The oil import fee proposed yesterday by Senate budget conferees seeking a way to cut prospective budget deficits is a complex and controversial measure that could slow economic growth and add to inflation, economists say.
Even setting aside 20 percent of the proceeds, as the Senate conferees proposed, to aid regions of the country that would be adversely affected -- such as the energy-poor and oil-dependent Northeast -- the fee would still be a powerful revenue raiser. The conferees estimated that a $5 per barrel fee, and a commensurate fee on refined products, would yield about $20 billion over the next three years, excluding the regional aid.
However, a number of economists said the actual calculation of such a fee's impact on the deficit was much more complex than that. For one thing, the slower growth of the gross national product would offset much of that gain.
"Almost every model suggests a $5 fee reduces GNP adjusted for inflation by 1 percent," said Larry Goldstein of the Petroleum Information Research Foundation, an industry sponsored research group whose analysis is widely respected.
Advocates of the fee noted that with oil prices falling, consumers would not be hurt by its imposition since they are already paying the higher prices involved. But if oil prices come down, and there is no fee to raise them again, inflation likely would fall and real economic growth be increased. The faster growth would in turn increase federal revenue.
The proposal, which would have the effect of putting a floor under prices for crude oil produced in the United States, had divided the oil industry even before it became part of the Senate budget conferees' package yesterday.
Mobil Oil Corp., a major oil importer with close ties to Saudi Arabia, has run newspaper advertisements opposing such a fee. Among those strongly favoring it is Ashland Oil Co., the largest U.S. independent refiner, which has little crude production of its own, and which, like other refiners, is facing strong competition from oil products refined abroad.
One industry source said another major company, Texaco, has given some indication it might favor a fee. The view at Exxon Corp. is not known. Amoco, whose crude production is largely in the United States and who is having some difficulty marketing some high-cost natural gas, favors it, the source said.
Another consideration raised by some economists was the potentially adverse impact a fee would have on the international competitiveness of segments of American industry. The fee would increase the price of crude oil, and probably natural gas as well, in the United States but not in other countries. Foreign prices could even go down a bit if imposition of the fee put some additional pressure on OPEC, Goldstein said.
In a speech last February, Edward G. Jefferson, chairman of E. I. du Pont de Nemours and Co., warned about the impact of a fee. "While appealing at first glance, a tax on imported crude oil would seriously impair the worldwide cost competitiveness of many domestic industries by forcing them to use energy and petroleum-based raw materials at prices above world levels."
Added Jefferson, "The advantages seen in energy taxes might well be realized, however, through an increased tax on gasoline at the pump. This would not have a negative impact on our industrial competitiveness since, unlike a tax on crude oil, it would be borne directly by the consumer."
But some analysts would question Jefferson's assumptions about a higher gasoline tax as well. For one thing, businesses account for a substantial share of gasoline purchases in the United States. And such a tax would also increase inflation.
However, a gasoline tax would not put a floor under prices for domestically produced crude oil, and transfer additional billions of dollars from consumers to energy producers -- while at the same time transferring billions to the U.S. Treasury.