American consumers will pay $47.4 billion more for oil between June 1979 and September 1981 because of decontrol of U.S. crude oil prices than they would if controls had continued unchanged, the Energy Department now estimates.
When President Carter announced controls would be phased out over that period, the cost to consumers was put at $16 billion.
But Energy Secretary Charles Duncan defended the president's decision as "absolutely essential" at a House Commerce subcommittee on oversight and investigations hearing called to examine the big increase in the estimated cost of decontrol. "I think we did precisely the right thing," Duncan declared.
He said the major reason or the bigger immediate cost of decontrol was the doubling of world oil prices since early last year. Most of the increase came after the DOE estimates were made.
Duncan said that what has happened to prices as a result of actions by the Organization of Petroleum Exportin Countries only has made decontrol more needed than ever. He said that higher prices are responsible for most of the sharp drop in demand for oil products this year, for the very large jump in the number of drilling rigs at work on oil and gas wells, and for significant new activity in the synthetic fuels area.
Already the higher decontrolled prices for oil from marginal and newly discovered properties is paying off in more production, Duncan argued. "The volume impact of this short-term response has been approximately 50,000 barrels per day of incremental production to date, and we estimate this figure will rise to about 350,000 barrels per day by September 1981," he told the subcommittee.
However, rep. Bob Eckhart (D-Texas), the subcommittee chairman, complained that "decontrolling domestic crude oil in advance of the Sept. 30, 1980, expiration of controls . . . is rather like bleeding the patient to cure anemia."
Eckhardt noted that when phased decontrol was begun last year, the Carter administration said decontrol would result in about 742,000 more barrels per day of domestic production in 1985 than in the so-called "based case," in which controls were continued through 1985. That estimate, like that of the cost to consumers, has been revised to show a 1985 production response of only 516,000 barrels a day.
Duncan acknowledged the downward revision, but said that he is optimistic the production response will be greater than that.
As for consumer prices, the energy secretary said, "Roughly speaking . . . the impact of crude oil decontrol on gasoline and heating oil prices may range from a little less than a penny a gallon per month to a little less than a penny and a half per month." He added that the actual price impact could be higher or lower depending on a variety of factors.
At a rate of about 1.5 cents a gallon a month, decontrol would add between 20 cents and 25 cents a gallon to gasoline and heating oil prices between now and the latter part of 1981, assuming world crude oil prices rise about 15 percent a year in the interim.