B. SPECIFIC QUESTIONS ON PETROLEUM

1. What is the State Department's policy on imports of petroleum? (a) Does the Department propose that its policy is designed to encourage the development of domestic reserves? or

(b) Does the Department's policy assume that development and maintenance of adequate domestic reserves is impossible; therefore foreign reserves must be developed and relied upon in event of another national emergency?

2. Does the State Department's policy on petroleum recognize that there is some limit whereat imports might injure the domestic industry to such an extent that the imports should be controlled?

(a) If so, what is this limit?

(b) What injury is to be suffered by the petroleum industry before control is employed?

(c) In the event of injury being suffered by the petroleum industry, what type of control of imports does the Department propose to employ?

3. Is the State Department's policy on trade agreements integrated with our national petroleum conservation program?

(a) How is it coordinated, if at all, with proper production rates in the United States?

NOTE.-Through the conservation laws of various oil-producing States and the regulations of the State regulatory bodies, together with the assistance of the interstate oil compact, domestic production is controlled to meet all demands and, at the same time, insure the greatest ultimate recovery by the most efficient production methods. Imports of foreign oil entering the same market are uncontrolled and unpredictable, thus serving to disrupt the domestic conservation program.

(b) Does the Department recognize any relationship between costs and the conservation of a natural resource?

(c) How can the petroleum policies under the trade agreements program be reconciled with the increased cost of developing and maintaining petroleum reserves in the United States?

NOTE. A comprehensive study of the cost of crude petroleum in this country showed an increase of more than 100 percent in the 1944 average cost over the prewar level. Further cost increases have since taken place. No business can continue unless costs are recovered. Known reserves are abandoned and new reserves are not sought under depressed or inadequate prices. All available evidence indicates that the cost of most foreign production is much less than the average cost in this country.

(d) How is the trade agreements program related to the maintenance of sufficient petroleum supplies to insure national security?

NOTE. It has been established beyond question that an adequate and available supply of oil products is essential in times of emergency. During the last war, oil from the Near East, the Far East, and South America did us little good when the enemy controlled the Pacific and the Atlantic Oceans. Under the trade agreements program, the United States has become a net importer of oil. Such a trend means dependence upon foreign sources. 4. Has the State Department considered the effect of its petroleum policy (or the treatment of petroleum in existing Venezuela and Mexico agreements) upon the purposes of the anti trust laws?

(a) Is it not possible that the monopolistic ownership of foreign reserves will serve to frustrate the very purposes of the antitrust laws? NOTE.-Five American companies and two of British and Dutch control dominate the foreign petroleum scene. The possible effect of this monopoly is emphasized by the fact that the five American companies dominate the purchase of crude oil in the United States. For detailed study of this matter see page 49 of the petition and brief filed by the Independent Petroleum Association of America on December 21, 1946, with the Committee for Reciprocity Information.

5. In view of the ownership of foreign reserves of petroleum isn't it true that concessions granted on petroleum in reality are concessions to our own nationals rather than concessions to other nations?

(a) If so, doesn't this policy give preferential treatment to a few members of a domestic industry to the prejudice of the remaining members of the industry?

6. Since granting concessions on petroleum in the Venezuela and Mexico agreements imports have increased markedly-to such an extent that the independent segment of the industry contends that the domestic industry has been caused to suffer injury. How do you reconcile this result with the Department's policy?

NOTE.-Imports of foreign oil are increasing rapidly and have reached alltime record levels. (See chart A attached hereto.) During the last 6 months of 1946, these imports averaged 387,000 barrels daily as contrasted with an average rate of 147,000 per day for the 7-year period (1933-39) prior to the reduction of import taxes under the trade agreements program. During December 1946 imports averaged 441,000 barrels per day and during January 1947 imports averaged 490,000 barrels per day.

7. How do you justify continuation of present policy with respect to the petroleum industry in view of the fact that during the operation of the trade agreements program the United States has been converted from a substantial net exporter to a net importer?

(a) Does not this mean that the Department is pursuing a policy which is forcing the United States into the position of being dependent upon foreign sources of oil?

NOTE.-Exports of domestic oil are decreasing to the point where the United States has changed from a substantial net exporter to a net importer of petroleum. (See chart B attached hereto.) During the 7-year period (1933-39), prior to the Venezuela agreement, petroleum exports exceeded imports by 260,000 barrels daily. For the last 3 months of 1946, imports were 52,000 barrels per day larger than exports. This change in foreign trade represents a loss in market to the American producers of 312,000 barrels daily. If continued, the United States will become dependent upon foreign sources of supply.

8. What is the purpose of article VI of the Venezuela agreement which provides, in part, as follows:

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should the Government of one of the Contracting Parties find it necessary because of special circumstances to establish a quantitative restriction1 on any such article, it shall notify the other Government."

(a) Under this proviso what is the meaning of "special circumstances?" (b) What would constitute "special circumstances" with respect to petroleum?

9. What is the purpose of the "escape clause" in the Mexico Agreement which provides that if, as a result of unforeseen developments and of the concession granted on any article covered by said agreement "such article is being imported in such increased quantities and under such conditions as to cause or threaten' serious injury to domestic producers of like or similar articles, the Govern ment of either country shall be free to withdraw the concession, in whole1or in part, or to modify it to the extent and for such time as may be necessary to prevent such injury." It will be noted that the concessions may be withdrawn in whole.

(a) What standards does the Department use in determining “injury” as used in the escape clause?

(b) Under the trade agreements program the domestic petroleum producer has suffered a net loss to imports of over 300,000 barrels per day. Does this constitute injury within the meaning of the escape clause?

(c) If not, what would?

(d) Has the Department ever made a study of the petroleum situation to determine if it is appropriate to invoke the escape clause? If so, what were the Department's determinations? If not, what purpose does the escape clause serve unless someone maintains a surveillance of the effects of the trade agreements?

10. Does the President's Executive order, February 25, 1947, making mandatory the inclusion of an escape clause in every trade agreement, change or altar in any way the meaning or scope or purpose of the escape clause as included in the Mexico agreement?

(a) What assurance is this Executive order, in view of the experience of the petroleum industry whereby its numerous pleas for involking the escape 1 Emphasis supplied.

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