Twenty years ago, the Eisenhower administration imposed a quota on U.S. oil imports because foreign oil was so cheap. The rationale was that unrestricted imports would undercut U.S. producers.
Today the Carter administration is forging ahead with plans to reimpose a quota on oil imports-- but this time partly because foreign oil is so expensive.
The idea is to cut U.S. dependence on foreign oil almost forcibly.
The irony, according to experts both in and out of the administration, is that meaningful quotas will increase oil prices even further.
The administration plans to publish three quota plans in the Federal Register this week, and hopes to have one in effect by Jan. 1.
Senior administration officials have been arguing in private in recent weeks that no matter which plan is selected, an oil import quota will end up being inflationary, trigger possible anticompetitive practices and mire the already embattled Carter presidency in a new round of political controversy.
"A lot of people around town realize the quota plan is a horrible idea but are reluctant to say it," says one official who has had a role in shaping the three options.
The three alternatives, according to a near-final draft obtained by The Washington Post, are:
An auction system under which the government would fix the amount of oil that could be imported each quarter and license the importers. The lower the quantity of oil allowed to be imported, more importers presumably would bid for licenses. That license price would be passed along to consumers on top of the price of the oil.
A license-fee system. The government would collect a tariff of $2 or more a barrel. The tariff theoretically would be set high enough to discourage demand and keep imports below the administration's self-imposed ceiling of 8.5 million barrels a day.
An allocation program. The government would simply apportion the right to import crude oil and refined petroleum products according to past usage-- how much each importer previously had imported. The amount imported would be below demand, or there would be no point in having the program. The allocation program thus would create an artificial shortage; it, too, would put upward pressure on prices.
When Carter promised to put a limiting quota on imports earlier this year, his experts expected imports this year to average only about 7.8 million barrels a day, well below the quota. Now they have revised their estimates upward to 8.1 million barrels, closer to the critical point. The revision means the country may bump up against the Carter quotas sooner than had been anticipated and lends some urgency to the regulation-writing process that will start this week.
The 27-page administration draft anticipates many criticisms expected to be offered at public hearings on the proposals over the next months.
It says that "a potential problem of the auction system is the possibility of market manipulation." Another problem associated with the auction method is that "companies with substantial financial resources"-- the major oil companies-- "could exclude others from the market by bidding excessively high for the import tickets," the draft notes.
As to alternative No. 2-- tariffs-- John Lichtblau, head of the Petroleum Industry Research Institute in New York says, "One possible consequence of this could be that OPEC nations see this as evidence that their prices are still too low to curb the growth in demand for their oil."
At the least, Lichtblau adds, even a "relatively small mandated reduction in imports" would result in a substantial increase in oil prices. This, other oilmen argue, could create pressure for reimposing oil price controls.
As for the third option, of allocation based on past imports, the administration draft suggests that it could spur the construction of inefficient refineries and effectively bar further competition in the oil industry.
Unlike the Eisenhower oil import program that was set aside in 1973, Carter's proposal would include all petroleum-based imports, such as asphalt, propane, butane and petrochemicals.