220. Letter From the Director of the Office of Defense Mobilization (Flemming) to the Oil Importing Companies1
The Presidential Advisory Committee on Energy Supplies and Resources Policy has made a re-evaluation of the situation relative to the imports of crude and residual fuel oils. Enclosed with this letter is a staff memorandum which has been used by the Committee in making its review.2 This re-evaluation has been made in the light of the following recommendation in the report which the Committee made public on February 26, 1955.
“The committee recommends, however, that if in the future the imports of crude oil and residual fuel oils exceed significantly the respective proportions that such imported oils bore to domestic production of crude oil in 1954, appropriate action should be taken.”
On the basis of the facts set forth in this memorandum, the Committee has arrived at the following conclusions:
- 1.
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On an over-all basis the ratio of crude oil imports to domestic production for the last nine months of 1955 was 5.17 percent as compared with 4.64 percent for the 1954 base period, excluding imports into District 5 (West Coast) and all imports from Canada and Venezuela.
We believe that, under present conditions, imports into District 5 (West Coast) should not be considered in determining, on a nation-wide basis, the question of conformity or non-conformity with the Committee’s basic recommendation. We believe that this policy should be followed because there is no present indication of an increase in production in District 5. As a result, it is logical to expect a larger volume of imports into this District in order to meet increasing demands although it should be noted that during the period covered by this report the inclusion of District 5 figures would have a minor influence on the nation-wide analysis. The Committee will continue to follow the situation in District 5 and if at any time it concludes that imports threaten to impair the national security, it will make special recommendations applicable to District 5.
The reasons for excluding imports from Canada and Venezuela were indicated in the letter of October 29, 1955. Again, however, we call attention to the fact that any sharp increase in the imports from these sources (exclusive of the amounts needed in District 5) could threaten to impair our national security. This aspect of the total problem will be kept under careful surveillance by the Committee.
- 2.
- The adjustments made in imports of crude oil for the first quarter of 1956 by most of the importing companies reporting to ODM following receipt of the letter of October 29, 1955 from the Director of ODM, resulting in actual imports substantially below original plans, are a source of real satisfaction.
- 3.
- However, the increase in planned imports for the second quarter on the part of some companies is a source of real concern. If these plans materialize, it would result in an over-all excess for the first half of 1956 which will not only offset the satisfactory conditions indicated earlier in the year but will nullify the efforts of a majority of importing companies to conform with the Presidential Advisory Committee recommendations. It is hoped that downward adjustments will be made in actual imports to such a level below these indicated plans that the over-all crude oil import situation for the year 1956 will show a satisfactory relationship to domestic production, as recommended.
- 4.
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Imports of residual fuel oil during the last nine months of 1955, exclusive of imports for ships’ bunkers and for military use, were below the figure suggested by the Advisory Committee in its report.
In view of the fact that imports for ships’ bunkers and for military use have no direct relationship to the objectives set forth in the recommendations of the Presidential Advisory Committee, we believe they should not be considered in determining on an over-all basis the question of conformity or non-conformity with the Committee’s basic recommendation.
- 5.
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The planned imports of residual fuel oil for January–June 1956, as compared with a corresponding period in 1954, exclusive of imports for ships’ bunkers and for military use, are only slightly in excess (5,000 B/D) of the amount indicated by the Advisory Committee’s recommendations.
This program is, therefore, substantially in accord with the Committee’s recommendations. The small planned increase may well be needed to build up stocks of residual fuel oils to levels consistent with past experience and to give assurance of meeting next winter’s requirements.
- 6.
- A re-examination of the Committee’s formula relating to the
imports of both crude and residual oils should be undertaken and
completed by September 1, 1956. This is in conformity with the
following extract from the Committee’s February 1955 report:
“The committee recommends further that the desirable proportionate relationships between imports and domestic production be reviewed from time to time in the light of industrial expansion and changing economic and national defense requirements.”
- 7.
- If, following this re-examination of the Committee’s formula, and a re-evaluation of the import situation in the light of the reexamination, the Committee finds that import programs are threatening to impair the national security, the Director of the Office of Defense Mobilization should schedule a public hearing not later than October 1, 1956, under the provisions of Section 7 of the Trade Agreements Act.
In the light of the requirements placed on me as Director of the Office of Defense Mobilization by Section 7 of the Trade Agreements Act, I have considered and accepted the conclusions of the Advisory Committee on Energy Supplies and Resources Policy.
I will be very glad to hear from you relative to any views you may have on the matters discussed in this letter or in the enclosed memorandum.
Sincerely yours,