President Carter announced last night the gradual lifting of price controls on domestic oil and a complex series of other measures, the net effect of which will be to force Americans to "use less oil and pay more for it."
In a nationally televised speech from the Oval Office, the president also said he will ask Congress to impose a "windfall profits" tax on the oil industry-the chief beneficiary of price decontrol-and to put the tax proceeds into an "energy security fund" for the nation.
Carter called decontrol "a painful step" but warned that the United States has no choice but to take it to end dependence on "a thin line of oil tankers" carrying oil from the Middle East and the Persian Gulf.
Under the plan, controls on domestic oil prices will begin to be eased on June 1, when Carter assumes unilateral statutory authority to lift them, and will end entirely by Sept. 30, 1981, when the law imposing the controls expires.
Administration officials estimated that decontrol alone will add up to 5 cents a gallon to the price of gasoline by 1982, although, according to other estimates, the added cost could be 8 to 10 cents a gallon. Officials also estimated that decontrol will reduce the amount of imported oil by up to 600,000 barrels a day by 1982, the bulk of this from increased domestic production stimulated by the higher prices.
Oil company revenues will rise dramatically under decontrol, by as much as $10.7 billion in 1981 if the 50 percent "windfall profits" tax Carter proposed is not enacted, and by $4.5 billion in 1981 even if the tax is imposed, according to administration estimates.
Carter proposed that proceeds from the tax - estimated at $10 billion by the end of 1982 - be used to provide grants to low-income families that will suffer from higher energy prices, to underwrite expanded mass transit systems in urban areas and for government investment in developing other energy sources.
The decontrol plan and the proposed tax were the centerpiece of the president's energy message, which appeared designed to offer some incentive to as many constituent groups and regions of the country as possible.
Decontrol, for example, was avidly sought by oil-producing states such as Texas. But Carter last night also announced that he is lifting government fees on imported oil, a step designed to ease the oil price squeeze on energy-dependent New England.
Carter also called on Congress "to close foreign tax loopholes that now give unnecessary benefits" to the industry.
Before last night's speech, there was considerable debate in the administration over whether decontrol of oil prices should be made contingent on Congress enacting a tax to prevent the oil industry from reaping all the financial rewards. The president opted for going ahead with decontrol without the tax, gambling that public pressure will force Congress to enact the "windfall profits" that is key to establishing the "energy security fund."
Administration officials insisted yesterday there is a fighting chance of enacting the tax, although Congress balked at a similar measure Carter proposed in 1977. Like the last version, the new tax would not be related to profits, but levied at so much per barrel.
Voting against the tax would, in effect, be voting " $5 billion to $6 billion a year...to the oil companies, which they didn't earn and don't need," one official said. "There may be a way to explain that to the folks back home, but I haven't thought of it."
The president stressed the same theme in his speech. Warning that the oil companies "can be expected to fight" the tax, he compared the effort to "regain control over our energy future" with the 1960s' effort to land a man on the moon and bring him home safely.
"That is why the energy security fund-with the tax on windfall oil profits that will pay for it-is so vitally important," Carter said. "That is why every vote in Congress for this fund will be a vote for America's future-and every vote against it will be a vote for excessive oil company profits and for reliance on the whims of the foreign oil cartel."
The speech, considered by some aides as one of the most important Carter has delivered, came almost exactly two years after his initial energy message to the nation in April 1977. Its basic theme was essentially the same-that the United States is "dangerously dependent" on imported oil and can overcome that dependence only at the cost of higher energy prices, more inflation and less energy use.
"The future of the country we love is at stake," the president said last night.
Reaction to Carter's proposals was predictably mixed. Before the speech, Sen. John Durkin (D-N.H.) said, "If he decontrols oil, he's dead in New England." After the speech, James. F. Flug, director of the Energy Action Educational Foundation, said the president's justification for higher oil prices "makes no sense" and that it appears that Jimmy Carter would rather be wrong than President."
But Forest I. Rettgers, executive vice president of the National Association of Manufacturers, praised the decontrol steps while ignoring the new tax on the industry. And Sen. Russell B. Long (D-La.), whose Senate Finance Committee would handle the tax, called the proposals "very complicated" and said he would withhold comment.
Sen. Charles Percy (R-III.) said he supported Carter's phased decontrol of oil. "If a windfall profits tax on oil company profits is necessary...then full credit should be given to oil companies for plowing back profits into discovery and development of new energy sources," he said.
At a White House briefing for reporters, administration officials detailed the increased production Carter expects from decontrol.
Because of decontrol, officials say that domestic oil production-now 8.7 million barrels a day-will rise by as much as 150,000 barrels a day in 1980, 300,000 in 1981, and by as much as 780,000 barrels a day by 1985.
Administration officials said conservation measures, which Carter called "our cheapest and cleanest energy source," would save up to 50,000 barrels a day in 1980, and up to 250,000 a day by 1985. The United States' oil consumption now amounts to about 19.5 million barrels a day.
Some consumer advocates have said that if Organization of Petroleum Exporting Countries (OPEC) prices rise and if a per-barrel oil tax is not enacted, oil company revenues could rise by as much as $16 billion by the time controls expire in 1981. Without the new tax, Carter said the oil companies "will reap hugh and undeserved windfall profits."
According to the White House, if the tax is enacted it will reduce oil industry income by $5.6 billion in 1982, leaving the companies will $13.9 billion in new revenues.
One prickly problem facing White House political advisers is that weeks from now the oil industry will be reporting its first-quarter earnings for this year, which Wall Street security analysts say will be among their highest ever.
Carter will decontrol prices by implementing a number of complex oil pricing regulations that, in effect, have been on the table for months as proposed Energy Department regulations.
Carter's administrative decontrol plan is complex.
The most critical measure, from the standpoint of the oil companies, is allowing 80 percent of the nation's old oil-largely produced from wells drilled before 1972-to rise from $5.85 a barrel to $13 a barrel on June 1. Later it and the remaining old oil would rise to world prices.
Beginning next Jan. 1, "new oil," largely produced from wells drilled after 1972, will rise gradually from $13 a barrel to the world price.
Newly discovered oil will go immediately to the world price beginning June 1.
To prevent all the new revenue from going to the companies, Carter asked Congress to enact a two-step levy that would tax 50 percent of the difference between current prices and the world price, and 50 percent of whatever the companies would earn from future OPEC price hikes. The White House estimates that from next Jan. 1 to the end of 1982 $10 billion in revenues could be set aside for the proposed energy security fund. This in turn would be returned to lower-income families, and put aside for mass transit and energy development.
Carter announced the following other steps, most favored by the oil industry:
Provisions that could allow private oil companies to explore for oil in the Naval Petroleum Reserve in Alaska. This measure-representing a reversal in policy-has already been put into legislation pending in Congress.
A $3 a barrel tax credit on oil produced from shale.
While the president did not formally propose allowing the oil industry to sell crude oil to Japan from the Alaskan North Slope, he did urge Congress not to restrict his authority to permit swaps if pipelines to elimiatethe West Coast oil glut are not built.