Stormy Petrol

Bowing to the long-standing demands of the powerful U.S. independent oil producers, President Eisenhower last week told big oil companies to slash crude-oil imports "voluntarily" to a level 10% below their average imports from 1954 to 1956. This would cut current U.S. imports of foreign oil by about 20%. If the companies do not go along with the request--and three other similar pleas since 1955 have only been moderately successful--the Administration threatens mandatory Government controls. Grudgingly, most of the oil importers promised to cut back rather than risk controls. But oilmen will probably suffer less than the U.S. consumer. Charged Vermont's Republican Senator Ralph Flanders: "The quotas will surely result in a price rise in the near future--in fact, that is the purpose of the order."

President Eisenhower ordered the quotas--despite his free-trade convictions--as a result of an Office of Defense Mobilization report that "the nation's security" was being endangered by the flood of cheap foreign oil. Crude imports have risen by 500,000 bbl. a day in the past five years (see chart) while daily U.S. production has gone up 1,100,000 bbl. But crude imports were scheduled to hit a record 1,200,000 bbl. daily this month, or 16% of U.S. production (v. the 12% limit set by the quotas). As a result of the foreign competition, Texas producers are selling about $1,000,000 less oil a day than they did in May, will work their wells an alltime low of 13 days this month. The quotas are also intended to encourage new exploration in the U.S. This year, for only the second time in its history, the U.S. will probably wind up with lower reserves than it had on Jan. 1.

But the quotas pleased almost no one. Tidewater Oil Co., which only recently began buying heavily abroad, condemned them as unfair and discriminatory against "new importers." Tidewater's imports will be slashed from a planned 84,600 bbl. daily to only 34,200 because it imported little in the base 1954-56 period. Even the domestic producers who will benefit most from the quotas called them too little and too late. Said Olin Culberson, chairman of the Texas Railroad Commission, which controls 45% of U.S. output: "There is every logical reason why the voluntary plan will break down. No voluntary plan ever worked."

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