The oil industry, which for years fought against government controls on its operations, has begun quietly lobbying for government sanctions on imports of refined petroleum products to the United States.
Many independent oil refiners and medium-sized oil companies want the government to impose some sort of import fee, or even a quota system, to stanch the increasing flood of imported petroleum products. Such actions, experts say, could add a few pennies a gallon to prices of gasoline and other products in the United States.
The refiners complain that the cheaper imports -- primarily from Europe and Latin America, although in increasing amounts from new refineries in the Middle East -- are unfair competition, worsening an already bad situation in an industry plagued by overcapacity and sagging prices.
"The rapid growth in refined product imports has been devastating for a U.S. refining industry already hard hit by declining demand," Ashland Oil Inc. Chairman John R. Hall said in a speech earlier this month. "Unless something is done to prevent it, the situation will get worse before it gets better as new export refineries come on line."
Ashland is part of a group of independent oil companies and refiners that is scheduled to announce today the formation of the Independent Refiners Coalition. The group aims to battle what it sees as "the threat to American national security posed by increasing imports." Other companies are lobbying on their own for some sort of action.
But many of the oil industry's biggest names seem to be sitting this one out, apparently concerned that they'll look hypocritical asking for controls so soon after they battled to have other regulations taken off the industry. "It's hard for them to come in and say, 'we were for decontrol, now we're for control,' " said Ed Rothschild, director of the Citizen/Labor Energy Coalition, a Washington-based consumer-action group often critical of the oil industry.
Imports of petroleum products are not a new phenomenon. Gasoline and other products have been refined overseas and then shipped to the United States for years. But the amounts have been growing rapidly of late -- about 30 percent a year -- and imports are now equal to about 15 percent of the amount of such products made in U.S. refineries.
That 15 percent is just about the difference between the current operating levels of U.S. refineries -- about 76 percent of capacity -- and their optimum operating levels of about 92 percent of capacity. In addition, the amount of petroleum products being imported is beginning to approach the amount of crude oil coming into this country -- the oil-import problem that is usually the focus of concern.
The various petroleum products -- gasoline, naptha and distillate oils -- coming into the United States are being sent here for a number of reasons. One is that overseas refineries have many of the same problems as U.S. refineries, and are trying to sell their output to any customer they can find. Another is the one that is behind many other exports to the United States: the strong dollar.
Critics use one more familiar-sounding complaint -- that the overseas refineries can make and ship petroleum products here at prices less than U.S. refiners' costs for the same products. "Foreign export refineries, often foreign government-owned, typically have a lower investment in facilities and make heavier fuel oil products for local markets, allowing surplus byproduct gasoline to be exported to the United States at whatever price will assure a market," according to a report prepared by Texaco Inc. "In contrast, domestic refiners have had to invest billions in modern facilities and technology to meet the domestic demand for premium light products and to comply with mandated environmental standards, face a heavier tax burden and are therefore at a competitive disadvantage."
The U.S. refiners also say their overseas competitors are taking advantage of customs regulations to get products into this country at lower prices by identifying products as unfinished grades of petroleum, which have substantially lower customs duties than do gasoline or some other products. These lower grade products, known as blending stocks or feedstocks, are then mixed with higher-grade fuels by U.S. wholesalers to make gasoline.
The solution, people in the industry believe, is to tighten up existing oil import fees to catch the blending stocks as they come in and take away some of their price advantage. "It doesn't really make any sense to have material that looks like gasoline, smells like gasoline, but isn't called gasoline to pay a lower import fee than something that really is gasoline," said Theodore Eck, chief economist at Standard Oil Co. of Indiana.
But the independent refineries and others who see themselves injured by imports would like to go even further, and get the government to impose an across-the-board levy on petroleum product imports. Ashland's Hall, for instance, has proposed that the current 1.25-cent tariff on gasoline imports -- in place since 1958 -- be boosted to 10 to 12 cents a gallon to match the rise in the price of crude oil in the past 27 years -- an increase that would effectively cancel out any price advantage held by imported gasoline.
Such a proposal does not sit too well with most of the larger multinational oil companies, which generally have opposed import fees on crude oil and themselves import some petroleum products from their own offshore refineries.
Proponents of an import fee, however, hope that it would stifle low-priced imports and protect U.S. refineries. Of particular concern to many in the industry is the rapidly growing refining capacities of a number of members of the Organization of Petroleum Exporting Countries, particularly Saudi Arabia. Texaco's report estimates that six OPEC refineries to be opened in the next three years will add 1.1 million barrels per day of refining capacity. One oilman calls that "the ghost of things to come."
Products from those refineries will present still more competition to the U.S. facilities. "Clearly, someone should close," said Larry Goldstein, an analyst at Petroleum Industry Research Foundation, a New York-based analysis group. "What the U.S. refineries are saying is, 'Not us.' "
Nevertheless, experts think the domestic refining industry is going to have to lobby hard to get action against the competition from abroad. "The question is, from a national policy view, is it a serious problem? Up to now, it hasn't been," said Philip K. Verleger Jr., an analyst for Charles River Associates, a consulting group.
"You're going to have to show that the loss in refining capacity is going to lead to a national security risk," Goldstein said. "The real question is, it's like the farm industry -- is there a legitimate reason to have government involvement?"