"high prices for No. 2 fuel oil, which have held up despite the existence of greatest distillate inventories in several years;

"refusal of major refiners to provide long-term assurance and contracts for supply at competitive prices;

"decreasing sources of supply due to acquisition and mergers of independent refineries by the majors;

"decreasing availability of American flag tankers to independent operators; "decline in profits; and actual losses for some operators;

"loss of customers;

"increasing reliance on emergency purchases of wholesale supplies at premium prices in the open market."

In other words, the independents are between the upper and the nether millstone. They must purchase from the major oil companies, with whom they must also compete for customers. They are sharply restricted as to allocations. They are at the mercy of their suppliers when shortages develop. Their survival depends on their being given greatly increased and direct access to allocations— not of crude oil, but of No. 2 fuel oil. To require the independents to deal with the majors on the basis of crude oil allocations would mean that the independents would be forced to pay higher prices for No. 2 oil whenever the majors choose to produce too little No. 2 fuel oil, creating shortage in supplies.

The cost to consumers of this system need hardly be stressed. The major oil companies, who have a direct stake in keeping the cost of No. 2 fuel oil as close to that of gasoline as possible, retain effective control of pricing. The Legislative Reference Service, on the basis of Bureau of Labor Statistics figures, has apprised me of the following steady price rise of No. 2 home heating oil in the New YorkNew Jersey metropolitan area.

March 1965

Centa per gallon

March 1966–

March 1967_

March 1968–

March 1969.

15.9

16. 2

16.9

17.2

17.8

Assuming no change in consumption since 1967 in which year Interior Department figures show that 83.7 million barrels were consumed in New York State alone, the people of my State are paying 1.9 cents per gallon (79.8 cents per barrel), or a total of $76.8 million, more per year to heat their homes. Similar figures have been submitted to Secretary Hickel for the New England States. The only solution is to make increased supplies of home heating oil available from sources other than the major oil companies, namely, the independent terminal operators. In this connection, I am persuaded that the 30,000 barrel per day increase of imports of crude oil along the East Coast proposed by Secretary Udall last January is inadequate to produce the desired competitive effect. The increase should be in the neighborhood of 60 to 80,000 barrels per day.

In addition, any modification in the present program that may be established should make independent deepwater terminal operators who were not importers of record in 1957 eligible to receive import licenses for heating oil and should allow the Secretary of the Interior to allocate portions of the finished products quota to such operators for No. 2 fuel oil.

It is imperative that the present sequence on the independent operators be promptly relaxed so that they may effectively perform their essential economic role as competitors.

Sincerely yours,

EMANUEL CELLER

STATEMENT OF LESTER L. WOLFF, REPRESENTATIVE IN CONGRESS FROM THE

STATE OF NEW YORK

Mr. Chairman. I appreciate the opportunity to discuss a matter which has long been of concern to me the oil import quota.

As you know, earlier this year, I joined with several of my colleagues in sending a letter to President Nixon urging the President to consider eventual removal of all controls on the importation of oil so that the winter months would not find our already hard-pressed consumers having to face ever increasing fuel oil prices.

Unfortunately, Mr. Nixon's reply did not comply with our request. The prediction, subsequently, became reality. Our citizens were hard hit, and wound up paying an extra $4 billion for oil products.

His own Task Force in this matter was able to offer the President documented evidence that a "phased-in liberalization of such quotas would not have threatened the national economy nor would it have impaired national security.' Yet, the President stood firm in his decision and Americans faced spiralling fuel oil bills.

The winter months of 1969-70 have drawn to a close and fuel oil needs are down. But this does not mean we can overlook the fact that there are still obligations which lie head. We have an obligation to provide lower oil fuel rates for future years.

It is also important to note that the President's Task Force also made a request for a 5 year phasing-out of the oil import quota system with its replacement by a variable tariff system. This too would have been a readily accessible method for lowering fuel rates. Yet, this had not been acted upon. What remains is Secretary of Labor Schultz's proposal to establish a phased-out reduction of controls. This I believe must be accepted if we have intentions of halting spiralling fuel prices and the growing dismay that Americans have experienced in this matter.

I join with my colleagues in urging the President to reconsider the original and most effective suggestion that total removal of oil imports be undertaken. For his Task Force has clearly shown that the initiation of such a measure can save us more than $8 billion a year by 1980. In light of our current economic situation, Mr. Nixon would do well to reconsider the potential impact of such

a measure.

I believe moreover that the President's first and foremost obligation is to the most under-represented group in America, the American consumer. He cannot help the plight of so many Americans by turning his efforts away from the immediate call to reform, and continuing to look only toward the oil industry.

Such a liberalization of the oil quota, according to the Task Force, "would not so injure the domestic industry as to weaken the national economy to the extent of impairing our national security."

In conclusion, I would again like to urge the President to reconsider the necessity of implementing both interim and long term adjustments of the oil importation quota. Without such implementation we will face even colder and longer winters to come.

STATEMENT OF RICHARD D. MCCARTHY, REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK

I commend you for convening these hearings to spotlight the heating oil problems of the Northeastern States. There is no more pressing issue of oil policy, and I hope that from the evidence and testimony at these hearings will come a clear direction and a clear call for immediate action.

As a representative of the Buffalo area I can speak from bitter experience of the inequitable, burdensome impact of the oil import program.

Buffalo, unlike New England, has two refineries. But, like New England, we are at the end of the domestic oil transportation network and are far from domestic crude oil fields, and thus we must depend on pipelines for our crude oil. The domestic pipeline which serves Buffalo is antiquated and inefficient and, of course, costly. We do, however, enjoy access to a modern, efficient pipeline from Canada, which brings lower cost oil into our area.

Last month, President Nixon took his first act after receiving the report of the Cabinet Task Force on Oil Import Control. And that act dealt a severe blow to the consumers of the Buffalo area; that act dealt a severe blow to hopes for continued economic development in western New York State.

The Presidential action substantially reduced the access of U.S. refineries to Canadian crude oil. I said at the time, after analyzing the allocations issued at the end of March, I state even more strongly that the President's action was unwise, unwarranted, and in violation of the intent of Congress as expressed in the national security clause (section 232 of the Trade Expansion Act of 1962).

I might add, Mr. Chairman, that we were very pleased by the support given by you and others in New England to the protests against the President's restrictive action on Canadian imports.

We are pleased therefore to join in your plea for additional imports of No. 2 fuel oil for district I, which, of course, includes New York State.

I believe that No. 2 fuel oil imports should be allowed into district I without limitation, to assure an adequate supply in the coming winter and in subsequent years, and to assure a prompt reduction in consumer prices throughout the east coast.

We in Buffalo know full well the dangers of tight supply of essential home heating fuel, and we share your concern of avoiding a recurrence of the threats of shortage and run-out in the homes of New England that have concerned you for the past three winters.

We are even more directly concerned by the price problem. For while the New England States, as a region, pay the highest prices for No. 2 fuel oil, and bear by far the heaviest cost burden of the oil import program, the citizens of Buffalo also pay very high prices.

In fact, the Department of Labor's Consumer Price Index released last week showed that the average retail price for fuel oil in Buffalo is nearly 20 cents per gallon, one of the highest cities in the Nation.

We also share your outrage at the fact that the people of the Neighboring city of Montreal pay 14 cents per gallon to heat their homes-almost 6 centsor less per gallon than the homeowner of Buffalo.

With the stroke of a pen President Nixon could cut our heating costs by one-third. Imagine the impact of such a move in the fight against inflation.

We have very cold winters in Buffalo, and we pay for them to support an inequitable, inefficient and, as the task force report underscores, discredited program that gouges the middle American to enrich the coffers of big oil.

It's time for a change; It's time for action.

And I am pleased to join with the Senators and Congressmen of the Northeastern States in calling for immediate decontrol of all imports of No. 2 fuel oil into district I beginning July 1, 1970.

Senator MCINTYRE. Our concluding witness this morning is Mrs. Bess Myerson Grant, commissioner of consumer affairs of the city of New York. We are glad to welcome Mrs. Grant here, and we are very interested in your testimony that you are about to bring us on behalf of the consumers of the No. 1 city of America. We know of your fine work in this field, and I understand in many respects you are representing the views of the good mayor of New York, Mr. Lindsey. STATEMENT OF BESS MYERSON GRANT, COMMISSIONER OF CONSUMER AFFAIRS FOR THE CITY OF NEW YORK; ACCOMPANIED BY DAVID ANDERSON, STAFF MEMBER, PRESIDENT'S TASK FORCE ON OIL IMPORT CONTROL

Mrs. GRANT. Thank you, sir, for inviting me here. I would like to introduce Mr. David Anderson, who is a member of the staff of the President's task force.

Senator MCINTYRE. Fine, we are delighted to welcome Mr. Anderson here.

Mrs. GRANT. Mr. Chairman, I am pleased to have this opportunity to discuss what may be the single most scandalous instance of exploitation which the American consumer must face in meeting her family's basic economic needs. I refer to the policy of maintaining quotas on the importation of relatively cheap foreign oil, and thereby fixing the prices which consumers must pay at artificially high levels.

In particular, I believe that it is important at this time to call attention to the administration's apparent decision to scuttle the report of the President's own Task Force on Oil Import Control. This task force was chaired by Labor Secretary George Schultz, and was composed entirely of high level appointees of President Nixon himself. The task force's report was prepared on the basis of 9 months careful study, and after review of 10,000 pages of written submissions, by an exceptionally distinguished staff under the direction of Prof. Philip Areeda of the Harvard Law School. The report exploded once and for all the myth that oil import quotas serve to protect our national security. It exhaustively documented the fact that the only function of the quotas is to preserve the immense private profits of oil companies and oil investors.

The task force's recommendations were hardly radical. Indeed, I could not myself support them except as a necessary and temporary compromise. The report did not propose the termination of oil's status as a special object of Government largesse. It suggested merely that the administration alter the method of forcing consumers to make annual welfare payments to the industry. Tariffs, rather than quotas, the report demonstrated, could reduce fuel prices for the Nation's consumers without jeopardizing the standing of any oil company with Dun & Bradstreet.

But the oil industry doesn't want to substitute tariffs for quotas. Tariffs would illuminate a bit too dramatically the injustice inherent in the sheltered status of oil. Therefore, they might awaken the American people to the need for even more fundamental reform. So oil registered its opposition. And the administration, it seems, has reacted accordingly, President Nixon made an implicit public promise not to tamper with the oil import quota system-probably not until after the November elections.

I congratulate this committee for its courage in holding hearings on this vital question-in the face of overwhelming pressure that can be brought to bear by an industry with $5 billion in annual revenues at stake. Only by educating the people and giving them the facts can we who care about this issue, convert our individual concern into public concern. Only thereby can be dismantle this system of legalized larceny. Only thereby can we force Government to start protecting the people, and stop playing its present role, which is something like that of a cop in a crowd who stealthily picks the pockets of individual citizens and then distributes the proceeds to those hoodlums unable to succeed at the pick-pocket game without official aid.

Mayor Lindsay's Commission on Inflation and Economic Welfare gave a conservative estimate that the total annual cost of oil import quotas to New York City's population is $95 million. The President's task force stated that each individual New York City family loses nearly $100 each year in excessive payments.

In the aggregate, the oil industry extorts an incredible total of approximately $5 billion each year from consumers across the Nation by means of the oil import quota system. Not only do quotas excuse it from the inconvenience of meeting more efficient and less expensive foreign competition. Quotas also shelter the industry's devious price

fixing arrangements which have been created under color of State laws in oil-producing States. Moreover, oil companies even make vast profits from the resale of those amounts of foreign oil which Interior Department regulations allow to be imported under outstanding quotas.

Nearly $1 million is made every day from these resale rights. Since the beginning of the oil import quota program in 1959, Standard Oil of New Jersey has gained at least $305 million in this manner; Gulf has made over $290 million; and Standard of California has taken over $265 million. Every penny of these astounding totals rightfully belongs to tens of millions of ordinary families, many of whom have literally lost as much as $1,000 in excess payments for fuel-$1,000 which they could no doubt put to very good use in coping with the ravages of inflation.

There is only one conclusion a fairminded observer can draw from these facts. The magnates of oil-and the politicians who serve themhave said, "The consumer be damned."

Oil from Venezuela or the Middle East could be delivered to the U.S. east coast for about $2 a barrel. Oil from Texas costs about $3.90 a barrel on the east coast. For New York State, these basic figures mean that the cost of the program this year, 1970, will be almost half a billion dollars. When New England is added in, the cost is over $800 million in this year alone. This means that the oil quotas will cost New York and New England this year almost as much as the Federal Government is spending to fight crime in 1970. According to the report of the President's task force, over the next 10 years, the extra cost to the Nation's consumers of continuing this program will be about $65 billion.

This is a huge, hidden tax on consumers across the Nation-not only on those who live in the North-though northern consumers are most seriously affected. Northern States' economies receive no oil production taxes and they use oil for heating as well as for industry. Among the Northern States, New York and New England are most heavily taxed, because of their high consumption and great distance from the major producing areas. The tax is compounded in the Northeast because pipelines, which offer comparatively economical oil and gas transportation, do not effectively reach us. We must rely on U.S.-flag tankers, which increase the risk of pollution and which are approximately twice as expensive as U.S.-owned ships under other flags.

A final defect in the system of import restrictions is that it achieves its goal in the most inefficient way possible, by using quotas instead of tariffs. The task force makes evident that either approach can yield the same U.S. price for oil. However, quotas make it impossible for small marketers to buy more than a fixed quantity from foreign sellers an oligopoly can increase prices without worrying the foreigners might come and introduce competitive pricing into the market. Moreover, the quota encourages the State governments, as in Texas, to support prices by restricting the production of the most prolific (lowest cost) fields.

The naive might expect that a tax of this size-far higher than the annual cost of the C-5 and F-111 programs put together-would at least have a defensible reason for being.

Unfortunately, as the task force report makes clear, the national defense needs for the oil import program are largely a gleam in the