AMONG THE MORE poignant welfare cases of the season are the independent oil refineries, who have lost their fat subsidies under the price control system. The controls contained a feature known as the small refiner bias. At its peak, the bias was worth perhaps half a million dollars a month to a small -- or sometimes not so small -- refinery. With the end of controls, it has vanished. The independt refiners are now naked to the cold wind of market competition.
Opinions differ regarding the cruelty of this treatment -- but it's certainly unusual. These independent refiners have been nurtured for decades on one kind of government subsidy and protection after another. As lobbyists, they are more than ordinarily skillful, and Congress has repeatedly taken care of them. In the last decade alone, several dozen clearly uneconomical refinereis have been built solely to take advantage of the small refiner bias. Without further and fatter subsidies, they say, some will fail. That's true.
What form should these subsidies take? Sen. J. Bennett Johnson (D-La.) writes to say that in earlier comments we misrepresented his position. The senator's letter appears elsewhere on this page. He says that he is not currently advocating a subsidy for the independents, but only guaranteed access to oil supplies in a shortage. Our view is that guaranteed access to supply is a subsidy of a most powerful and valuable kind. It isn't paid by government check and won't appear in any budget. Like most of the independent refiner's past subsidies, it would be paid by one refiner to another, to be passed on ultimately to the consumer.
If the government gives an independent refiner access to other companies' oil, that refinery doesn't have to spend its own money finding supplies.It doesn't have to sign long-term contracts with producers. Above all, it doesn't have to build expensive storage facilities. If it runs out of oil, all it as to do is cry and the government will require another company -- better managed and more provident -- to share its stocks at a price low enough to keep the buyer profitable. That's not a subsidy?
The small independents claim that they can't be expected to buy oil for themselves because the big integrated companies control the market and keep it away from them. That accusation was never entirely true, and today it's totally false.Over the past decade, the share of the world oil trade controlled by the major companies has dropped dramatically.
Congress might more usefully encourage refiners, small and large alike, to build up their stocks for the shortages that undoubtedly lie ahead. Instead of giving refiners claims on each other's stocks, Congress would do better to warn all of them to build more tanks. What about the possibility that some refineries -- having been designed primarily to refine subsidies rather than oil -- will go broke? That's terribly sad, but refining oil is now one of the most spectacularly profitable businesses in the country. A Congress that talks about cutting food stamps has no business bailing out oil companies.