A quarter-century after oil sheiks were first accused of gouging Americans for petroleum, a new accusation surfaced yesterday: Foreigners are "dumping" oil at unfairly low prices in the U.S. market.
The dumping complaint, filed by a group of independent oil producers from Oklahoma, asks the Commerce Department to impose stiff duties on oil from Saudi Arabia, Iraq, Mexico and Venezuela for allegedly selling petroleum below market prices.
But even before the filing, word of the case was causing considerable head-scratching among trade experts, who find it hard to understand the rationale for alleging such dumping of a commodity that is widely traded on global markets.
"When I first heard about this, I had the reaction a lot of people are having -- `You've got to be kidding,' " said Robert Litan, the director of economic studies at the Brookings Institution. "But apparently they're not kidding."
Indeed not, and therein lies a tale about the workings of the dumping laws, which are designed to protect the U.S. market from predatory foreign competition, but which critics say are rigged in favor of domestic companies. Dumping complaints have been used successfully in recent months by the U.S. steel industry to roll back an influx of imported steel.
Harold Hamm, founder of Save Domestic Oil Inc., which filed the complaint, likened the problems in the U.S. oil patch to those afflicting steelmakers.
"The domestic oil industry, which is experiencing the worst crisis since the Great Depression, has lost more than 100,000 jobs in the last year, representing 20 percent of the labor force," Hamm said in a statement.
Details of the complaint weren't released, but the statement accused the four targeted countries of selling oil "at less than fair value" and using government subsidies to compete unfairly. The group also cited a December 1997 story in the Oil Daily, a trade publication, that quoted officials of Venezuela's national oil company advocating an effort to bring world oil prices down to gain market share, because lower prices would "force some high-cost producers, particularly in the United States, out of business."
That article may be a "smoking gun" showing a desire by foreigners to injure the U.S. industry, said Philip Verleger, a petroleum economist. But he wondered what good it would do to slap duties on crude from the offending countries.
"What would happen is that crude oil not subject to duties -- produced in, say, Norway or the U.K. -- would flood over here and replace the crude subject to duties," Verleger said.
Under the law, countries can be found guilty of dumping when their products sell in the U.S. market at lower prices than their home markets. Alternatively, countries can be charged with dumping when their products are sold in the United States below the average cost of production.
Neither standard could likely be used to show dumping by most oil-producing countries, experts said, because such countries typically charge their own people little for oil and produce the stuff very cheaply -- perhaps $1 to $2 a barrel in Saudi Arabia's case.
But the complaint filed yesterday uses another legal standard to prove dumping -- that the four accused countries are selling oil in the United States more cheaply than they sell in other parts of the world, notably Japan, according to John Hodges of Wiley Rein & Fielding, the Washington law firm representing the group.
The Brookings Institution's Litan, a critic of the dumping laws, said such reasoning proves how unfair the rules are.
"There's a silver lining in this for someone like me," he said. "This is such a ludicrous example of how the dumping law can be exploited, it may actually put dumping law reform on the international trade agenda. It may wake people up and make them say, `This statute is ridiculous.' "