Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

279. Memorandum From the Deputy Director of the Office of Near Eastern Affairs (Rockwell) to the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Rountree)¹

Washington, December 9, 1957.

SUBJECT

• Possible Limitation of Oil Imports into the US West Coast

Problem:

The Office of International Resources (OR) has indicated that early this month the Cabinet Committee of Crude Oil Imports may receive a proposal for limiting crude oil imports into the West Coast. Persian Gulf crude represents almost one-third of the 350,000 barrels a day of imports scheduled for the first half of 1958.

Discussion:

The Cabinet Committee on Crude Oil Imports in its report² of last July established a voluntary system of quotas for the purpose of limiting oil imports into Districts I through IV (the Atlantic and Gulf Coasts and the Canadian border east of the Rockies). It concluded that since no restrictions on domestic production were in effect in California, and since the West Coast was a deficit area in oil, no restrictions on imports into the West Coast were necessary. It did, however, provide for periodic review of this matter.

Captain Carson, the Administrator of the voluntary quota system, has been taking evidence at hearings regarding the situation with respect to oil imports into the West Coast. The evidence presented to him by the petroleum companies marketing in the area shows a program of oil imports scheduled at about 350,000 barrels a day (almost one-third of which represents Persian Gulf crude) for the first half of 1958. Imports into the area during 1957 were about 270,000 barrels a day. Production of oil in the area is forecast at 925,000 barrels a day as against a figure of 930,000 barrels a day for 1957. (An oil company source has indicated that Persian Gulf crude has been able to compete price-wise in this market due to its low cost of production and the depressed tanker rate situation.) Although West Coast producers have expressed apprehension over the rate of imports, no producer has indicated that he has any shut-i oil or that he is now having any difficulty marketing domestically produced petroleum.

However, it should be noted that, with the leveling off and decline of US industrial activity this year, domestic West Coast producers may have some grounds for concern over their ability to sell their oil in the short-run future. For example, West Coast consumption has not increased as was contemplated; the level for 1956 and 1957 being roughly the same. Moreover, the Department of Interior’s consumption projections apparently show that the West Coast would need only about 200,000 barrels per day during 1958 to supplement domestic production.

Under these circumstances OR thinks it would not be illogical to expect presentation to the Cabinet Committee of a proposal for limiting imports to about 200,000 barrels a day as against the projected 350,000 barrels. Mr. Hoover has come to town from Los Angeles, and will be here until December 12, to advise Captain Carson on the matter before the Captain’s discussion with the Cabinet Committee. The countries which would be adversely affected by a restriction on imports of oil to the West Coast include those in the Persian Gulf and Indonesia, Venezuela and Canada. All of these countries have had reason to believe that we would not limit imports into the West Coast.

OR has pointed out that, although the proposal to limit oil imports into the West Coast is fundamentally unsound, it would no doubt be expressed with considerable vigor in the name of national security.

In conclusion, however, it should be noted that shipments to the West Coast represent only about four percent of total daily oil exports from the Middle East. It is not expected, therefore, that limitation of oil imports into the West Coast will result in significant economic consequences on the Persian Gulf states. Moreover, it will be recalled that the reaction of these states to the July limitation on oil imports into the Atlantic and Gulf Coasts was almost nil.

Recommendation:

That you consider bringing to the Secretary’s attention the following aspects of the extension to the West Coast of the voluntary system of quotas for the purpose of limiting oil imports:

(1) Approximately one-third of the scheduled 350,000 barrels a day of oil imports into the West Coast originate in the Persian Gulf; this represents about four percent of total daily oil exports from the Middle East.

(2) The economic consequences on the Persian Gulf states of a decision to limit oil imports into the West Coast is not likely to be significant.

(3) However, with world oil production currently tending to rise at a raster rate than consumption, it is possible new U.S. restrictions on oil imports into the West Coast might be exploited by Middle Eastern elements unfriendly to the United States far out of proportion to its economic consequences to the Persian Gulf states.³

1. Source: Department of State, Central Files, 411.006/12–957. Confidential. Drafted by George Bennsky of the Office of Near Eastern Affairs.
2. Attachment to Document 270.
3. On an undated chit attached to the source text, addressed to Rountree and Rockwell, John F. Shaw noted that this problem had been “overtaken” and that a decision had been reached by the Cabinet Committee on Crude Oil Imports to limit imports into District V to 233,000 b/d. The President announced this decision on December 23; see Document 281.