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Alan Greenspan, a member of TIME'S Board of Economists and no foe of the oil companies, believes that the key reason has been price. At the end of December, he notes, the Organization of Petroleum Exporting Countries decreed a 130% hike in crude prices, sharply increasing the potential value of oil in the holds of tankers at sea. If the oil was unloaded in the U.S., it could be sold only at Government-controlled prices; if it was diverted to Europe or Japan, it could be sold for much more. "There is considerable evidence that there were fairly large diversions" away from the U.S. to take advantage of the higher prices elsewhere, says Greenspan.
Washington's crude-oil allocation program has aggravated the trouble. Under it, all refineries are supposed to get enough crude to operate at 76% of capacity. Companies that have more must sell the "excess" at controlled prices to competitors who are short. The intent of the program was to equalize the amount of fuel available to refineries, protect smaller companies with no crude resources of their own and ensure steady production around the country. When the program took effect on Feb. 1, many small-and medium-sized refiners with inadequate crude supplies stopped trying to buy oil abroad at auction prices ranging up to $20 per bbl., secure—they thought—in the knowledge that they could buy it at home for about $7 or $8. But major oil companies, or so FEO officials believe, reduced imports because they were reluctant to sell so cheaply. Gulf Oil has brought suit against the FEO, charging that by requiring it to sell its crude at relatively low prices, the Government is in effect confiscating its property.
A Way Out. FEO officials privately concede that the crude-oil allocation plan, which was ordered by Congress, has been an "unmitigated disaster." Simon last week called on Congress to suspend the program for 90 days to allow time to amend the system. Such a move would temporarily enable the majors to keep all the oil they import for themselves and should persuade them to step up imports. One possible change in any new allocation plan: only small refineries turning out no more than 30,000 bbl. per day would be permitted to buy from companies in the U.S. That limitation would probably satisfy the majors, whose main complaint is that they must now sell to large rivals. It would further ensure a continuing flow of oil into the U.S. by forcing big independents to buy their crude abroad.
Oil company chiefs will not concede that they have diverted unusually large amounts of petroleum from the U.S. to Europe or Japan. But a spokesman for Phillips Petroleum last week asserted that several large companies are indeed holding back imports because of the U.S. crude allocation. Most oilmen explain the low level of U.S. imports by making two arguments: they must scrupulously observe the Arab embargo because they operate in the Arab countries only with the sufferance of the host governments, and they cannot scant Europe and Japan by shifting non-Arab oil to the U.S. because that would open the oil companies to political attack abroad. Warren Davis, a Gulf economist, says: "We are foreigners in the countries in which we operate, and we have no business trying to influence their governments."