27. Letter From the Deputy Secretary of Defense (Packard) to the Director of the Office of Emergency Preparedness (Lincoln)1
I am enclosing a draft of a Defense Department position on the oil import matter.2 This draft will have some further editing before it is forwarded. I have a few personal observations I would like to make on this matter.
The present problems with the oil situation, to the extent there are problems, are not a result of quotas, but rather a result of the way the quotas are administered.[Page 72]
I see no serious objection in going to a tariff system instead of a quota system. I think, however, in making this decision we must determine whether this new arrangement will be administered to meet domestic price objectives or national security objectives.
In the Defense Department we have to take the position that national security objectives must be over-riding. Beyond that the Administration should think a long time before it adopts a system that is, in effect, a Federal price control system.
I believe the administration of whatever system is adopted is the key to the matter, and therefore believe that a Federal Commission should be established; that it should be chaired by the OEP; that it should have a strong representation from Defense, and that the commission should be charged with administering the system, either tariff or quota, with the following objectives in mind:
- Exploration should continue at close to the present rate so as not to allow an undue drop in domestic reserves.
- In the present environment it is crucial to avoid discrimination, or the appearance of discrimination, against the Arab countries of the Middle-East. This is crucial to the Defense position in the world because of the critical reliance by our NATO allies on Middle-East oil. Action, particularly at the present time, which might contribute to a further deterioration of the situation in the Mediterranean is more critical to Defense interests than the level of domestic reserves.
It should be recognized that this is a complex industry and any change from an established system to a new system will be upsetting, and therefore transition, if it is undertaken, should be very gradual.
While it is true that the level of the domestic prices will affect the reserve position, and while we can accept some reduction in the level of reserves, let me again emphasize, I do not believe it is wise to announce a specific price objective at this time.
- Source: National Archives, RG 220, Records of the Cabinet Task Force on Oil Import Control, Entry 24, Box 1, Classified Documents, Confidential Letter from Packard to Lincoln. No classification marking.↩
- Attached but not printed is a Defense Department response to ongoing revisions of numbered paragraphs of X–2.↩
- Packard signed “Dave” above his typed signature.↩