President George W. Bush's plan to impose stiffer tariffs on most imported steel may help US steel producers, but it could hurt the US oil industry, say some US producers.
Majors and larger independents see a dangerous precedent being set. They argue that the same outdated US dumping laws the Bush administration was forced to consider when making its decision on steel could also be used by smaller independents to support crude oil import fees.
Oil dumping limbo
"This is an issue [for which] we believe the administration cannot and should not be on the sidelines," said Larry Goldstein, president of Petroleum Industry Research Foundation Inc.
For the past 18 months, parties on both sides of the import issue have waited in legal limbo for the US Court of International Trade (CIT) in New York to decide whether the Department of Commerce must reexamine a 1999 antidumping claim brought by a group of US independents against the country's leading foreign crude importers.
The Oklahoma-based group Save Domestic Oil maintains that Iraq, Mexico, Saudi Arabia, and Venezuela sought to drive US oil producers out of business in 1998 and part of 1999 by subsidizing their own domestic oil, selling oil to US refiners below production costs, and pricing oil differently in key US market locations.
Commerce in 1999 said SDO's case did not merit a formal investigation, but the court disagreed in a September 2000 decision.
Following that ruling, the US government went to a federal appeals court hoping to get a better answer but instead was sent back to CIT, where the case remains.
Since the petition was first filed, a lot has happened in Washington, DC, and in world oil markets. There has been a change in administration, another oil boom cycle, another bust, and another possible boom may be on the horizon.
Messy politics
But industry still waits. If the CIT judge reverses himself, the game is over, said Goldstein. But if he again rules in favor of SDO, "the game has just started. Politically and economically, it is very messy."
If SDO prevails again, Commerce Sec. Don Evans, the former president of Midland, Tex., independent Tom Brown Inc., will have to conduct a formal investigation that may take a year and could force the administration to consider tariffs.
Larger US oil companies say any new tariff would be counterproductive, because the US would be forced to limit its supply choices; smaller independents argue the action would spur domestic production. But both sides acknowledge a decision in favor of tariffs could provoke trade wars with key allies and create more legal action worldwide.
One possible solution for larger US oil companies with international investments is to lobby Congress to update dumping laws.
But most lawmakers, Democrat or Republican, do not want to look as if they are weakening rules designed to protect US businesses. So in the end, it could be up to the Bush administration to decide how far the game can go.
