November 20, 1973
Page 37761
THE CASE FOR GASOLINE RATIONING
Mr. STEVENSON. Mr. President, the last tankers to arrive from the Middle East are only days away.
In the coming weeks, the Nation faces a petroleum shortage ranging from 10 percent to 35 percent. Unemployment could range from 6 percent to 10 percent by early next year. Minority unemployment could skyrocket to 35 percent. The gross national product could fall by 7 percent. Clearly it is time for action. The production of essential fuels for industry, agriculture and homes must be increased. The only way to do so significantly is by decreasing the consumption of gasoline. Every day the Government waits, it insures greater industrial shortages and tens of thousands more unemployed.
Yesterday, with 24 of my colleagues, I sent a letter to President Nixon urging him to immediately maximize the production of fuel oil distillates by reducing the refining of gasoline, and also to initiate a program of consumer-level gasoline rationing.
Mr. President, I ask unanimous consent that the full text of the letter be printed at the conclusion of my remarks.
The case for gas rationing has been recognized by leaders in industry, energy experts and Government officials. It is well put in a column by Hobart Rowan which appeared in the Washington Post last Sunday. I ask unanimous consent that this column also be printed in the RECORD at the conclusion of these remarks.
When the shortages are upon us, the homes cold, and the factories closed, it will be too late. I urge the President to act now.
There being no objection, the letter and article were ordered to be printed in the RECORD, as follows:
U.S. SENATE,
Washington, D.C.,
November 19, 1973.
THE PRESIDENT,
The White House,
Washington, D.C.
DEAR MR. PRESIDENT: We are deeply troubled by your unwillingness to increase the supply of fuels for essential purposes by limiting the production and consumption of gasoline. We believe the time has come for resolute action.
For every million barrels of petroleum products the nation is short per day, about one and one- quarter million people will be put out of work. When the last Mid-East oil tanker reaches our shores in coming days, the nation may be faced with a three million barrel per day shortage. That would mean almost a doubling of the unemployment rate to over nine percent and a seven- percent reduction in gross national product.
These figures are national averages. Hardships do not fall evenly on all sections of the country or all individuals. Suburban residents heavily dependent on the automobile could be severely inconvenienced by the fuel shortage. A shortage of three million barrels a day could drive unemployment among minority workers as high as thirty or forty percent. Human suffering, severe economic dislocations, even social disorders are threatened. These effects of the fuel shortage could be felt by the first of the year. To minimize them, we first urge you to increase the production of essential industrial, agricultural and home heating fuels, like fuel oil, by decreasing the production and consumption of non-essential fuels.
A fourteen percent reduction in the refinery yield of gasoline could mean as much as a thirty percent increase in the supply of fuel oil. But the nation's 252 refineries are not maximizing their production of fuel oil at the expense of gasoline. Currently the refineries are turning only twenty-three percent of every barrel of crude oil into distillates, and fifty-one percent into gasoline. They could be turning thirty percent of every barrel into distillates if gasoline yields were reduced to forty-four percent. They could make this changeover in less than one week.
Every day they wait, we lose another opportunity to reduce a growing industrial and home heating fuel oil shortage that may go as high as twenty-five percent of total demand.
By reducing gasoline production and consumption, you could keep America's factories and industries open this winter. To assure that non-essential gasoline consumption is reduced, and available supplies allocated fairly, we also urge you to ration gasoline.
Mr. President, we request that you exercise your authority to allocate scarce petroleum products under the Economic Stabilization Act Amendments of 1973 and the Emergency Defense Act of 1950 by immediately initiating the following two-part program:
1. Require all American refineries to immediately maximize their production of fuel oil distillates, reducing gasoline production to whatever extent necessary to accomplish this goal. Stringent monitoring of refinery performance in this regard is essential.
2. Initiate a program of consumer level gasoline rationing for the purpose of establishing an equitable distribution of reduced gasoline supplies.
A decrease in gasoline consumption can come out of non-essential fuel uses and create the necessary fuel for essential uses. Administration spokesmen, energy experts and industry leaders have acknowledged that limitations on gasoline production and consumption will be adopted sooner or later. We respectfully suggest that the nation has already waited too long. Every day the government waits, it insures tens of thousands more unemployed. Every day it waits, it increases the chances of social disorders and economic chaos.
The stakes are simply too high to wait a day longer. The personal sacrifices associated with limiting gasoline production and gasoline rationing are small when compared to the havoc and hardship resulting from shortages of home heating and industrial fuel oil and gasoline for essential uses.
We urge you to act now.
Sincerely,
SENATORS SIGNING LETTER TO THE PRESIDENT
Stevenson, Jackson, Ribicoff, Burdick, Cranston, Eagleton, Metcalf, Hughes, Muskie.
Haskell, Moss, Chiles, McIntyre, Hathaway, Hart, Abourezk, Proxmire, McGee.
Mansfield, McGovern, Randolph, Williams, Humphrey, Symington, Inouye, Kennedy.
FUEL CRISIS AND THE ECONOMY
(By Hobart Rowan)
Former Economic Council Chairman Walter W. Heller wisely observed in a special article for the Wall Street Journal last week that because of the oil crunch, all forecasts for inflation in 1974 are now "subject to change without notice." Let's go one step beyond that: all forecasts of any kind are useless.
The only realistic assumption that can be made is that the economy will be in some sort of recession next year and will continue to be depressed while the Arab oil embargo lasts.
Just how bad the economic slide here will be depends on a number of unknown factors, including the duration of the embargo and the wisdom of U.S. leaders in handling the shortage problem.
So far, there is little reason to be optimistic on either score: the Arabs seem interested in limiting their production and maximizing profits (already huge) regardless of the outcome of the Egyptian-Israeli negotiations; and the Watergated Nixon administration once again appears to be bungling an economic management job.
The clear need at the moment is to install a gasoline rationing program that would sharply cut pleasure driving, so that energy resources still available can be husbanded for essential industry.
But administration spokesmen are all over the lot on this issue, some trying to sweep the urgency of the problem under the rug. Others talk wistfully of a "free market" approach, letting prices skyrocket in order to create new production incentives as well as to diminish consumption.
The trouble with letting prices shoot up should be obvious. Not only would that mean the well-to-do could use and waste resources at will while people of modest means suffer, but such a "solution" would raise unholy hell with the economy.
Heller points out that fuel prices had been soaring even before the "sheik-down." Thus, the price index of fuels, related products and power (representing 7 per cent of the wholesale price index) had risen 20 per cent from September, 1972, to September, 1973. Refined petroleum products rose 35 per cent in that period.
Further price increases are certain. But unless rationing and price controls are made effective, costs will go out of sight.
Some administration officials, notably Economic Council Chairman Herbert Stein and Treasury Secretary George Shultz – who fear any kind of controls – would opt for a surtax system to reduce consumption of gasoline.
But Treasury experts admit that each penny of additional tax sucks $1 billion out of total purchasing power. If – as Gov. John Love suggested – the country needs a 30-cent tax to cut consumption of gasoline by 20 per cent or so, that would pull $30 billion out of individuals' pockets and into the Treasury.
Even if a chunk of that were rebated in various ways, it would be likely to throw the economy into a serious recession.
In any event, the administration has badly failed the nation in assessing and coming to grips with the energy problem. The most compelling energy statistic I've seen comes from Deputy Treasury Secretary William E. Simon:
Prior to the Middle East crisis, the administration's expectation was that energy consumption in the United States would increase by 4 per cent a year, doubling 1970's needs by about 1980.
And how did we plan to get that increased energy supply? From the Middle East, because oil there was cheap. The idea of considering national security in economic terms apparently never occurred to the administration. Now, Mr. Nixon talks of "independence" by 1980.
Back in April, the President sent a message to Congress in which he referred to an energy "challenge" – he wouldn't even use the word "crisis." Five years too late, Mr. Nixon abandoned oil quotas. Yet, there was no recognition that oil was an international problem, and that some day we would have to come to grips with an international cartel with a stranglehold on key supplies.
Meanwhile, the domestic oil industry, fat and comfortable, wasn't anxious to add to refinery capacity or to prove out new reserves.
Some oil industry leaders confess they badly underestimated how fast demand would rise, but most tend to blame the conservationists for holding back new exploration.
Early this year, former Commerce Secretary Peter G. Peterson came back from a trip around the world and reported to the President that energy would be the United States' overwhelming problem for the next decade, but he was politely ignored.
Peterson tried to get Henry Kissinger's attention focused on the problem, but Kissinger was too preoccupied.
In his report, Peterson sharply highlighted U.S. dependence on Middle East oil for the projected growth of the economy through the 1970s and early 1980s. In an interview with him published in the Washington Post on July 9, 1973, 1 reported:
"Peterson's figures assume that the Middle East countries will continue to be attracted by higher prices, increase their production and sell the West all the oil it wants to buy.
"But the Middle East countries, knowing that their oil resources are finite, may decide not to increase production so rapidly. And in any event, the Middle East countries broadly suggest that unless there is a solution to the Arab-Israeli conflict more satisfactory to them, they may not cooperate with the West at all.”
The administration wasn't listening.
Around mid-year, Mr. Nixon appointed Love to head an Energy Policy Office, but a sense of urgency didn't emerge until the shock of the oil embargo that accompanied the outbreak of war in the Middle East.
Mostly, the past few months have been a time of fumble and stumble. Mandatory allocation of propane and middle distillate fuels was put in, but gasoline and electricity consumption are still subject to only voluntary restraint.
Above all else, the administration needs to act at once to put a mandatory rationing system in effect for private transportation and home heating oils.
At the same time, it must address itself to developing new sources of energy for the long haul, and to working with other Western nations in the short run to find ways of persuading the Arabs to lift their embargo.
There is no reason why the Western nations should not consider economic counter sanctions, from food shipments to sales of manufactured products (including aircraft and arms) to technical aid and knowhow. A retaliatory embargo, of course, would require the Western World to act together. Given the Arabs' success in forcing Britain and France to make the right anti-Israeli noises, and the possibility of similar successful blackmail against Japan, prospects for the success of such a concerted drive look dim indeed.