CONGRESSIONAL RECORD -- SENATE
March 12, 1969
Page 6183
Mr. STEVENS. Mr. President, I commend the Senator from Louisiana for his comments concerning the economic aspects of the developing oil area of the State I have the honor to represent.
I know that we have to ship our oil in American ships, because of the Jones Act. We purchase our steel from American steel producing companies, and they enjoy protection by law. The import system which we are supporting today is primarily responsible for the development of the oil industry in Alaska.
Mr. LONG. Mr. President, the alternative to what the Senator suggests is that the oil would be purchased from foreign nations and transported in ships made in foreign shipyards from steel produced in foreign steel mills, as compared to ships manufactured in American shipyards with American steel. That should be of great importance to New England. Many ships are built in New England. New England does a fine job and they build good ships, even though their ships are built with a higher wage scale than is prevalent in other countries.
Mr. MUSKIE. Mr. President, will the Senator yield?
Mr. LONG. I yield.
Mr. MUSKIE. I wonder whether the Senator, in considering these figures, has added to the cost, as included in his computation, the cost of heating in New England. I think it tends to close this gap somewhat. It costs a little more, may I suggest to the Senator from Louisiana, to provide a home in New England, to heat it, especially with the prices that are now paid by New England consumers; and perhaps this differential in part accounts for the increased cost of living.
Mr. LONG. I ask the Senator whose fault that is. The Senator very ably represents a great State in New England. Whose fault is it that it costs more to heat in New England?
The PRESIDING OFFICER. The Senator's hour has expired.
Mr. LONG. Mr. President, I ask unanimous consent that I may be permitted to continue for another hour or such part of that hour as I may require to complete my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LONG. Can the Senator tell me whose fault it is that it costs more to heat in New England?
Mr. MUSKIE. Appreciating the limitations on the Senator's time, and the fact that we have not had the opportunity to give full consideration to the argument he is making, New England Senators intend to cover the questions the Senator has just raised and all the related questions which are discussed in the Senator's statement. We intend to present a formal, orderly case, so that the country may understand it when we get to it.
We in New England challenge many points the Senator has made this morning -- the facts, arguments based upon those facts, and conclusions. We intend to get into this. The Senator's speech is the first concentrated attention and concern the oil industry has indicated in New England in the 10 years I have been a Member of the Senate.
I appreciate the Senator's statement and his evidence of concern, and we intend to get into it when the time is more propitious and adequate than it would be if we tried to engage in that kind of exchange this morning.
Mr. LONG. The reason why I ask that question is that in my speech I develop the reason why it costs more to heat in New England. The best I can make of it, I say to the Senator, is that the dealers in his area charge a higher markup than do dealers elsewhere.
Mr. MUSKIE. I say to the Senator that most of the oil distribution in New England is done by the major oil companies. Is the Senator saying that the major oil companies are the gougers?
Mr. LONG. I have been informed by the staff of the Committee on Finance that the major oil companies distribute approximately 25 percent of the oil up there. The other 75 percent is distributed by the local dealers, and their markup is substantially higher than it is in the Middle Atlantic or South Atlantic area; and that is the main reason why it costs more.
I have the figures. You are getting your oil wholesale cheaper than they are. Your dealers are charging more to distribute it.
Mr. MUSKIE. I think we will be able to show that the major oil companies control supply in New England. Senator MCINTYRE's hearings have already indicated that, and we will show it at length when we get to it, at the right time. So if it is a gouging operation, the gouging is being done by the industry which the Senator is defending this morning.
Mr. LONG. With 75 percent of the distribution being done by the independents, it comes with poor grace to accuse the major oil companies.
May I say that, as a member of the Subcommittee on Small Business in years past, I have conducted hearings at which these independent distributors complained about the pricing conduct of the major oil companies. Does the Senator know what their complaint has been? Their complaint is that the major companies are not charging enough at retail and that they, in competition with the majors, cannot make enough money, with the result that the price of oil should go up.
I have done what I can to help the small retail gasoline stations get a better price and make a better profit, in order to keep them in business. Their principal complaints have been that the major oil companies will not let them have enough markup; that they have to compete with the major stations. They say that not enough money is made at the marketing end, and that the major companies should arrange their way of doing business so that they make more of their money on the marketing end. That has been a complaint in my hometown, where we have a major refinery; and it has been so in other areas where I have held hearings and talked with independent retailers.
In some instances States have even passed laws to see to it that major companies would not so reduce that retail markup to the point that the independent stations would have difficulty in surviving.
Mr. MUSKIE. Mr. President, will the Senator yield?
Mr. LONG. I yield.
Mr. MUSKIE. Mr. President, I do not wish to interrupt the Senator's discourse, but since he has referred to me specifically in this connection, I would like to make one or two points.
First, the Machiasport proposal does not require the repeal of the import quota system of protecting the oil system. Much of the Senator's argument is based on the assumption that that is the objective. It is not.
Second, the shoe industry has not had that kind of protection. At the present time imported shoes constitute almost 30 percent of the domestic production and not 12.2 percent, which is the protection for the oil industry.
Third, the Senator, as the chairman of the Committee on Finance, has not yet reported, nor to the best of my knowledge has he supported import quota production for shoes or textiles.
Mr. LONG. I shall demonstrate during the course of my speech that if this special advantage is given Occidental Petroleum, which would help Maine, there is no justice denying similar advantage for Savannah, Ga.; or denying the company that has a foreign trade zone in Pennsylvania, a similar advantage, or denying it to a company in New York or in New Jersey that might want a foreign trade zone for the same purpose. How can we do this for Occidental Petroleum Co., which is a relatively new company, and deny it to the older companies which have made great sacrifices to maintain this Nation in good times and bad times at considerable sacrifice and cost to themselves?
Furthermore, with regard to other low cost imports, that is a problem which is going to face us in the Senate. The Senator had advocated that there should be protection for the shoe industry of Maine; that they should not be put out of business by low-cost foreign competition.
In my judgment, the time will come when we will have to do something about that, and that time will come in connection with the steel industry. They have to compete with low-cost foreign steel, mainly because of the wage differential. The same thing is going to be true one of these days in connection with the electronics industry. Where American industries have to compete with products from foreign countries where they can get labor much cheaper, or about one-fourth the cost of ours, the problem will become increasingly serious.
I have never asked that we be judged by dual standards. When someone suggested we have a foreign trade zone in Louisiana to manufacture ships or barges to be sold in foreign areas, I was willing to support that proposal only on the condition that it would be a case of products coming in to be manufactured and then going back out to be used abroad, and that they should not be sold in competition with American manufacturers on the American market. I have been consistent.
If one looks at the overall problem, considering crude oil imports and residual fuel, they are about 25 percent of the market for oil and gas. If a war were to come upon us we could use our old shoes for quite awhile until we had our bare feet on the ground, but that is not true of fuel. It would only last about 30 days. We would have to rely on the refineries and resources we have.
[Intervening unrelated action omitted]
(This marks the end of the colloquy that occurred during the delivery of Mr. LONG's address.)
Mr. MCINTYRE. Mr. President, I listened with great interest to our distinguished friend from Louisiana as he stated the case for the big oil companies as to why and in what manner the Machiasport foreign trade zone would bring down the oil industry and result in the loss of jobs throughout the country.
I simply wish to say, Mr. President, that I have, since December, in the Small Business Subcommittee hearings, been not only frustrated but completely baffled by the administration officials, who have engaged in a game of musical chairs, as it were, in denying to the State of Maine and to New England what that region should have.
Mr. LONG. Mr. President, will the Senator yield?
Mr. McINTYRE. The Senator from Louisiana charges, Mr. President, that this project is an attempt to help the Northeast section of the country at the expense of the Southeast and the Southwest. All the experts would agree, I believe, that that is an accurate description, in reverse, of what the oil import program now does. The program helps the oil producers of our country, and has forced the concentration of refining capacity in Texas and Louisiana, causing high prices in New England and elsewhere in the Northeast. And I must say this is important to New England. We use 22 percent of the No. 2 fuel oil produced in this country.
Mr. LONG. Will the Senator yield at that point?
Mr. MCINTYRE. Again, the Senator from Louisiana speaks of advantage to one section of the country. That certainly describes the effect of the oil import program. We in New England, I say to the Senator from Louisiana, are not seeking to gain any advantage, but are merely trying to share in the advantages which already exist, but accrue solely to the benefit of one other portion of this country.
As the Senator from Maine (Mr. MUSKIE) has stated, it was agreed that the New England Senators would allow the Senator from Louisiana his full time today, and that we would come back on another day, when I hope we will be joined by the distinguished chairman of the Joint Economic Committee, the Senator from Wisconsin (Mr. PROXMIRE), and we will then try to state our case.
I believe, the more I look into the matter, that New England has a unique case, and the strongest case possible. The more I examine the oil industry, with the concessions being granted to it in the form of tax credits and deductions, I am delighted that the Senator from Michigan (Mr. HART), in his capacity as chairman of the Antitrust and Monopoly Subcommittee of the Committee on the Judiciary, has started his hearings on the matter, because I noticed that while the Senator from Louisiana talked a good deal today about the little fellow, he did not tell us too much about what this oil import program means to the big ones.
We have many, many oil companies in this country with assets in excess of $500 million. Some of them have not paid a corporate income tax for 4 or 5 years. So on another day, we shall be back to present the case for Machiasport and New England.
I yield to the Senator from Massachusetts.
Mr. KENNEDY. Mr. President, I associate myself with the remarks of the distinguished Senator from Maine (Mr. MUSKIE) and those of the Senator from New Hampshire (Mr. MCINTYRE), and thank them for their comments here. They have indicated to the Senate that at some time in the very near future, within the next week or 10 days, many of us from the New England area, and I am sure Senators from other parts of the country as well, will have an opportunity to make a very careful review of the comments that have been made today by the distinguished Senator from Louisiana, who has presented his views and the views of the oil industry on this exceedingly important issue.
As the Senator from New Hampshire has pointed out, the Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary has been holding hearings on the whole question of the oil importation program, as well as the other kinds of special treatment that are provided to the oil industry in the way of benefits, exemptions, subsidies, handouts, or whatever other phrase one might wish to use.
The one fact that we cannot get away from, Mr. President, and that every American ought to know, is that just this one special program for the oil industry -- the import controls -- is costing us anywhere from $4 to $7 billion a year. Thus, Mr. President, since the oil importation quota program started some 10 years ago, the consumers of this country have been paying $40 to $70 billion to these special interest groups in the oil industry.
I think the burden of proof certainly lies with the oil industry to show the reasons why we ought to continue such an expensive program, why this is so important in terms of national security, and why they have to be treated so uniquely and so generously under the circumstances that exist today.
Mr. President, with all due respect to the distinguished Senator from Louisiana, that case has not been proved either by his statement, or by the many statements from the leaders of the oil industry. Many of the points that he has mentioned today have, I think, in fact been answered, and answered fully and responsibly, during the course of our hearings in the Anti-Trust Subcommittee these past few days, and have been answered many other times as well.
Mr. President, I welcome, as I know my colleagues from New England welcome, an opportunity to take this program issue by issue, advantage by advantage, subsidy by subsidy, handout by handout, and reveal to the Members of the Senate and to the American people exactly what this is costing not only the consumers of New England but also all the other consumers of our great land.
I associate myself with the remarks of the distinguished Senator from New Hampshire, and I commend the splendid work done by him in the hearings he has held and the information and the comments derived from those hearings which have provided such an insight into the whole broader question of special privileges and advantages to the oil industry.
I also commend the distinguished Senator from Maine for the splendid work he has done. He has really provided a great leadership in this area. He speaks in this matter not only for the State of Maine and for New England, but also in the interest of rendering a great service to the Senate of the United States and the American people.
I commend the New England Senators on the other side of the aisle for their interest in this matter. We all want to show the Senate and the American people what the facts are.
Mr. McINTYRE. Mr. President, I thank the Senator from Massachusetts. I applaud the emphasis with which he put the question before the Senate and the country today.
This matter may have started in Machiasport, but my own experience has been that as I look at the various aspects of the problem, I realize that I have been sitting here in the past completely ignorant of what the oil industry and the oil barons of this country have been doing and are doing.
I hope that the Senator from Michigan (Mr. HART) will come up with some answers. I know that as far as I am concerned, I will continue to do what I can to let the people know the facts.
Mr. MUSKIE. Mr. President, will the Senator yield?
Mr. McINTYRE. I yield.
Mr. MUSKIE. Mr. President, I do not want to add more than a word or two to what I said earlier this morning.
I compliment the distinguished Senator from New Hampshire for the hearings held with respect to the Machiasport project. I add my emphasis, as he has, to the hearings of the Hart subcommittee which have already begun.
I ask unanimous consent to have printed at this point in the RECORD an article entitled, "Probe of Oil Price Behavior Promises To Be Illuminating," written by Laurence Stern and published in this morning's Washington Post, which undertakes to outline the scope of the action initiated by the Hart subcommittee.
There being no objection, the article was ordered to be printed in the RECORD, as follows:
PROBE OF OIL PRICE BEHAVIOR PROMISES TO BE ILLUMINATING
(By Laurence Stern)
It is ten years since the Senate Antitrust and Monopoly Subcommittee conducted its hair-curling investigation into prices and profits of the drug industry. This week the same gadfly group quietly opened up a new inquiry into the price behavior of the American oil industry.
The subcommittee has made a specialty of digging into the subsurface issues of public life that are rarely featured on the front page or the 6:30 television report (its revelations on drug prices having been an exception).
Staff investigators have spent months gathering evidence and witnesses for the new series of hearings. The pattern of evidence suggests that as spectacular as the drug price markups might have been, they don't hold a candle to the excess costs being paid by American oil consumers – thanks in large measure to friendly Government intervention.
Drug products, beyond their economically intangible capacity to save lives and reduce suffering, play an important role in this country's industrial economy. But oil is the colossus of American enterprise. During 1968 the $55 billion in sales by oil companies dwarfed those of the drug industry by more than six-fold.
The drug manufacturers had friends and advocates spotted on strategic committees during the drug act reform battle in 1962 and it was only the thalidomide scandal that prevented them from carrying the day. But oil has entire regions, battalions of legislative allies on Capitol Hill and one of the most pervasive and well-heeled lobbies in Washington.
A commonly voiced criticism of oil's influence in Washington centers on the 27½ per cent depletion allowance that oil producers are able to write off on their taxes. And, in fact, the depletion allowance has proved far more durable than other innovations, such as the war on poverty.
But the antimonopoly subcommittee headed by Sen. Philip A. Hart (D-Mich.) will train its attention on the import quota system which was inaugurated by President Eisenhower and has hardened into concrete along with many other such Federal benefactions to American big business and big labor.
One prominent economist has told Hart's investigators that the oil import quota system costs all U.S. oil purchasers $4 billion annually.
Domestic producers in the Southwest began clamoring for import controls after World War II when lower-cost foreign oil from the Middle East began entering American ports. President Eisenhower finally proclaimed a system of mandatory quotas (a brief period of voluntary controls failed) in 1959 on grounds of national security.
The national security argument was that American dependence on cheaper Middle Eastern oil rendered the country vulnerable to the vagaries of international crisis. It was the Suez crisis in 1956 that led to the eventual adoption of the quota system.
Because of the oil quotas, the price of foreign oil coming into the United States is nearly twice the world level of about $2.10 a barrel. Imports are held down to 12.2 per cent of the total domestic demand.
While the oil industry boasts some of our most vociferous free enterprisers and rugged individualists, few sectors of the American economy are more intertwined with Government at all levels from the State House to the Capitol. The level of oil production is rigorously controlled down to virtually the last drop by a network of interstate, Federal and state agencies operating in close step with the producers. The object of this elaborate regulation is sometimes called conservation but the name of the game is price maintenance.
If the production of frying pans, or baby food were so controlled, the housewives of America would be in a state of rebellion.
Opposition to the import quotas on oil is not limited to impractical free enterprise economists. It encompasses some important big business interests, specifically the Nation's top chemical companies, who claim that the higher price of U.S. oil puts them at a disadvantage with German, British and Japanese competitors. The chemical industry will be heard from during the forthcoming Senate hearings.
All in all, the new investigation comes at a time of heightened public awareness of oil's ubiquitous influence on the American economy and physical environment.
The Santa Barbara oil slick, a result of lax public regulation of underwater drilling, was a major embarrassment to the industry. The fight over the proposed Machiasport, Maine, free trade zone galvanized Senators and Congressmen from New England against the majority of oil companies who sought to scuttle the project.
Also the recent increase in retail gasoline prices will take an estimated $800 million in additional costs from the pockets of gasoline buyers.
And so, it would seem, oil is once again finding its way into troubled waters.
Mr. MUSKIE. Mr. President, much wider questions have been opened up as a result of the Machiasport project.
The Senator from Louisiana in his speech has indicated the danger, as he sees it, of New England's reliance upon foreign oil for its fuel supply.
If this is indeed a danger, then we might consider whether we should repeal the oil depletion allowance which involves drilling for oil in this country and also overseas. It also involves drilling on the Outer Continental Shelf. The oil depletion allowance is used for those purposes as well.
If we are to believe the distinguished Senator from Louisiana, we are using this allowance to produce oil reserves which are vulnerable and would be of little consequence to us in times of national danger.
Mr. KENNEDY. Mr. President, with respect to the whole question brought up by the distinguished Senator from Maine concerning the importation programs, the Senator knows as well as I do that all of the oil consumed in New England comes by way of tanker from the gulf ports.
There is always the question as to why it is so much in the national interest to import that oil from the gulf ports rather than from Venezuela. If an enemy submarine is off the Atlantic coast or off Florida, it will sink a ship coming from the gulf ports as easily as a ship coming from Venezuela. Yet, we hear the statement made that this program, which makes us get our oil from the gulf, will protect our security.
The point the Senator made on oil depletion is fundamental and basic, and we will certainly want to get into this area as well.
Mr. McINTYRE. Mr. President, the Senators from New England will be heard from in due course.