South America were 50 percent above the 1936 level. Oil salaries and wages in the United States rose 62 percent in the same period. Average wages for oil workers in the Near and Middle East and Netherlands East Indies range from $409 to $596 for the 8,000 to 12,000 workers in that area over the ten-year period 1935-1944 yet was only $500 for the year 1944, some 60 dollars less for that year than for the year 1935. PRESENT POLICY ON IMPORTS PROMOTES MONOPOLY A monopoly is a control that may be enjoyed by one or by several acting in combination. In that sense monopoly exists today in foreign oil. Perhaps it was inevitable that such condition should develop. That issue is beside the present point. The IPAA is concerned with the effect on the domestic petroleum industry and the possible extension of that effect. The existence and the importance of the foreign petroleum monopoly is shown in the Tariff Commission's report in 1946 on petroleum, "War Changes in Industry Series-Report No. 17." Five American companies and two of British and Dutch control dominate the petroleum scene in the principal producing countries outside the United States, except in Russia and Mexico, where the monopoly is Governmental. The known world reserves of crude petroleum available for production have been estimated to be on the order of 63,000,000,000 barrels. Twenty billion of this is in the United States. Excluding Russia, the foreign reserve is 37,500,000,000 barrels. The reserve credited to companies other than American, British, and Dutch is 2,905,000,000 barrels. The reserve, therefore, that is in the hands of this group is about 34,500,000,000 barrels. The ownership by any other than the five American and two British and Dutch companies in that reserve is small. As a matter of fact, the five American companies own foreign reserves nearly as great as the total proved reserves of the United States. They also dominate the purchase of crude oil in the United States. Here is a condition of which notice must be taken and a remedy applied, lest the monopoly become complete in the United States. It is not a case for the "trust buster." It is not a job for the grand jury. It is an economic condition which calls for an economic, not a punitive remedy. The seven companies are partners in foreign holdings. They are joint adventurers. However fiercely they may compete in the United States for producing acreage and for gallonage of products, the tie of mutual interest is present in every foreign producing country of importance, and is evidenced by partnerships. The outline (See page 56) which appears in the Tariff Commission Report, sets forth the close relationship of "The seven principal petroleum concerns operating outside the United States and their affiliations." Currently, there is evidence of even further cooperation. Two companies, the Standard Oil Company of California, and The Texas Company, jointly own the company which holds the enormous concession in Saudi Arabia. Now, it has been announced that the Standard Oil Company of New Jersey and the SoconyVacuum Oil Company will acquire a 40-percent interest in this holding. Plans were announced some months ago for the construction of pipe-line facilities to make available additional crude oil from the developed fields of Arabia. Recently it has been announced that Iraq Petroleum Company will lay a 1,200-mile pipe line from fields in Iraq to terminate in Syria and Palestine, adding about 90,000,000 barrels a year of capacity, to existing facilities over the same pipe-line route. This company is another of the partnerships. It is domi nated by the Anglo-Iranian Oil Company and the Dutch-Shell group, with Standard Oil Company of New Jersey and Socony-Vacuum Oil Company, the newcomers to the Saudi Arabian group, holding minority but substantial interests. That is the pattern. Here it is two of the group, there it is three and else where around the world it is four or five who have entered intercompany rela tionship. Their concern is that they not be absent from any area of large po tential production. Wherever the lowest cost barrel of oil may be found, they naturally want to be represented in the ownership of that barrel. The pertoleum industry in America has been developed through a strong competition. It has been the policy of the Congress of the United States to foster competition. The benefits to the consumer of petroleum products have been manifest throughout the history of the industry. The development of oil resources in the United States led to the establishment of a large refining industry. Products were improved and prices were decreased as diversity and usage of pro ducts increased. American free, competitive enterprise has no better exemplar than the oil industry. In the course of events, some companies grew to be the giants of the industry. They looked for world position. Their ventures abroad were financed initially and largely from profits made in the United States. Development of foreign holdings was stimulated greatly during the war. Men, materials, and money were poured into the Caribbean area and the Middle East to shorten the transportation of petroleum products to areas of military and naval activity. That was necessary, but the result now concerning the independents in the United States is that such development left an enormous actual production and a potential of much more and this excess supply is seeking an outlet in the already developed market in the United States. It would be far simpler to pour a flood of foreign oil into the markets of the United States than to try to develop additional markets abroad. The development of new markets outside the United States must wait for changes in economic conditions and in ways of living that will result in the use of more oil-using equipment. Our nationals are to be commended for their enterprise and ingenuity in acquiring the foreign reserves. Properly used, they can be a source of protection to our country. But, the power to use these resources to destroy our domestic industry must be apparent to anyone familiar with the nature of this industry. The power to prevent such use rests with our national Government. The will to destroy competition in American oil does ont need to be inspired by malice or implemented by evil intent. The mere exercise of business prudence by the management of the companies which hold the vast foreign reserves might well accomplish the evil through market expansion. Stimulated by Government encouragement, deliberate or uninformed, it is inevitable that the markets of the United States would be captured by these companies by an ever-increasing volume of foreign petroleum. It would seem that the proper policy to pursue is to import only such oil as is absolutely necessary to supplement domestic production. The difficulty with such policy, is that at present no means have been provided to make such policy effective. Anyone having foreign oil to sell is free to import it into our markets, subject only to the nominal tax on crude oil and fuel oil, and to the more substantial tax on gasoline, now included in the program of coming negotiations with eighteen countries. The volume of imports is not limited by quota. In short, there is not only no limitation in quantity, nor adequate limitation in duty or tariff, but there is the positive encouragement spoken almost daily by some in Government to raid our markets for oil. It might be well here to emphasize once more a fact that is frequently ignored or obscured by those who would surrender our oil markets to the foreign sources. It is an avowed purpose of the trade-agreements program to stimulate prosperity within the countries with whom agreements are made; to encourage their industrial development. It should not be lost to sight in any discussion of this program that there is no such thing as a native petroleum industry in many countries outside the United States. Certainly, there is none in any of the countries which have the reserve to invade our home markets. The petroleum industry in Venezuela, for example, consists of the Standard interest, the Gulf, the Shell, the Texas and the Sinclair, with lesser interests by other American and English companies. The petroleum industry in Arabia consists of the Standard Oil Company of California and the Texas Company, soon to be joined by two other members of the Standard family. In nearly all cases the dealing is direct between a Government-frequently a dictatorial one-and the oil company, not, as in the United States, between the citizen who owns land and mineral rights and the oil producer who would explore and develop petroleum resources. There is, in short, no such disbursement of proceeds from oil development as occurs in the United States where a portion of the revenue from every barrel of oil is locally distributed and any benefits to the economy of the foreign country with large oil reserves are wholly at the option and the discretion of the central government. It has been the avowed purpose of those who have administered the tradeagreements program to stimulate home industry as well as foreign. We do not speak for other industries but as to the petroleum industry there has been no beneficial effect in the United States, to industry or public. Whatever causes may be cited or explanations made, the fact remains that our exports of petroleum have fallen and our imports have increased. Attention is called to the statistical summary on page 30, showing a net loss to the American industry of 253,000 barrels daily since the trade-agreement program became effective. Since the beginning of the trade agreement program there has been a decline of 32 percent in the number of oil and gas producing corporations-in the United States while the large companies producing oil in this country have increased their aggregate production of crude petroleum from 55 percent of the nation's total in 1941 to 65 percent in 1945. For several years the Congress has displayed much concern over the course of small business in the United States. It has said repeatedly that monopoly must be discouraged and competition fostered. Many hearings have been held and many reports issued. Certain legislation has been passed to provide credit to the small businessman and to preserve his market. That is one program. Another, insofar as petroleum is concerned, is directed to the creation of conditions which will nullify the thing Congress seeks to do. The transfusions attempted by the Congress are counteracted by the bleeding of the patient through administrative policy. This trend toward concentration of power in the petroleum industry the Congree sought to correct through the import taxes provided in 1932. Fear that the trade agreements program might conflict with this Congressional action was expressed at the time of the extension of the Trade Agreements Act. Only after solemn assurance by the President of the United States and the Secretary of State that the trade agreements program would not destroy domestic industry in favor of such concentration was the act passed without amendment to prevent such action. The conditions of the trend toward petroleum monopoly through the operation of Government-encouraged cartels abroad are alleged to be true in fact. If they are true, they challenge Government concern and action and in such program it is the concern of the legislative branch of Government as well as the Executive. If the allegations are not true, many are laboring under false impressions. The responsibility of determining these facts and recommending appropriate correction, in the first instance, rests with this Committee, before action of enduring effect is undertaken. The seven principal petroleum concerns operating outside the United States and their affiliations CONCLUSION The Independent Petroleum Association of America hereby objects to any further concessions being granted of imports of crude petroleum and petroleum products and submits that in order to effectuate the purposes of the Trade Agreements Act, and more particularly, in order to give effect to the "escape clause" of the Venezuela and Mexico Agreements and to the recent assurances of the President that the trade agreements program would not be used in such a way as to "trade out" any segment of American industry, the following relief sought in the accompanying Petition must be granted: (1) Restoration of the excise taxes established by the Internal Revenue Act of 1932 on imports of crude petroleum and petroleum products; and (2) Establishment of an import quota. The applicable law is unequivocal, the "escape clause" in existing agreements affecting petroleum stands undiminished and the President's recent statements were depended upon to allay apprehension and to provide assurance of the correction of the very abuses that are the subject of this complaint. Under the administration of the trade agreements law, the protection against the abuses complained of has not been applied. This in spite of the provisions of the agreements and the assurances of the President and the Secretary of State. Some of the existing abuses are as follows: (1) Monopoly is being promoted through the administration of the trade agreements program. (2) An international petroleum cartel is being created which is capable of and now threatens to destroy the domestic oil industry. (3) Since the application of the trade agreements program to petroleum, exports have decreased, imports have increased resulting in a net loss to the American oil industry. (4) Congressional intent as to the administration of the Trade Agreements Act with respect to the petroleum industry has been disregarded. (5) The agreements proposed in this proceeding, should they result in the encouragement of greater imports of petroleum products into the United States, will foster the oil cartel in its expansion of foreign refinery capacity in contemplation of such imports. (6) Increased petroleum imports are not needed. (7) The present import policy is disrupting and tends to vitiate the domestic conservation programs. (8) The present import policy threatens the economy of the United States, the States and communities thereof. (9) The present import policy threatens the well being of the American laborer. (10) The present import policy discourages the exploration for and development and maintenance of the petroleum resources of the United States. The consequences of the present policy of imports of crude petroleum and petroleum products go far beyond those enumerated above and compel the recognition of the evil effects accomplished through the trade agreements program and challenge this Committee to be the correction thereof. The Committee is urged to grant the relief specified and requested in the accompanying Petition. Respectfully submitted. RUSSELL B. BROWN, Dated: Washington, D. C., December 21, 1946. Before the Committee for Reciprocity Information, Tariff Commission Building, IN THE MATTER OF PENDING TRADE-AGREEMENT NEGOTIATIONS WITH AUSTRALIA, Application To Be Heard The Independent Petroleum Association of America hereby request, pursuant to public notice of the committee, dated November 9, 1946, that it be afforded the opportunity to be heard at the hearing scheduled in this proceeding for 10:00 A. M. on January 13, 1947, and at any and all other hearings scheduled in this proceeding. Respectfully submitted. RUSSELL B. BROWN, Dated: At Washington, D. C., December 21, 1946. TABLE NO. 1.-Imports of crude petroleum and its products into the United States, 1920-46 |