Oil companies hardly seem needy these days, but a group of U.S. refiners have nevertheless turned to Congress for a new form of aid:
Protection against foreign competition.
The group -- which includes many "small" refiners but also some well-known members of the Fortune 500 -- is seeking a 3-cent-a-gallon protective tariff on imported refined petroleum products.
Administration critics say that such a tariff could add more than $3 billion a year to consumer costs.
Under a bill on which sponsoring Sen. J. Bennett Johnston (D-La.) will start hearings today, part of this money would be turned over the qualifying U.S. refiners to help finance expansion. In addition, the bill would give these refiners $2 billion in federal loan guarantees.
A forceful congressional spokesman for domestic refining interests, Johnston argues that his bill will boost industry competition, enhance national security and stimulate refinery construction.
"We have had no coherent refinery policy for years and the state of our refinery capacity shows it," Johnston says.
Of the 19 million barrels of oil a day consumed in the United States, 17.2 million are domestically refined and the balance imported.
Domestic refiners such as Ashland Oil Co., Pennzoil, Union Oil of California, and Cities Service -- all members of the Fortune 500 -- say protective relief is necessary once they lose subsidies inherent in the current oil price control system. Citing this, plus higher costs resulting from environmental laws, requirements to use American tankers and other regulations, they and smaller refiners say the government should act to preserve their competitiveness.
Still another factor, the refiners says, is that they will have to spend hundred of millions upgrading existing refineries to produce premium unleaded gasoline, and to refine heavier grades of oil now coming on the market.
Not everyone in the oil industry supports the proposal, however,
Such major companies as Mobil, Shell, and Exxon, all of which operate under different economics, oppose the bill.
Also critical of Johnston's approach is Bruce Wilson, an energy analyst with Smtih Barney Harris Upham, an investment banking firm. Wilson says there is a surplus of world refining capacity today, including enough additional planned capacity in Europe to meet U.S. needs through the early 1980s, He and others also say that the United States should be fostering construction of large refineries, rather than the forty 10,000-barrels-a-day plants that have been built since 1974 with the government's existing small-refinery subsidies.
So far the Energy Department has not commented officially on the Johnston measure, although Deputy Energy Secretary John F. O'Leary is expected to voice support for additional domestic refinery capacity at the hearings today.
An internal DOE study this year found no justification for added domestic refinery subsidies, from either an economic or national security standpoint.
The DOE found that a $1-a-barrel subsidy "Would increase the annual cost of petroleum products to the American consumer by $3 billion." A dollar a barrel is a little under 3 cents a gallon. The study also concluded that "A tariff would not in general provide any national security benefits; the tariff would decrease imports of refined products, but would increase imports of crude oil."
A copy of the study was obtained by The Washington Post.
According to a senior administration official, "O'Leary indicated that he would like to see the bottom line recommendation of a $1.25 a barrel tariff on imported product, and said do it over again."
DOE has yet to make public a final copy of its long-awaited refinery policy study.