Source: EXP materials for Appropriation Committee; Official Statistics of Foreign Governants; CC Vol. 11. Tariff Commission Reports. "Available Supply" is generally defined as domestic production plus total per ta minna exports. Account has not been taken of changes in stocks. For som commodities data on "consumption or requirements" had to be used. ECA Financing: Includes shipments to dependent overseas territories. The physical quantities indicated in this column represent estimated commodity shipments proposed to be Financed by E.C.A. during the 12-month period, April 18 through March 1949. In addition to these commodity shipments financed by 8.C.A., it is estimated that E.C.A. funds will be obligated before March 31, 1949 to procure goods which will be shipped after that date. PETROLEUM AND PETROLEUM PRODUCTS STATEMENTS OF HON. OSCAR L. CHAPMAN, UNDER SECRETARY OF THE INTERIOR; MAX W. BALL, CHIEF, DIVISION OF OIL AND GAS; JAMES BOYD, DIRECTOR, BUREAU OF MINES, DEPARTMENT OF THE INTERIOR; LOUIS LISTER, INTERNATIONAL RESOURCES DIVISION; WALTER LEVY, CONSULTANT, DEPARTMENT OF STATE; LT. COL. CHARLES H. BLUMENFELD, UNITED STATES ARMY; AND C. MEADE STULL, CHIEF, FUELS BRANCH, OFFICE OF INTERNAL TRADE, DEPARTMENT OF COMMERCE Mr. CHAPMAN. Secretary Krug asked me to come up this afternoon and extend his apologies for not being here himself, but he will be here at any time you feel it is necessary for him to come. He felt this afternoon that Max Ball, head of the Division of Oil and Gas, was familiar with the details of these figures and also Jim Boyd, Director of the Bureau of Mines, could answer the details as much as possible on any figures with respect to the matter. I myself am not familiar in detail with them, and I am going to ask these two gentlemen to be the witnesses to testify on the requirements. The CHAIRMAN. Tell us what you can about the oil picture. We started to go through the requirements first and then talk about where we could get it, and if that is a satisfactory way to proceed, from your standpoint, it would be all right-or do you have a general statement you would like to make to us? GENERAL STATEMENT Mr. BALL. I would like to make a general statement. Despite what Mr. Chapman has said, I am not the man who can give you the details, as I will explain as I go along, and I would like to make a brief general statement which will give you the background on which to base your general questions. Mr. WIGGLESWORTH. Is there anyone here who can give the details? Mr. BALL. Yes. The primary concern of the Interior Department and its primary function in this, of course, is to keep a watchful eye on the impact on the domestic economy of proposed supplies of petroleum products furnished under the European recovery program. NEED FOR PETROLEUM PRODUCTS BY PARTICIPATING COUNTRIES Obviously, petroleum products are essential to the functioning of any modern economy, our own as well as those of the 16 countries concerned. The European economies cannot function much less recover and get on a normal functioning basis without petroleum products. They need petroleum products for food production. Although the European agricultural industry is not motorized to the same extent it is in the United States, they nevertheless are dependent to a considerable extent on motorized equipment. Food has to be transported, and there were times this spring and late in the winter when food did not get to Paris because of shortages of gasoline, and also there have been similar situations, both real and threatened, in the United King dom. Transport, of course, is almost wholly dependent on petroleum products, and, of course, industry cannot function without fuel, and Ein some cases fuel oil is the only fuel available. NEED TO KEEP DRAIN OF PETROLEUM SUPPLIES FROM UNITED STATES TO IRREDUCIBLE MINIMUM As against that, it is essential that the drain on the United States be kept to the irreducible minimum. I do not have to tell you gentlemen what we went through here last winter with respect to fuel oil. Those shortages of last winter would have been serious if it had not been, among other things, that exports were very definitely curtailed and reduced. We are not looking forward to as dismal a situation, we hope, as we faced last winter. But unless every factor works out on schedule, we will have some shortages of gasoline in the United Stateslocal shortages; I trust nothing worse this summer and possibly some shortages in fuel oil as we had last winter. With those things in the background, you can see it has been of concern to the Interior Department to see that the requirements of the European recovery prgram on the United States for petroleum products were kept at the lowest possible level. When it came to estimating what those requirements from the United States would be, although we were asked to do it, we did not have the staff to do it. Therefore, the detail work was done in the State Department by Mr. Walter Levy, who is here with me, and he can answer your questions with respect to this screening of the requirements for these 16 countries as to petroleum products. REDUCTION OF REQUIREMENTS ESTIMATED BY PARTICIPATING COUNTRIES I can give you just a few over-all figures that will give you an idea of how that was done. The Paris report, which, you remember, was the original report that came up when this was all started and was prepared by the participating countries themselves, called for a total supply to the participating countries of 1,190,000 barrels per day for the calendar year 1948. That was subjected to a very rigid screening by the State Department, particularly by Mr. Levy in which he accumulated, as he must, the additional information from many sources, including the countries themselves, the petroleum industry, our own diplomatic representatives abroad, and other sources. As a result, he reduced those requirements to 968,000 barrels a day for the fiscal year 1949, which is more of a reduction than appears when you consider it is balanced against the calendar year 1948; because, naturally, as European economies recover, they require somewhat increased amounts. That means that there was a reduction from the original estimate of the requirements of over 18.7 percent. SOURCES OF PETROLEUM PRODUCTS The State Department then undertook a study to see how much of that could be made available from sources outside of the United States. That study was made by Mr. David Longanecker, who is here with me. He, after an exhaustive study, came to the conclusion that the requirements for the participating countries would be 515,500 barrels per day from nondollar sources; that 38,000 barrels per day would be available from indigenous production in the participating countries, leaving 434,000 barrels per day to be supplied from dollar sources. Those three figures added together make up 987,500, which is above the 968,000 figure I just gave you by 2 percent, to allow for refinery losses and for minor reexports and that sort of thing. That is the grand total for the fiscal year 1949 of the requirements for these countries from all sources, of which 434,000 is from dollar sources. Starting with that 434,000 from dollar sources, Mr. Longanecker then made a detailed study to see how much of this would have to come from the United States, there being other dollar sources than the United States, and finally arrived at a figure of 95,600 barrels per day to come from the United States, which is 9.7 percent of the total requirements. COMPARISON OF EXPORTS UNDER PROGRAM WITH 1938 EXPORTS Mr. WIGGLESWORTH. What percent of our production? Mr. BALL. That is about 1.5 percent of our American supply or domestic supply which, by the way, is the lowest percentage of our domestic supply that we have exported for many years. Back in 1938, for instance, we were exporting to the ERP countries 5.7 percent of our total supply. Mr. KEEFE. When you say "total supply," do you mean produced in the continental United States or that produced in the Caribbean area? Mr. BALL. No, the continental United States plus imports. Mr. BALL. Yes. Mr. KEEFE. To the United States? Mr. BALL. Plus imports to the United States. Mr. CASE. Now, you are speaking in terms of percentage of our production, but also production has gone up in that period. What is the absolute quantity? Mr. BALL. That calls for exports from the United States Mr. CASE. That is 95,600 barrels, but when we were exporting 5.7 percent, how many barrels did we export? Mr. BALL. We exported to the ERP countries in 1938, 76,000,000 barrels during that year. Mr. KEEFE. That makes quite a different picture-76 as against the 95 here. Mr. BALL. No, that is 76,000,000 as compared to the 35,000,000 barrels. In other words, for the total year 1938 we exported to the ERP countries 76,000,000. The ECA program calls for exporting only 35,000,000 for the fiscal year 1949. Mr. WIGGLESWORTH. What did we export in the calendar year 1947? Mr. BALL. Fifty-five million. The ECA program, in other words. calls for exporting about 1.5 percent of our United States supply in the fiscal year 1949. In 1947, we exported 150,000 barrels per day, so that the ECA program for 1949 calls for a reduction of 55,000 barrels per day compared to 1947, which is a reduction of 36 percent. Mr. CASE. Does that take into consideration the demand for our own people in the occupied territory of Germany and Austria? Mr. BALL. Yes. That includes the western zone of Germany, excluding requirements of our occupation forces. I may say in comparing these figures with 1947 that our exports have already been scaled down very materially below the 1947 level. As a matter of fact, they have been scaled down now so that for the first quarter of 1948 they were running at about the level proposed for 1949 under the ECA program. So that the ECA program is not adding to the rate at which we are already exporting. Mr. CASE. Does it make any inroads upon the quantity we would normally get from such areas as the Caribbean? Mr. BALL. No, that contemplates that our own imports will continue to increase. As this program goes along on the longer range, it will mean an increase in production in the Middle East and a lessening of the drain on the Caribbean and make more available for import into the United States from the Caribbean area. Mr. KERR. When you speak of barrels, do you mean refined petroleum products? Mr. BALL. This is crude oil and refined products. It is all petroleum. FINAL DETERMINATION BY SECRETARY OF COMMERCE AS TO AMOUNT OF PETROLEUM PRODUCTS TO BE EXPORTED I have said the exports have already been scaled down to about the proposed ECA figure, and that points to one thing that seems to me very important in figuring what the effect of this will be on the domestic economy. It is that the European Recovery Act, Public Law 42, leaves with the Secretary of Commerce and not with the ECA Administrator, the final determination as to what amounts will be exported, so that exports will continue to be subject to the same scrutiny that they now receive. Mr. STEFAN. Does that mean that the Export License Control Division of Commerce will handle this item? Mr. BALL. They will still have the last say. Mr. STEFAN. And have you taken into consideration the statement made by the Export Control Division of the Department of Commerce when they told this committee: The unprecedented demand for petroleum products has resulted in serious shortages of these products, particularly in certain areas of the United States. This precedented demand for petroleum means a greater need for additional wells, ore recycling plants, pipe lines, pump stations, refineries, storage facilities, kers, barges, tank cars, and tank trucks. If these items could be supplied sufficient quantity, it would permit the petroleum industry to produce more and transport it more efficiently and effectively. The petroleum industry has not been able to obtain all the materials needed to relieve the shortage which w exists and which may grow more serious in the coming months. How do you justify that statement with the statement that you are going to get more from the Caribbean? INCREASE IN IMPORTS OF PETROLEUM PRODUCTS Mr. BALL. I subscribe to every statement made there. We anticipate a material increase in the domestic production and distribution if the petroleum industry can get the steel to do it. I think we are going to see a material increase in crude production this summer, from the point of view of the wells that are already under way and in |