A method for estimating the GNP loss from a future oil embargo

This article develops a theoretical model to estimate the loss in GNP to the U.S. economy that would result from a future oil embargo. The model is based on an input-output matrix of the economy, but modifies the traditional input-output analysis in order to take account of conservation and substitution possibilities. Data generated from the 1973–74 embargo is used as a bench mark for this study in order to assure that the model produces reasonable estimates. Based upon estimates of future economic and energy growth, this study concludes that the United States will become increasingly vulnerable to economic damage as a result of a future embargo.This work was begun while the author was employed at the Center of Naval Analyses during the summer of 1974. Financial support for the continuation of this project was received from the Federal Energy Administration, and this paper is a condensed version of a report sent to the FEA. Views expressed in this paper are those of the author, and do not necessarily reflect the position of either of the above organizations.