IPAA ASKS CLINTON FOR RELIEF FROM OIL IMPORTS
The Independent Petroleum Association of America has petitioned the Clinton administration to give U.S. oil producers relief from low priced oil imports.
Last week IPAA and 20 allied oil associations asked Commerce Department for expedited relief under Sec. 232 of the 1962 Trade Expansion Act.
They did not request a specific type of relief, such as an oil import fee, leaving options open for the administration. IPAA said the administration could declare an import fee, quotas, floor price, offer tax incentives for marginal production, or take a variety of diplomatic actions.
The petition was filed a few days before the Energy Department was due to release a gas and oil initiative designed to help the U.S. oil industry.
The initiative was not expected to contain substantive relief for producers, but IPAA officials noted it was premised on $18-19/bbl oil.
George Alcorn, IPAA chairman, in a letter to Clinton said, "Since the beginning of this year, oil prices have fallen from $19/bbl to $14.95 last Friday (Dec. 31). In the field, producers are receiving around $13. In California, where Alaskan oil skews the market, producers are receiving $8.25. "In constant dollars, this price is more than $1 lower than in 1986, when the oil market crashed, bringing down businesses and financial institutions across the country, and sending the Southwest into a depression.
"Over 20% of our production in the U.S., about 1.3 million b/d, is marginally economic and labor intensive, and current prices are well below the cost of producing this oil. If this situation persists, the U.S. could easily lose an additional 100,000 oil industry jobs on top of the 450,000 jobs we have lost in the last decade. With this growing level of cheap imports, energy conservation measures are hopeless, and work on alternative fuels will grind to a halt. Already, utilities and industrial users that can switch to cheap imported fuel oil are turning away from natural gas. Imported fuel oil is now cheaper than coal."
IPAA was the lead association filing the petition, although it had declined to join some of its member companies in a similar petition after the 1986 price collapse. IPAA officials said the Clinton administration's receptive attitude makes the situation different today. After the earlier petition was filed, Commerce conducted a lengthy study that concluded oil imports threaten the national security of the U.S. But the Reagan and Bush administrations declined to take actions to restrict oil imports. IPAA maintains that study still is valid and another review, which could take a year or longer to prepare, is not necessary.
Alcorn quoted Clinton as saying during his campaign last year, "Our reliance on foreign oil is a genuine threat to our national and economic security. (In 1988) foreign oil made up a third of our trade deficit...Now we import nearly half of our oil, which accounts for two thirds of our trade deficit. That kind of dependence makes us vulnerable and we must change the situation."
Although the Clinton administration has worked in recent months to remove trade barriers, in negotiations for the North American Free Trade Agreement and General Agreement on Trade and Tariffs, Alcorn noted it also has acted to protect U.S. sugar and orange producers.
OTHER VIEWS
Sens. David Boren (D-Okla.), a finance committee member, and Bennett Johnston (D-La.), energy committee chairman, urged the administration to seriously consider the petition.
Boren said, "If prices were to stay at this artificially low level for 6 months to a year, Oklahoma could lose over 10,000 jobs and see its economy shrink by $1 billion."
Sen. Johnston said, "The collapse of oil prices will mean further curtailments in exploration and drilling, more layoffs in the industry, and even greater long term dependence on imported oil."
American Gas Association Pres. Mike Baly said low oil prices could result in flat U.S. gas consumption in 1994, rather than the 2.4% increase that AGA projects.
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