Washington Peep Show

Like a deft stripteaser, the Administration has for months been peeling off just enough tantalizing gossamer to give the customers some tempting glimpses of a "secret oil cartel." The Federal Trade Commission, which had been poring over subpoenaed oil-company records since early 1950, unpeeled the first rumor in March: it had recently completed a 900-page report, so shocking that the public could not be permitted to see it.

This had the predictable effect. Newsmen and Congressmen began clamoring for release of the forbidden shocker. The State Department, Defense and the Central Intelligence Agency all insisted that the report be classified as secret, because its contents might give aid & comfort to Soviet propaganda in the Middle East. In June, after Senator John Sparkman's Small Business Committee demanded the report's release, Harry Truman didn't even bother to reply. He had already suppressed it for what he called the good of the nation. But after the Democratic Convention, when Sparkman, now the vice-presidential nominee, asked again, Harry Truman changed his mind. Last week, for the good of the party, he took the wraps off the document (minus about 40 pages chopped out for security reasons).

Like many a much-touted peep show, the document proved to be something less than advertised. Candidate Sparkman played it for all it was worth. He had his own Small Business Committee's name put on the report (which it had done nothing to prepare), wrote his own introduction to it. He distributed only a limited edition (35 copies) to newsmen and let them hunt for the details of the wicked international oil cartel they had heard so much about. But for all of Sparkman's buildup, the document turned out to be little but ancient history, nearly all of it available in college economics books. Items:

P: It charged that the five biggest U.S. oil companies and two foreign associates* control, among them, 88% of the world's oil production outside of Russia and the U.S.

P: It rehashed the "red line" agreement (initiated by the U.S. State Department) which forced the British, French and Dutch to let the U.S. into the rich Iraq oilfields.

P: It spelled out intercompany agreements on production and prices during the chaotic Depression '30s--agreements which, like the New Deal's own NRA, tried to limit production to get prices back to a profitable level.

P: It spent more scores of pages, filled with impressive looking charts and interweaving lines of "interlocking directorates," to show the formation of huge joint international companies (e.g., Arabian American Oil Co.), which the U.S. Government had actually encouraged and often aided.

All in all, the secret document was about as secret as last year's newspapers. Only one thing in the report merited the headlines it got: the specific charge that U.S. companies had overcharged ECA for the Middle Eastern oil it financed for delivery to Italy, Greece and other European countries. To back up the charge, Attorney General James P. McGranery last week slapped a suit on Jersey Standard, Socony-Vacuum, The Texas Co., Standard of California and six subsidiaries, seeking recovery of $67 million in alleged overcharges. His claim: they sold Middle East oil to ECA at $1.75 a barrel overseas, when they were billing their own sales to the U.S. at $1.43. According to FTC's report, this was done under a complex "basing point" price system which added "phantom freight" to the price of the oil. Thus, a Middle East buyer, next door to the producing wells, had to pay as if the Middle East Oil had been hauled from the U.S.

Whether or not the oil companies had, as they stoutly denied, overcharged the Government was a matter for the law courts to eventually decide. But the Administration's strange and undignified handling of the whole cartel furor seemed to prove only that the election is getting closer every day. Said Socony-Vacuum's Board Chairman George V. Holton: "Somebody does this sort of thing every four years. We're whipping boys during an election campaign."

*Standard (N.J.), Socony-Vacuum, Standard of California, Texas Co., Gulf; Anglo-Iranian, Royal Dutch-Shell.

This file is automatically generated by a robot program, so reader's discretion is required.