What began as a simple plan to placate New England politicians and boost heating oil imports has sent western European leaders into a diplomatic snit, and has prompted the International Energy Agency to call an emergency meeting next week.
Adding still further layers to President Carter's energy woes, administration officials now concede that the Energy Department's program to provide a $5-a-barrel subsidy for heating oil imports has added unexpected friction to relations between the United States and European allies.
At issue was an announcement last Friday that the $5 subsidy would be applied to heating oil imports between May 1 and Aug. 31.
After the DOE announcement, spot prices for middle distillate oil - heating and diesel fuel - rose more than $5 a barrel on the Rotterdam spot market.
Yesterday West German Foreign Minister Hans-Dietrich Genscher lodged a formal protest with the U.S. ambassador in Bonn. In Washington, German Ambassador Berndt von Staden exrpessed official displeasure with the DOE program, according to an embassy spokesman.
Meanwhile, British Energy Minister David Howell urged French Minister of Industry Andre Giraud to express "profound concern" during his visit with Energy Secretary James R. Schlesinger Jr.
A high-ranking European diplomat based in Washington yesterday said the European governments were disturbed that Schlesinger and other U.S. officials had not notified fellow IEA members before the subsidy was announced.
Sharp reaction to the DOE's subsidy plan has not been limited to diplomatic circles.
Yesterday's London Daily Mirror was emblazoned with a headline, "Carter declares oil war." Le Figaro, a leading Paris daily, said, "In the face of a crisis, Uncle Sam has reacted as usual: it is applying the law of the strong." It called the DOE's plan "a scandalous coup de force." Le Matin, a socialist paper published in Paris, commented, "The hallowed principle of egoism, every man for himself, is at work."
Energy Department officials say that much of this criticism is unjustified, since the subsidy was targeted at channeling imports from Canada and the Caribbean to replenish U.S. heating oil stocks.
They also point out that while the Europeans bought heavily on the spot market in the wake of the Iranian oil shutdown, U.S. oil companies were not aggressive buyers.
DOE officials say they hope that the subsidy will create an incentive for oil companies to import an additional 150,000 barrels a day of middle-distillate oil by the end of summer. This, in turn, would ease the squeeze on domestic refiners, who are under pressure to produce more heating oil instead of gasoline.
European leaders object to the subsidy because they say it will create further upward pressure on oil prices, and that it will give U.S. oil companies an unfair advantage competing for oil products in the tight international market.
The subsidy, which DOE officials say could amount to nearly $70 million, will in turn be paid by U.S. consumers at a cost of an additional tenth of a cent a gallon on oil products.