WITH THE PROMISES that he gave in Bonn, President Carter has changed the politics of oil and energy. One crucial part of his energy program, from the beginning, has been to raise U.S. domestic oil prices to the world level, ending the present enormous subsidy to imports. Until now, Mr. Carter has been urging Congress to push the price up with a tax on domestic crude oil. But Congress refuses. Mr. Carter's crude oil equalization tax bill is a dead duck. It hasn't been passed, and it won't be. But a week ago Mr. Carter told the other major industrial nations in Bonn that he was still determined to bring oil imports under control and get the U.S. price up. How is he to do it?
One possibility is a tariff. Another is an import quota. The president could impose either, without Congress's help, under his emergency powers.But both tariffs and quotas for oil are dangerously bad ideas. Either would set an evil precedent in world trade. Either would be extremely difficult to administer, with infinite possibilities for favoritism and manipulation.
There's much better and more direct way to do it. U.S. prices are currently held down by mandatory price controls set by law. But by next May, those controls cease to be mandatory. The president can then set them wherever he chooses. We suggest that - after the election, perhaps at the beginning of the next Congress - Mr. Carter announce he is gradually going to take the price controls off crude oil, over a two-year period.
Decontrolling crude oil would raise prices of oil products about a nickel a gallon. The total revenue would be about $15 billion a year. That brings us to the second half of our suggestion. President Carter ought, at the same time, to ask Congress to enact a simple severance tax - a flat amount on each barrel, paid by the producer - to scoop up most or all of that $15 billion a year and send it to the U.S. Treasury.
Mr. Carter's original crude-oil tax would have put Congress in the position of voting a tax that would raise the price, and it was a position that not many people in Congress cared to occupy. The president would do better to raise the prices himself by lifting controls. Congress then gets the much more congenial job of rushing to the public's protection with the tax that will keep that $15 billion a year from flowing to the oil producers. How big a severance tax? Foreign oil is now entering this country at about $14.50 a barrel. New oil production in this country is controlled at about $12 a barrel. The severance tax would be as much of that $2.50 difference as Congress thought the public ought to recapture. There would have to be a higher tax on the pre-1972 oil production, since it is now controlled at a much lower figure. But with that single exception, there would be no variations.
There would be none of the rebates, energy trust funds or production subsidies with which the administration has tried to fan up congressional interest in its original tax bill. There would be none of the dubious dispensations and murky distinctions that are rapidly eating their way, like termites, into the present regulatory structure - the breaks for small refiners, for Caribbean refineries, for certain recovery methods, for small wells, for Alaskan oil, and so forth. The present system is becoming increasingly irrational and unmanageable. It is only a matter of time until major enforcement breakdowns, and perhaps scandal, overwhelm it. It can't be remedied as long as the government keeps trying to maintain several widely differing prices for the same oil.
To come back to the basic question, why raise oil prices a nickel a gallon? Because even small increases make people more careful in using the stuff. Because it is absurd to hold prices down artificially, when Mr. Carter and most other American think that the country uses too much oil. If decontrolling oil created social inequities, they would be minor compared with the gross inequities imposed by the general inflation that, as Mr. Carter accurately observed in his press conference Thursday, is being aggravated by the outflow of dollars for foreign oil. Congress won't swallow Mr. Carter's original oil-tax plan. But, as we suggest, there's a better and simpler way to get from here to there.