1927. It was during that year that industrial users of coal were caused great and undue hardship because they did not have an adequate supply due to the strike. As a result, they began to look for a new form of fuel that could be supplied with some degree of certainty, and they found it in residual oil, both domestic and imported. It may be recalled that this strike lasted for several months, and as a result the coal industry had 23 million man-hours idle for the year 1927. The coal producers also failed to tell you that at spasmodic intervals thereafter there has been strike after strike. As a result, industrial users of coal, as well as the operators of large heating facilities, found that coal was not a dependable fuel. Over the years, facilities for the use of so-called residual oil were developed and expanded. In brief, the coal industry itself set in motion a chain of events which brought about a necessary competitor. Now they would have you take that competitor from the market place, regardless of the impact it would have on the thousands of companies and persons whose heating units can only be run on residual oil.

On January 31, 1955, a representative of the bituminous coal industry testified before the House Ways and Means Committee as follows:

** The increasing flood of oil displaces coal and destroys its market, causes mines to close, impairs the capital investment of the coal industry; retards domestic exploration and development of new oilfields; decreases potential traffic for American railroads; reduces opportunity for livelihood for thousands of coal mine and railroad workers; threatens the existence of thousands of small-business men; and imperils the Nation's security by building up unwise dependence on foreign oil sources.

At that time this same representative advocated:

* Restrictions on the total quantity of crude petroleum and products, including residual fuel oil, which may be imported for consumption within the United States to not more than 10 percent of the annual domestic requirements.

Despite the fact that no significant restraints have been imposed on residual oil imports, the coal industry in the years following that presentation saw enormous increase in productivity. Instead of the mine fields being littered with the bodies of starving miners, the situation became quite the reverse and the mines were again full of miners with full bellies who were digging coal with all their might to meet unprecedented demands. It is true there has in recent months been a drop from this peak of productivity in the same manner as our total business economy has dropped. The point I am making is that the record for more than 29 years does not reflect that restrictions on residual oil imports are necessary for this country to maintain a healthy domestic coal industry.

The record of the prophecies of the independent producers is equally as bad, although it is admitted that at the present time our domestic crude oil-producing segment is suffering temporary pains which we believe will be alleviated by the natural course of events in the same manner as the temporary pains complained of by the coal industry in 1953 and 1954 were remedied.

The independent producers, for the past 29 years, have also been predicting doom and destruction for the domestic industry and the Nation as a whole if oil imports were not restricted. Their campaign for restrictions has been even more consistent and persistent since

1948. In the years 1948-49, a subcommittee of the House Small Business Committee held exhaustive hearings on the "Effect of Oil Imports on Independent Domestic Producers." During these hearings, represesntatives of the stripper well producers repeated their traditional prophecies that unless imports were restricted, they would be forced out of business and billions of barrels of oil would be wasted, since such quantities still existed to be milked from the earth in relatively small dribbles. We also heard about drilling rigs being stacked and rusting; we heard of the unemployment which was rampant in the oilfields; we heard of tax losses in the various oil-producing States because of reduced production allowables; we heard of the depleted number of geophysical and seismograph crews; we heard about the inability to obtain capital to continue with an aggressive program of exploration and development of oil and gas properties; we heard about the giant international oil companies who were flooding this Nation with oil-all of which would result in economic chaos in the producing segment of the industry and, of more significance, the drastic predictions of the impact of these conditions on our national security. The lamentations and wails of the independent producers that were committed to the record were enough to melt the hardest heart and to force the most liberal freetrader to copious tears. Again in 1953 and 1955, when the Trade Agreements Act was before you for consideration, substantially the same groups were back, again pleading for important restrictions in order to save the Nation from economic chaos and military insecurity. Let us look for a moment at the cold, hard record between 1948 and the present. I cite no other authority than the general counsel for the Independent Petroleum Association of America, who has stated on page 1070 of the Compendium of Papers on United States Foreign Trade Policy, recently collected and published by the staff of the Subcommittee on Foreign Trade Policy, Ways and Means Committee, as follows:

For example, during the period from 1948 to 1957, the domestic oil-producing industry found and developed more than 35 billion barrels of oil in the United States, or 50 percent more than the amount produced during that period. The capacity to produce oil in the United States was expanded from less than 6 million barrels daily in 1948 to an estimated 10,150,000 barrels daily in 1957, an increase of about 70 percent. This expansion of capacity exceeded the increase of 60 percent in consumption of oil in the United States.

In the face of dire predictions to the contrary, the producing segment of our domestic industry has this fantastic growth record for the period referred to. What other industry in the United States can point to a similar record of achievement and growth, much less one that persisted that it was in the throes of a struggle for survival? Not only did those years produce fantastic profits for the producing segment but, in addition, it provided the funds which enabled the industry to achieve new records in drilling activities every year with the exception of 1957. In addition, it also provided the funds that enabled many of the small-and middle-sized companies to venture into exploration and development of crude oil and gas properties in Canada, South America, and the Middle East.

As I reflect on the verbiage which has been expended on this issue over the years, there comes to mind a portion of a statement made to the Ways and Means Committee in May of 1953 by a small oil jobber from Pine Bluff, Ark. This jobber, who began his existence in the

oil industry with borrowed money and a leased service station, had this to say:

Let's take a look at what these boys are after. The coal crowd wants to cut off residual imports because they figure that it will force some residual oil consumers to burn coal. In my opinion, the reason these people quit using coal and started using residual oil was because John L. Lewis called so many strikes and holidays they didn't know when or whether they were going to get any fuel. Now, he comes along and wants these same consumers forced to use his product after he's run them off. Apparently, the consumer, as usual, is caught in the middle.

Now we come to the crowd that I really cry overr-the independent producers. It looks to me like they are eating pretty high on the hog already. The price of crude oil today is more than double what it was during the war years, whereas most of the jobbers are making the same amount of cents, and fractions thereof, per gallon gross that they were making in 1940 while our net has decreased tremendously. Now what do these boys want? They want imports on residual oil curbed so that a shortage will be created and the price pushed up some more. When the price of residual oil goes up, they will then push up the price of crude oil. When the price of crude oil goes up, every consumer of petroleum products in this country will have to foot the bill in some form or another.

** Of course, they want to get crude-oil imports cut off so that they can produce some more at a new higher price which will be brought about by cutting the residual oil imports.

Now mind you, these independents never do these things for themselves—it is done in the name of national defense. I have been reading their stuff for years, and if I believed everything I read I could figure that they are not in business to make money but are solely interested in the security of the United States. I think they are as patriotic as the average American businessman, but I seriously doubt there has ever been a purely patriotic oil well drilled in the history of the world. They are in business to make money just like I am, and if having a good supply of oil is to the benefit of the United States as a whole, it is a byproduct of their real objective. I don't object to them making money but I do get sick and tired of seeing people cover up their greedy desires with the American flag. I have to work hard to sell petroleum products. The independent producer is guaranteed a fair share of the crude-oil market by proration laws. The only way I can get a fair share is by hard work. On top of this proration protection they get what is known as a depletion allowance which, in my judgment, is about equivalent to a license to steal. As a matter of fact, I believe I would rather have the depletion allowance.

Now I'm not trying to be hard on these fellows, but I think it is high time that the businessmen of this country-and that includes the coal people and the independent producers quit looking to the Federal Government for aid at somebody else's expense every time business takes a dip.

THE CURRENT SITUATION

The fact that the principal proponents of restrictions on oil imports have a bad record as prophets is not in and of itself sufficient reason to ignore their current petition for restrictions-to the contrary, we must examine the situation, giving due regard to all factors and aspects, before making permanent decisions to cure temporary ailments. It is quite true that domestic production of crue oil in this country has been cut back, a situation faced also by our good Western Hemisphere neighbors, Canada and Venezuela. It is equally true that current indications point to a definite trend toward increased domestic production.

Now what are the reasons for the current situation? There would probably be as many answers to that question as there are people attempting to give an answer. In my judgment the principal reasons are as follows:

1. The productive capacity of the domestic crude industry has been increased at such a rapid rate-as was pointed out by Mr. Russell Brown-as related to demand, that we simply have an excess of capacity, with all participants desiring to produce at maximum.

2. This situation of domestic oversupply has been in existence for some time and despite this fact we have continued to produce oil and products to a point where one of two things must happen-either crude-oil production is cut back or the price of crude oil will drastically break.

3. Natural gas-produced by the same segment—has made severe inroads into fuel-oil and coal markets.

4. The petroleum industry, like every other industry in the United States, is in the midst of a recession or business drop and as a result there is a decline in demand.

5. Imports of crude oil had become slightly excessive prior to the instigation of the voluntary quota plan, as related to the other factors mentioned above.

In brief, while crude oil imports have undoubtedly made some contribution to the current situation, they are not the prime provoking cause and have not, in our judgment, been excessive to such an extent as to warrant the necessity for mandatory restrictions. The question at issue is: Should we take the stringent measures recommended by the coal and independent oil producer groups to relieve the existing temporary situation? It is the jobbers' view that we should not. It is our belief that the domestic petroleum industry will work itself out of this situation in the same manner that it has done so for the past 30 years, and that any action to restrict oil imports would be in disregard of the historical flexibility of the domestic industry and would be born more of panic than necessity to preserve our national security.

Certainly no discussion of the present situation could ignore the actions of the President's Cabinet Committee and the Office of Defense Mobilization since 1955. It was early in 1955 when the President's Cabinet Committee made the finding that imports of crude and residual oil were excessive and should be limited to the ratios prevailing in 1954. This finding was coupled with a request that the importers adhere to this ratio. The importers did not adhere to the ratio, and subsequent studies were made with the result that the Committee found that while crude-oil imports continued to be excessive, the same did not apply to residual imports. This latter position has not been changed to this date. Later the Cabinet Committee recommended a new formula for the east coast, and subsequently another formula for the west coast, both of which called for significant reductions in crude-oil imports. The importing companies were called in and quota allocations were made for each.

Subsequently, the provisions of the Buy-American Act were applied to Government oil purchases and, in addition, the voluntary quota plan was extended to cover unfinished gasoline and other unfinished petroleum products. Thus far this so-called voluntary plan of import restrictions has on an overall basis worked well.

The jobbers have consistently been of the opinion that the action of the Cabinet Committee-I am referring now to the voluntary imports plan and the other methods taken to restrict oil imports on a so-called voluntary basis-that the action of the Cabinet Committee

was born more of political expediency than necessity. If, however, the importing companies saw fit to concur in this "pistol point" plan of restrictions, that, of course, was their business. Whether the action of the Cabinet Committee and ODM was justified or not, the fact remains that imports were restricted and still are restricted-all without the necessity of legislative mandate. Unfortunately, however, this does not appear to be enough for the independent producers.

THE PROPOSED AMENDMENTS

Let us examine briefly the amendments proposed by the independent producers and the coal producers before the Ways and Means Committee, bearing in mind their allegations that these amendments are necessary to achieve two basic purposes-(1) the economic stability of the domestic industry, and (2) our national security. In their first amendment they proposed that whenever the President has determined that imports of a commodity shall not exceed specified levels, then any importing company whose imports exceed such levels shall be subject to a duty amounting to 30 percent of the value of the cargo and, in addition, shall be subject to damages and confiscation of cargo. At no place in this amendment was any regard given for foreign source of origin of the imported oil on a basis that would be advantageous to our Nation from the standpoint of economics and availability of supply in the event of national emergency. The amendment suggested no provisions that would give preferential consideration for imports from such countries as Canada and Venezuela-two of our best cash customers-the countries whose oil we would need the most in time of national emergency. How could such an amendment be placed in a trade law, designed to promote trade reciprocity, without being inconsistent even with the basic purpose of the law itself? This amendment is inconsistent even with the policies of the independent oil producers, who have time and time again indicated that preferential consideration should be given to crude oil imported from Western Hemisphere sources.

Their second proposed amendment would limit imports of crude oil and petroleum products, respectively, to the ratios obtaining in 1954. This is premised on the conclusive presumption that imports in excess of these ratios automatically endanger national security. Even the President's Cabinet Committee, on whose determinations the proponents rely so heavily, has already determined that this relationship is no longer applicable to both crude oil and residual oil. Neither does this amendment permit preferential consideration for oil imports from those sources best suited for national defense, nor does it give any consideration to economic impacts. In brief, neither of these amendments provides any means for escalation or changes that would be necessary to achieve the desired ends-economic stability and national security.

CONCLUSION

It is the jobbers' firm belief that the current situation of oversupply in the domestic market place will ultimately right itself without the necessity of either Executive or legislative mandate. These same jobbers are more familiar with depressed markets and stiff competition than the independent producer has ever known or will ever know.