this bill, we feel a literal interpretation of any ban on travel advertising would really get carried away by the bureaucrats charged with preparing administrative criteria to enforce the law.

It could mean you could not distribute-or even display-travel folders. Much less do any other type of advertising.

In a talk with Bill Toohey, President of Discover America Travel Organizations this morning, Mr. Toohey advised it was his understanding this section of S. 2589 was aimed at the major oil companies and their advertising. Mr. Toohey did admit there was a danger of some bureaucrat running amuck with the law once it was on the books, however.

This matter was discussed at a special meeting Friday in Richmond, of the executive committee of the Virginia Travel Council. Since the major oil companies have now gone to a theme of conserving energy in their advertising, it was the feeling of the Virginia Travel Council that this provision of S. 2589 could safely be eliminated. I call this matter to your attention for your most serious consideration.

Thank you for your attention to this matter. With best wishes, I remain,
Sincerely,

THOMAS H. GIBSON,

President, Virginia Travel Council.

Hon. MARK O. HATFIELD,

NATIONAL AIR TRANSPORTATION CONFERENCES, INC.,
Washington, D.C., November 13, 1973.

Russell Senate Office Building,

Washington, D.C.

DEAR SENATOR HATFIELD: An item in the November 13 issue of Aviation Daily included the following concerning the Senate Interior Committee's markup session on S. 2589:

"Hatfield said he wants no cuts made in small community service on the excuse of a fuel shortage."

Now that the nation is faced with a fuel crisis, the question is asked: "If a commuter airline can better serve a small/medium community than a local service carrier and can do so by burning less fuel, should not appropriate arrangements be made to achieve such a desirable objective?"

In many cases the local service carriers have been unsuccessful in their attempts to enter into suspension/replacement agreements with the commuter airlines because of ALP's "scope clause" and the lack of community support. This raises the question: "How much longer can the nation permit such obstacles to stand in the path of more efficient and economical air service between short-haul low-density points?"

Your reaction to this suggestion for improving scheduled air service to small communities with a resultant savings in precious fuel and a reduction in subsidy payments to local service carriers will be appreciated.

Enclosed is a booklet about the commuter airline industry that should be of interest to you. Should you or members of your staff have any questions, please give me a call.

Respectfully yours,

Enclosure.

T. S. MILES, President and Chief Executive Officer.

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