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General Lincoln also said the government was not considering eliminating oil import controls and that substituting of a tariff system for the present quota system was not under active consideration. At the February 1, 1973 hearing, Senator Henry M. Jackson of Washington, Chairman of the Interior Committee, said federal oil policy was inconsistent and had failed to insure sufficient fuel oil supplies and demonstrated that “our institutions are not performing as they should to meet the needs of the national economy and the COInSurner. . . . Senator Lloyd Bentsen of Texas said he had looked at the operations of the Oil Import Appeals Board and found the Board to have allowed requests from £o for more imports to remain in the pending file for months. In this period of shortage, Senator Bentsen said, the refineries would have even preferred a negative reply over no reply at all since at least with a denial they could advise their customers that they could not meet projected demand. Senator Bentsen noted that in no instance he was aware of did the Appeals Board grant a refinery additional imports as large as requested. Senator Edward M. Kennedy of Massachusetts said he favored abolishing the oil import quota system as a first step toward developing “an intelligent national energy policy.” He said federal oil officials should have “full access” to all records kept by the oil industry as to supply and demand, and location of petroleum stocks. Senator Kennedy said it was wrong for the government to have to rely totally on the oil companies themselves for information on supplies and shipments. He said:
No one in the federal government seems to know whether the shortages claimed by the oil companies are legitimate. The oil companies should be required to submit that information to at least one federal agency.
In his testimony John G. Buckley, vice president of Northeast Petroleum Industries, Inc., said that for the past several years the oil marketers, such as his own organization, had warned the government that shortages were likely.
But the refining industries said shortages were not likely at all, Mr. Buckley said, adding:
Unfortunately for the consumer and the country, the government chose to believe the refiner.
Mr. Buckley said the gasoline shortage would “hit first and foremost at the independent marketers . . . because he draws on his supplies from domestic refineries.”
All of the company's and all of the independent jobber's supplies come from the major refineries.
If there is a shortage those refiners have to take care of their own supply systems first.
Darrell M. Trent, who became Acting Director of the Office of Emergency Preparedness when General Lincoln stepped down on January 19, 1973, told Senators that federal officials could take direct action on oil allocation in matters directly related to military needs but that in most instances in civilian affairs the government could do little more than use “persuasion or jawboning” tactics to influence “output or distribution in commercial markets.” As for present shortages, Mr. Trent said that as recently as September of 1972 government estimates showed the American refineries could provide sufficient heating oil for this winter. In addition, he said major refiners assured the government they could meet the nation's full oil needs this winter. But on November 16, 1972, Mr. Trent said, the government learned that its own estimates and assurances of the refiners were wrong and that . contrary to expectations, refineries had been operating below capacity and that a lower proportion of their production had been devoted to distillates than projected in September. Hence, inventories had not risen as rapidly as anticipated.
Mr. Trent said the Office of Emergency Preparedness and other federal bureaus had then begun a series of actions to increase imports and petroleum supplies.
Mr. Trent said:
These import actions were all complementary to the main thrust of government action, which was to o: principal reliance on domestic refiners for production of the distillate fuels we need.
Randall Meyer, President of Exxon, told Senators that “undue regulation or interference” by government in setting petroleum product prices would do more harm than good. Mr. Meyer said it was wrong for government officials to believe the nation's oil supplies could be met much longer at prices set in August of 1971, the date price controls were imposed. Oscar Wyatt, Chairman of the Board of Coastal States Gas Producing Co., said the blame for this year's shortages rested with government—not industry. To support his contention, Mr. Wyatt cited his company's requests to federal authorities for emergency import quotas in 1972. Mr. Wyatt said that if Senators would examine his company's aplications for emergency quotas in 1972, they would find that &oi tates made applications and pleas for “considerable amounts of foreio oil” but the requests were turned down by the government. r. Wyatt concluded:
So I don't feel that the real problem with the shortage lies with the industry. I think it lies with the Administration's handling of the import program in the short term past.
Annon Card, Senior Vice President of Texaco, said price-controls were a “key factor” in heating oil shortages and that federal officials o been unresponsive to industry requests for increased import alocations.
5.30-065 o - 74 - 7 A*
The Senate Committee on Banking, Housing and Urban Affairs conducted hearings in early May of 1973 on petroleum shortages.
On May 7, Annon Card of Texaco said Texaco had “taken every reasonable action” to increase additional gasoline supplies.
He said gasoline inventories were not built up sufficiently because of the “necessity to maximize distillate production.”
Mr. Card said:
With an anticipated increase of 5 percent or more expected in gasoline demand through the rest of the year, it may not be possible to supply all the gasoline that the customer may desire when he wants it...
He said no type of “mandatory controlled program or rationing” was needed, however, but warned that because the gasoline shortage was tying up the refineries the nation would enter the winter season with “lower than desired distillate stocks.”
Darrell M. Trent, Acting Director of the Office of Emergency Pre
aredness, advised Senators that some refineries were still not operat
ing at capacity because they lacked adequate supplies of both domestic and foreign crude oil.
Criticism of the procedures of the Oil Import Appeals Board was made by Edwin Jason Dryer of the Independent Refiners Association of America.
Mr. Dryer said Board rules required that requests for more imports had to be rejected if the company was making a profit in total oil operations.
This provision, Mr. Dryer said, prevented “every efficient independent refiner” from successfully petitioning the Appeals Board even though the refiner might be forced to operate at 60 percent capacity.
Asserting that this “inadvertent interpretation” of the Board’s mandate was still being invoked as recently as the previous week, Mr. Dryer said that in the fall of 1972:
A host of refiners went before the Board and I can cite case after case in which these companies said, if you give us the award, we have the arrangements by which we can get the oil, we can trade it with a crude holding major company and get the oil to operate at capacity.
In case after case because the company was not on the verge of bankruptcy, the award was turned down, the company cut back its rate of operations at the very time that this shortage was developing.
Mr. Dryer said that a shortage of fuel oil of 2 to 5 percent could develop in the winter of 1973–1974 if demand continues to increase at a fast pace or if no effort is made to practice fuel conservation or if the weather is abnormally cold or if refiners cannot operate at “anticipated rates.”
CHAPTER XI. PETROLEUM PRODUCT
The winter wore on and the petroleum shortages continued.
In a letter of January 11, #. to the Co-op Association in Minnesota, General Lincoln outlined the steps the government had taken and would continue to take to combat the fuel shortage.
I believe we have taken reasonably prudent steps to increase supply and to the extent feasible reduce demand through conservation. On the question of home heating oil, we have a major concern that the refinery industry needs to do more to maximize the production of No. 2 oil. We shall continue to monitor the fuel situation throughout the winter SeaSOn.
In a January 17 letter to the New England Fuel Institute, General Lincoln noted his appeals to industry to increase production, and observed that recent figures showed that industry had accelerated production of heating oil.
Two DIFFERENT EVALUATIONs
Not everyone shared Lincoln's satisfaction with the steps taken by the Federal Government to deal with the fuel situation. In a December 15, 1972 telegram to the President, Senator Thomas J. McIntyre of New Hampshire expressed concern that predictions made by Lincoln and Stephen A. Wakefield of Interior had not come to pass: In September 1972 during the hearings both the Director of §. Oil Policy Committee, General Lincoln, and Assistant ecretary of Interior, Mr. Wakefield assured the Subcommittee that the national supplies of home heating oil would be at the same level as in 1971 by the end of the calendar year. However, just the opposite has happened.
A January 24, 1973 OEP memorandum by Robert E. Shepherd, Chief, Oil and Energy Division, informed Darrell Trent of the pro3. of the January 23 meeting of the National Oil Jobbers Council (NOJC).
Attached to the memorandum was a copy of a presentation by Mr. Gordon Haglund, Chairman of the NOJC, and Mr. John G. Buckley, Chairman of the NOJC Fuel Committee.
Haglund and Buckley condemned OEP and other Executive Branch agencies for failing to utilize their powers to investigate the existing shortage of fuel oil. They criticized § for telling Senator McIntyre of New Hampshire in September 1972 hearings, based on industry assurances, that there would be sufficient supplies of No. 2 fuel oil for the winter. When shortages developed, “. . . OEP relied on largely
ineffective jawboning based on data supplied by the very industry upon which it was using exhortatory language.” Haglund and Buckley stated :
We do not view the present shortage of fuel oil as proof that the nation's demand for oil has outstripped supply. Indeed, no one can say that because no one seems to know what is indeed the cause. The refiners can each speak only for himself; and in most cases, each says that it has been making as much No. 2 fuel oil as it is possible for it to make, despite an unfavorable price restriction in effect (until recently). On the other hand, General Lincoln, who has surveillance responsibility for the entire industry, maintains that the refiners made less No. 2 than they were able to make because, under the prices set by the Price Commission, it was much more profitable to make gasoline than No. 2 ...
Who was making less fuel oil than they could? Who was not selling an equitable share to the small business marketer who supplies 70% of the nation's home heating needs What suppliers were not doing their share to provide diesel fuel for the nation's trucks and other vehicles? How did shipments by each refiner of No. 2 in the pipelines in the Midwest and East Coast this year compare to shipments last year? The Executive Branch had and has full power to obtain the information necessary to answer these and other questions. Unhappily, no one has exercised it. Instead, the government operates in the clark, comes forward with half measures, montlis or years too late. The only clear and undisputed fact is that a shortage of home heating oil and diesel fuels was first serious in the Midwest and has now spread nationwide. Daily, more
areas report growing shortages of crisis proportions. The statement pointed out the obstacles of the small business marketer who supplies 70% of the nation's home heating needs: a worldwide shortage of No. 2 oil which was more expensive than domestic No. 2, and an abundance of import tickets which did not encourage "... the bigger importers either to import for the account of the small man limless for payment of a large commission) or to rent him storage capacity they would rather use for their own product."...
INDUSTRY ASSESSMENT OF FUEL OIL SHORTAGE
Early in January some industry leaders felt that serious shortages miglot be averted. The Oil and Gas Journal of January 8. 1973, reported that "despite fear in political and consumer circles, indicatious in early January are that the industry still has the supply potential to ride through the test of the winter."
Other news of the industry reported by the Oil and Gas Journal of January 8, was that Petroleum Industry Research Foundation Incorporated (PIRINC) had completed a study that showed that oil supplies would be sufficient for the rest of the winter if refineries operated at 94 percent of capacity. The study did say, however, that additional imports would be needed to prevent local shortages.
The Oil and Gas Journal of January 1, 1973, reported that Shell and Mobil, caught with short supplies of fuel oil and little prospect of