The Case For A More Restrictive Oil Import Policy

This paper presents considerations in support of a U. S. oil import policy more restrictive than the present Government import program. A lower level of imports and greater long-range stability in the relationship between imports and domestic production are recommended. Reference is made to increasing world-wide surpluses of oil and wide disparities in foreign vs. domestic costs. Resulting economic forces are held responsible for the increase in imports (excluding residual fuel oil) of almost 300 percent and the change in ratio to domestic crude production from 5.4 percent to 13.9 percent during the period 1946-1956 prior to import restrictions. It is pointed out that these imports continued to increase during the years of import restrictions to a ratio of 17.3 percent of domestic production in 1961. Data are presented showing that increasing oil markets outside the United States provide an outlet' for more than 80 percent of total foreign production, with 90 percent of the increase in foreign production going to foreign markets. Attention is called to the fact that, if there had been no increase in United States oil imports during the past five years, foreign production would have increased by 45 percent in contrast to a static level of domestic crude oil production. The need for a less restrictive import policy in the interest of encouraging foreign oil development, therefore, is questioned. Declines since 1956 in the range of 30 percent in domestic exploratory crews, rotary rig activity and wildcat well completions in the United States are cited, together with a decrease of 9 percent in industry employment and increases of 9 to 18 percent in elements of cost. Recognizing that factors other than imports affect the domestic industry, it is concluded that continuing declines in the vigor, capabilities and competitive structure of the domestic industry can be expected unless further import restrictions are imposed. The public interest in assuring adequate domestic supplies is considered in the light of the role of oil and gas as a source of almost three-fourths of U. S. energy requirements and the economic benefits from petroleum production with a value exceeding the combined value of all other minerals in the United States.