But we would continue to supply these products and would be selfsufficient and over a period of time we might have some advances in these products. But we have built-in safety factors in this country of ours. We have the ability to make gasoline from shale. It is technically a success, but Mr. Rubel from Union Oil Co. says that it is available right now at competitive prices with gasoline from crude at present prices.

Maybe it is and maybe it is 50 cents a barrel higher than crude price equivalent, but if crude oil goes up to that level, then all the reserves of shale oil in this country act as an automatic stopgap to stop the price of crude from going any higher. If you do not like shale oil, we have got a lot of coal left in this country, and underground gasification is pretty well worked out.

We can convert as the Germans did and we can do it much better with coal or natural gas, for that matter, into petroleum products and they serve as a ceiling beyond which the price of crude in this country cannot go.

So I say that for a short-range viewpoint we may try to bring in cheap foreign crude and get a temporary economic advantage, but in the long run we are going to lose out on that basis.

Senator KERR. Isn't it a fact that the importers are the ones that are holding the price of domestic crude at the present level in order that they may have the advantage?

Mr. SCHULTZ. On their foreign imported product?

Senator KERR. Foreign imported product.

Mr. SCHULTZ. I believe that to be true.

Senator KERR. That is just the cold-turkey facts about it.

Mr. SCHULTZ. I would just like to point out two small things and then I will be through.

First, I previously worked, before I went to work for the Blackwell Oil & Gas Co., for a major oil company, the Standard Oil Company of Indiana, and for many years it was one of the few major oil companies that was a completely domestic company.

It had no foreign operations whatsoever.

In the last 2 years they have become a company interested more in foreign work than they are in domestic work.

Today its offices in Tulsa are being cut down by their staff, I would estimate 30 percent. They have opened offices in New York for their foreign work, their best men are being transferred to New York, and they are going foreign only on the basis of the dollar.

There is not a gentleman in the company, of whom I know many, who is willing to concede that there is not oil to be found in this country but they say we can find it so much cheaper over there.

Senator KERR. And if the others are going to import it, we are going to do the same?

Mr. SCHULTZ. We are going to do it too.

My little company is 53 years old, born and bred in Oklahoma and most of its activity and production is in Oklahoma, and recently we have taken a concession in Bolivia and we are getting ready to take one in Africa and we are doing it only for one reason. If the Congress of this United States is not going to protect the domestic producer, we feel we are going to have to find a way to depend on cheap foreign oils ourselves, and so we, as a preservative measure, have

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taken, are taking, and will take, another concession, foreignwide merely, because we feel we have to be protected, and if we are not going to be protected we have got to find another way to survive. Senator KERR. So you can be competitive?

Mr. SCHULTZ. That is right.

That ends my statement.

Senator KERR. Thank you very much.
Senator DOUGLAS. May I ask a question?
Senator KERR. Yes.

Senator DOUGLAS. You have made a very concise statement.

As you know, just prior to the reporting of the reciprocal trade bill to the House there was inserted section 8 of that bill which, in general terms, gave to the Director of Defense Mobilization and to the President the power to impose quotas which threatened to impair national security.

Now, the oil industry was not specifically mentioned in this language. But it was commonly understood that it was the chief industry to which this section referred.

As a result of the insertion of this section a number of Congressmen from oil districts, I think the record will show this-who had previously been opposed to reciprocal trade measures, voted for the provision, and it was understood that this was acceptable to a certain portion, at least of the oil industry. Now, is my statement substantially correct, in your judgment?

Mr. SCHULTZ. Well, it is not acceptable to the oil industry of Oklahoma, to the independent producers of Oklahoma.

We feel that the duty, the power of limiting imports and foreign trade rests in the Congress, and we do not feel that the prerogative of deciding what level and where, at what level national security is important should remain in the administrative hands of the Government which has so many powers.

Senator DOUGLAS. You are not in favor of this discretionary power given in the President?

Mr. SCHULTZ. No, sir; I believe it belongs to the Congress.

Senator DOUGLAS. May I ask this, what do you understand is the attitude of Gulf Oil?

Is this acceptable to Gulf Oil?

Mr. SCHULTZ. I imagine it would be because they have been able to get away from almost everything under the present law and this does not do much more than what the present law has done.

Senator DOUGLAS. How about the attitude of the various Standard Oil companies?

I notice they are not appearing.

Is this acceptable to them?

Mr. SCHULTZ. I do not know but I presume that it is.

Senator LONG. I believe I know their general position if I might briefly state it.

I think their position is that they do not want anything compulsory if they can avoid it. They would much prefer a voluntary program even if it does not work.

Senator DOUGLAS. May I ask about Shell?

Mr. SCHULTZ. I don't know.

Senator DOUGLAS. I am trying to find out what the situation is.

Is it this: That this provision is acceptable to the so-called big oil companies but unacceptable to the independents?

Senator KERR. I think I can explain that for the Senator. The section that was added in the House is an improvement over section 7, but it is an inadequate improvement and the industry in Oklahoma and practically everywhere I know that is dependent on domestic production and hoping that domestic production will be the dominant factor in the future oil picture would rather have the Congress fix the policy than to delegate it to the President, and then the President, in whole or in part, either voluntarily or involuntarily see it delegated to the companies that you have named. Senator DOUGLAS. Do I understand that the companies with appreciable international holdings are satisfied with section 8 but the domestic producers are not?

Senator KERR. I would say that I am not-I have not been advised of their position, but that would be a reasonable assumption.

Senator DOUGLAS. And that the companies which do have international holdings are what-Gulf, Shell, the various Standard Oil companies?

Senator KERR. Not all the Standards. A number of the Standards do not have. The principal Standard companies holding large foreign oil reserves are Jersey, New York, Socony, and California.

Senator DOUGLAS. Indiana?

Mr. SCHULTZ. Indiana has only recently taken concessions but they have no production yet.

Senator DOUGLAS. What is the position of the Texas

Mr. SCHULTZ. Yes, that is one.

Senator KERR. Texas Co. and the Gulf Co. and Shell. I believe those are the great

Mr. SCHULTZ. Those are the big five.

Senator DOUGLAS. Those 3 plus 3 or 4 of the Standard companies. Senator KERR. Correct.

Senator DOUGLAS. What about Sinclair?

Mr. SCHULTZ. They have been small in the foreign field.

Senator KERR. Sinclair is not a big factor in the importing field. Actually the Getty Combine, that is Western Petroleum Reserve, I believe, and Tidewater

Mr. SCHULTZ. Tidewater and so forth.

Senator KERR. Are larger in that field?
Mr. SCHULTZ. Larger than Sinclair.

Senator DOUGLAS. And they are big developers of foreign oil?

Senator KERR. That is right.

Senator DOUGLAS. And therefore they do not want compulsory quotas.

Senator KERR. That is correct.

For a while they refused to go along on the voluntary program, as you know. They were one of the

Mr. SCHULTZ. It was only when the Buy America Act was put in that Tidewater finally came over.

Senator KERR. Now that is in jeopardy by this lawsuit?

Mr. SCHULTZ. Yes.

Senator DOUGLAS. I am very glad to get the conflict of interests, so to speak, clarified.

Thank you.

Senator LONG. Isn't this true: That as far as the major companies are concerned, dealing in the American market, it gives them a large competitive advantage over an independent refiner if they can bring their crude in from abroad, produced at a cheaper price, while the independent refiner is compelled to buy his domestically where he has to pay the domestic price?

Mr. SCHULTZ. This is certainly true. I would like to make a comment made to me Monday of this week at lunch in Tulsa.

A man who is 1 of the 44 applicants asking now for another 300,000 barrels a day of production who are not importers now, 44 companies have applications in to become importers and I said to him "What are you going to do if you get the imports?"

He said, "I can sell it. I have a lot of companies back East who want to buy my import if I can get one.

Senator DOUGLAS. May I ask another question, Senator Kerr! Senator KERR. Yes.

Senator DOUGLAS. Suppose a quota is fixed, how is this quota to be apportioned for instance between Canada and Venezuela?

How will this be apportioned between the various foreign countries?

Senator KERR. Well, in the fixing of quotas, of course, Congress would be confronted with the decision of making it an administrative problem with discretion or without discretion and I do not see how it could be made on any basis other than with discretion, and the fixing of or the providing for quotas, I would say this, so far as I am concerned, would not be limited to the oil industry.

It would be a broad enough authority to be applicable to the oil industry, and to the minerals industry, and the plywood and textiles and all of the other industries who, without exception, have told us that in view of the inflationary situation that exists pricewise, that there would be no hope to secure tariff protection to adequate extent to solve their problems and the only way it could be done would be by the imposition of quotas and in my judgment that would have to be on a basis that the administration, while it would have the directive to apply them and a formula generally for the determination of them, it would be discretionary with them in the imposition of them—I mean as to the application of them to the countries.

Senator DOUGLAS. Well, now, suppose you were to take 1954 as a base which previous witnesses have advocated. You mean it would be optional whether the administration would put it into effect! Senator KERR. No. They would have to do it but they would have to determine as to the applicability of it as to the nations and the importers.

Senator DOUGLAS. You mean they would have to determine how much the quota would be for each of the foreign countries?

Senator KERR. Yes, sir.

Senator DOUGLAS. Which otherwise they would want to ship in Mr. SCHULTZ. And then for each of the companies to distribute amongst.

Senator DOUGLAS. For each of the companies?

Senator BENNETT. If it were left to us in Congress it would become an impossible political situation, I would think.

Senator DOUGLAS. Of course that is my feeling about this whole matter. Fixing of specific schedules is so complicated that it becomes

an impossible matter for Congress and that is why I have always been in favor of reciprocal trade.

Senator LONG. Why not let them bid for the quota allotments?

Senator KERR. Well, that should not be. In the first place you could not disregard entirely the history of imports and I do not think you should disregard the refining capacity that would be in need of the imports.

Senator BENNETT. You cannot disregard the world relationships involved in our defense against Russia.

Senator KERR. If States are able to put into effect conservation programs, and apply them to the proration of oil to the States there certainly should be no insuperable obstacle to the administration putting into effect a proration system on imports.

That is what it amounts to.

Mr. SCHULTZ. That is essentially it.

Senator LONG. Don't you in Oklahoma like we do in Louisiana, tell not just every single producer but you tell every person in your State how much on a barrel basis he can produce per day from every well in the entire State?

Mr. SCHULTZ. That is right.

Senator LONG. And enforce it?

Mr. SCHULTZ. That is right.

I would like to point out one thing and that is that in France the French law says that all oil used in France or any of its territories must be refined from French crude up to the ability of French crude to supply the market.

There is no allowable for any importation of any kind of oil, if France can ever find itself self-sufficient in oil, and with Sahara they may force the Standard of Jersey and Shell who have refineries in France actually to take oil produced in Sahara by Cities Service or Sinclair or someone else with concessions in this area and run their refiners on their own crude and then what are Jersey and the rest of them who are now taking their crude from the Middle East to do with crude? Unless we have some limitations it is going to work its way over here again.

Senator KERR. I will say this about the ability of this Government to impose and prorate their quotas.

If they are lacking in either knowledge or experience in that regard all they have to do is study the methods used with the methods of practically every state with whom we are signatory to the program because they are now doing it, practically every one of them, insofar as imports from this country to their countries are concerned, so thatMr. SCHULTZ. That is correct.

Senator KERR. So that they would have all of the guidance in the world in the matter of figuring out how to do it effectively because it is now being done to this country.

Mr. SCHULTZ. That is correct.

The countries that we are talking about here, the oil-producing countries outside the United States, are not quite as liberal as we are.

Most of these concession agreements that you sign require that if you find sufficient production you are required to build a refinery and refine the crude within their country.

Now these are things that are conditions that are imposed upon you as a producer of oil in their country.