API opposes independents' dumping petition

The American Petroleum Institute is opposing a petition by some independent U.S. producers that alleges other nations have dumped oil on the U.S. market at prices below fair value.

Save Domestic Oil Inc. (SDO), a coalition of independents, had asked the International Trade Commission to impose antidumping tariffs against imports from Iraq, Mexico, Venezuela, and Saudi Arabia.

The Independent Petroleum Association of America joined the case as an "interested party" to give the petition standing.

Last week, ITC delayed the case 20 days, setting an Aug. 9 hearing to determine whether the case has sufficient domestic support.

The petition seeks antidumping duties against the targeted nations` oil exports ranging from 177% on Venezuelan oil to 33% for Mexican oil.

It also seeks a countervailing duty to offset alleged government subsidies to the countries` national oil companies.

Mexican retaliation

The petition prompted Mexico to retain a tariff on U.S. natural gas imports (OGJ, July 5, 1999, Newsletter). That drew a reaction from the Interstate Natural Gas Association of America, representing gas pipelines.

Last week, Ingaa`s board passed a resolution opposing the antidumping petition.

Ingaa Pres. Jerald Halvorsen said, "This petition sends the absolute wrong signal at a time when Mexico is opening its gas markets to U.S. investment (see related story, this page).

"While Ingaa`s members are sympathetic to the concerns of domestic oil producers, we believe that this complaint is without merit and could impede the further development of North American and world natural gas markets."

SDO position

Harold Hamm, SDO president, said, "We had anticipated that some of these large companies that import crude, who are partners with some of these companies like Petroleos de Venezuela and Saudi Arabian companies, perhaps would be in opposition to this.

"They`re (the majors) obviously importers of crude for the most part, and many of them have partnership ar- rangements and business connections with those countries that should exclude them (from having standing in the case) under the law."

IPAA had no reaction to the API and Ingaa announcements.

Position

API Pres. Red Cavaney said his group decided to intervene in the case "because reliable historical information shows that prices are established by world oil markets."

Cavaney said, "Domestic oil and gas producers have been through extremely difficult times, and we are very sympathetic to their plight and that of U.S. oil field workers and others who rely on our industry.

"All in industry have suffered from low prices.

"However, we strongly believe that this antidumping petition will only make matters worse, because it will have the unintended consequence of making the oil supply system less efficient."

Cavaney said countervailing duties would force importers to seek different and potentially more costly foreign supplies for the U.S. market and raise refining costs as refiners adjust to different grades of crude oil. He said that would raise product costs for consumers.

"Over the longer term, it is difficult to see who would benefit from this action. The supply system would be disrupted over the short term, and the oil market would become less efficient."

He said U.S. producers could be helped by other actions, such as greater access to federal lands, royalty relief during periods of low prices, and more reasonable regulatory and tax environments.

Intervention

API said it is compiling data to persuade ITC and the Department of Commerce there has been no dumping.

Cavaney also said, "We believe we are close" to contesting the standing of the independents to file the case.

First, petitioners must show that their action is being filed on behalf of 25% of domestic production.

Then, industry would be polled, and 50% of producers responding must support the petition for it to proceed.

An API attorney said a side issue was complicating the case: that the petition was filed on behalf of producers in Petroleum Administration for Defense Districts (PADDs) I-IV.

But ITC could choose to include West Coast PADD V, including Alaska and California, which together produce a third of domestic oil output. That would significantly alter the 25% and 50% calculations.

Cavaney said, "This is absolutely not a large oil company vs. smaller independents disagreement. Each company is looking at this issue from its own perspective."

Should ITC recommend, and Commerce impose, countervailing duties on oil imports, then firms importing crude from any of the targeted nations would be forced to pay the tariffs.

Exxon`s stance

Exxon Corp. last week also urged the U.S. government to dismiss the antidumping and countervailing duty petition.

In a letter to Commerce Sec. William M. Daley, Exxon Chairman Lee R. Raymond said that Exxon "unequivocally opposes the antidumping and countervailing duty petition against Venezuela, Saudi Arabia, Mexico, and Iraq.

"Exxon strongly believes that the interests of U.S. producers and consumers alike are best served by open and free competition in worldwide crude markets with minimal government intervention."

History shows that worldwide crude oil markets are "very dynamic and often quite volatile as they respond to changing forces of supply and demand," according to Exxon.

Raymond said that companies in the oil exploration and production business, including Exxon, must deal with strong competition and changing market circumstances.

"Exxon is opposed to misguided requests for government protections to shield U.S. producers from the rigors of this competition and business climate," he said.

"Given the realities of the international crude market, we believe that imposing duties on crude imports will not help U.S. producers or consumers and is not warranted," Raymond said.

Raymond noted that Exxon is one of the biggest U.S. oil producers, accounting for more than 184 million bbl of the roughly 2.28 billion bbl of oil produced in the U.S. in 1998.

However, U.S. demand for crude oil substantially exceeds U.S. crude oil production. Exxon said that it can meet its customers` needs only through the import of crude oil for refining in the U.S.