Once again, the Clinton administration is in a predicament over an oil-import policy question.
This time, it's a US Department of Commerce study regarding whether rising crude and petroleum products imports threaten national security.
The study's conclusion is not in doubt. Similar investigations in 1975, 1979, 1988, and 1995 determined that rising imports threatened national security. Imports are even higher today.
The only question is what policy changes the administration will recommend.
Oil prices were at a modern low when the study, under Sec. 232 of the Trade Expansion Act, was requested last year.
The Clinton administration recognized that the study would help justify its proposals to help the oil industry through the price slump. The commerce department was told to expedite the review and report to the White House by July 26 (OGJ, June 14, 1999, p. 33).
Derailment
But another controversy knocked the study off track.
Save Domestic Oil Inc. (SDO), a coalition of independents, petitioned the US International Trade Commission (ITC) to impose antidumping tariffs against imports from Iraq, Mexico, Venezuela, and Saudi Arabia.
Energy Sec. Bill Richardson and other key administration officials strongly opposed that petition. But the Sec. 232 report was put on hold for a while.
It would have been embarrassing for one commerce department agency to declare that growing oil prices were a national security threat while another asserted that producers were not being harmed by low-priced imports.
Yes, there was a distinction between the national security and dumping questions, but it wasn't one the administration wanted to risk explaining in public.
By the time the independent ITC ruled against SDO in August, oil prices had rebounded somewhat, and pressure to issue the Sec. 232 report had eased.
Next step
The administration dallied and wasted the opportunity to issue the report last fall. Now the study is a potential embarrassment.
The administration still appears to be stalemated, and law mandates the document be released by late this month.
Sec. Richardson reportedly wants the recommendations to contain some tax and other measures to improve and maintain domestic oil and gas production. (A fee on oil imports is not an option.)
Other agencies-particularly the treasury department-argue that federal tax changes are unnecessary now because oil prices have recovered.
There are political considerations, too. The administration is loathe to grant the industry relief at a time when consumers are still smarting from recent gasoline price increases. And any substantive proposals could become political hot potatoes during the upcoming election season.
So chances are that the Sec. 232 recommendations will be milquetoast proposals designed to be ignored, just as previous ones have been. In that case, small producers will complain that the government took no actions as a result of the last oil depression that are significant enough to mitigate the next one.
