Imports study

Patrick Crow
Washington, D.C.
[email protected]

The U.S. Commerce Department is conducting an inquiry, under Sect. 232 of the Trade Expansion Act, to determine if rising imports of crude and products threaten national security.

Commerce Sec. William Daley has pledged to expedite the process and report to the White House by July 26.

There's no suspense about the ultimate conclusion. Similar investigations in 1975, 1979, 1988, and 1995 found rising imports were a national security threat then, and U.S. dependence on foreign crude is even higher today.

The key question is what actions the Clinton administration will propose. If the study determines imports are a threat, the President has the statutory authority to "adjust imports."

In 1975, President Gerald Ford imposed oil import fees. In 1979, President Jimmy Carter used a Sec. 232 finding as the basis of an embargo on Iranian oil imports.

New environment

President Bill Clinton will not propose an import fee, but the Petroleum Industry Research Foundation Inc. (Pirinc), New York, says the administration should use the study as a springboard for significant energy policy changes.

In a paper, "Oil and National Security," Pirinc said the concern is whether the U.S. economy should be vulnerable to sudden supply shortfalls and unanticipated sharp increases in prices.

"Even so, it doesn't follow that import levels, per se, are an indicator of vulnerability to such developments."

It noted that production continues to rise outside the Organization of Petroleum Exporting Countries, giving U.S. importers more supply options. Also, the U.S. Strategic Petroleum Reserve could be tapped in an emergency.

It said, "The investigations of 1988 and 1995 both recognized that the U.S. is a mature area in terms of oil production, but it is important not to confuse maturity with exhaustion."

Pirinc noted that, during 1990-98, U.S. producers were able to add nearly as much oil to their inventory of reserves as they produced.

So it said access to acreage must remain a key policy tool, and the U.S. also should consider using a sliding-scale royalty rate to maintain oil activity when prices are low.

Political baggage

Pirinc noted the investigations of 1988 and 1995 both led to recommendations that reflected the current administration's energy polices.

Under Republicans in 1988, Commerce recommended legislative actions to improve domestic supplies, including exploration of the Arctic National Wildlife Refuge and the Outer Continental Shelf.

In 1995, under Democrats, recommendations focused on promoting energy efficiency and alternative fuels.

"The study should take the time needed to formulate policy recommendations that avoid the limitations of the prior two," said Pirinc.

"The 1988 investigation was silent on energy conservation. The 1995 investigation properly highlighted actions to promote efficiency and alternatives to oil, but virtually dismissed the supply-side of the equation.

"The new investigation would serve the public interest best by focusing on both."