Now prior to this time most of us had purchased all of our product from one source. This was done for a number of reasons. I won't go into them now. All of a sudden in the midst of a cold snap we found ourselves pulling into a deepwater terminal and we found ourselves faced with the fact that this terminal then was without a supply of product. In the midst of a cold snap our trucks were, believe me, working overtime to deliver this product to our customers.

When this happens it creates havoc. By hook and by crook, by begging, borrowing, and stealing we were able to get through those crises, to the best of my knowledge anyway, without any homeowner being without oil in his tank.

But it was a near thing and we got through only by working exceptionally long hours. Now if this situation had persisted, and in some instances it did go on for as long as 4 or 5 or 6 or 7 days, if this had persisted any longer, there would have been a catastrophe. If you can imagine eight out of 10 of the homes and small businesses in the New England States-and as I am sure both you gentlemen know the winters that we have in New Hampshire, Maine, Rhode Island, and Connecticut-if you can picture eight out of 10 of these homes frozen, if you can picture the small businesses without heat, you can imagine the catastrophe that would be to New England.

And we came, believe me, you don't realize how close we came to this particular situation during those 2 years. It is only, I must add, due to the emergency allocations that were granted to a degree that this was averted during this past winter.

And gentlemen, the Government has it within its power to relieve this situation. And we feel in New England that this situation should be relieved. There is no reason to have this type of a shortage on hand, believe me.

Senator PASTORE. If I may interrupt at this point, on two occasions I called upon the Secretary of Defense to relinquish some of its quota in order that some of the companies could get oil and to the credit of Mel Laird of course he subscribed to that and did release the oil.

You see, I can't put my finger on it, but after all, we are dealing with a group of people who know the ways of life, who know the ways of competition, and know what is going on in their Government as well. You have got to admit that during the time that this task force was investigating, there was a loosening up of the oil.

When you talk about this winter as against previous winters, you see, they knew this was going on and they were building up their case. But the point we are making here is it is within the power of a half dozen companies to either open up this spigot or to close it.

Psychologically this whole system has had a very bad effect on the price situation; psychologically it has had a bad effect. These people can't go in and negotiate for this oil over a period of time; they can't do that any more, you see.

As a matter of fact, they are at the mercy of their own competitors, as has been brought out here. And this is where this thing is out of whack. It has been causing us a lot of trouble.

Yes, you might say there is enough oil. It is like having a glass of water to quench the thirst of a thirsty person; it depends on whether you allow him to have the glass of water or whether you give it to him

thimble by thimble. You can tease the guy to death. That is what we have been having done to us in New England, they have been teasing us to death.

Senator MCINTYRE. Senator Muskie?

Senator MUSKIE. I think Senator Pastore put his finger on it. What has happened to the price of oil certainly is related to the supply, it has to be.

Mr. DEBLOIS. That is correct.

Senator MUSKIE. So there is not only the question of whether or not in any specific home a tank is dry, but whether or not there is a sufficient supply to assure the New England market that the supply will carry it through the winter, and that there is competition in the availability of the supply to affect the price in a favorable way.

I think that Professor Weiss' analysis, which is contained in appendix L, really doesn't cover those points very well.

Senator MCINTYRE. I am going to reserve the question and ask it of Mr. Kenny later-but I would like to get a little description of this. Let me quote from page 318. This is what I thought I would like to hear a little more about.

Under II on page 318, it says: "Are independent distributors subject to a price squeeze?"

Weiss reports as follows:

The allegation. A number of independent dealers have pointed to a price squeeze in No. 2 fuel oil and attributed it to the independent distributors' dependence on refiners (allegedly forced by the import quotas) and to the availability of import tickets to refiners but not to independent distributors. A price squeeze arises where an integrated

This is one of the vertically integrated big companies

seller sets a low retail price relative to his wholesale price, so his nonintegrated customer-competitors are unable to cover costs. His own distribution system may show a low profit also, but this is merely an accounting-what he loses at retail he makes up for at wholesale. In a purely competitive market, this would be impossible because the high wholesale price would attract increased supplies and would be competed away. However, if the wholesale market is highly concentrated and the nonintegrated buyers

That is the independents

have no alternatives, a squeeze is a real possibility.

That is what I mean by a shortage, not in the physical sense, but the fact that they say "I am not going to pay that price."

Mr. DEBLOIS. That is what has happened since 1959 with the wholesale segment. I tried to point this out by showing that 17 of these independent wholesale terminal operators were in effect squeezed out of business, because of the fact that there was a convergence between the price they were forced to sell at and the price that they were forced to buy at.

Let's face it, when they get into a position where these two curves cross, they are losing money and they have really no choice but to sell. And this is what happened in these particular instances.

Senator MCINTYRE. Well, thank you, Senator Pastore, and thank you very much, Mr. DeBlois.

We will call as our next witness, Mr. Thomas Easley, executive vice president, New England Council.

Mr. Easley, we are happy to welcome you here again. You may proceed to testify in any manner you wish.

STATEMENT OF A. THOMAS EASLEY, EXECUTIVE VICE PRESIDENT, THE NEW ENGLAND COUNCIL

Mr. EASLEY. Thank you very much, Senator McIntyre.

My name is A. Thomas Easley and I serve as executive vice president of the New England Council for Economic Development. The council is a nonpartisan private membership organization of approximately 2,100 members and depends entirely on membership dues to finance its operations. We receive no State or Federal funds and this assures that the organization is broadly representative of the private sector and reflects the region's interests-not those of any single group within the region.

This is not the first time that I have had the opportunity to appear in Washington to discuss and comment on the continuing problems of oil for New England. In fact, I appeared before this very committee on December 30, 1968, and subsequently testified before Senator Hart's Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary on July 29, 1969. In addition, the council submitted its views to the Cabinet Task Force on Oil Import Controls.

It seems absolutely clear that no subject has been more thoroughly analyzed and reviewed in the last 18 months than the question of this country's oil import policy. As a result of all this effort and analysis, an overwhelming substantive case has been made-and clear-cut conclusions have been reached that this Nation can afford to import more foreign oil without incurring any threat to our national security.

Yet, despite all these efforts, despite all the work, no relief has been forthcoming. The New England area, which proportionately bears the heaviest weight of the burden of our current restrictive oil import policy, still pays the highest price in the Nation for its home heating oil. Your leadership, Mr. Chairman, has helped keep the New England oil problem in the public eye and we appear here before your committee once again today in the hope that these hearings will focus the attention of the administration on the action required immediately to solve the home heating oil problem in New England and in the Northeast. It seems to us that at a minimum, New England should have an answer to this problem by July 1, 1970. This will give our oil distributors time to arrange for additional foreign supplies prior to next winter's heating season.

I admit to you, Mr. Chairman, that despite all of your efforts and the efforts that we and others in New England have made, we have nothing concrete yet to show for it. At the same time, I believe that progress has been made. The New England problem is now generally recognized both the majority and minority of the Cabinet task force recognized the economic inequities and burdens that New England consumers have experienced because of the unavailability of adequate supplies of home heating oil at a reasonable cost. The imperative need for action to allow substantial additional quantities of home heating oil into the New England market is clear. Thus, if progress is measured by the growing acceptance of the merits of our case and the need for action to solve our problem, then, indeed, progress has been made. The home heating oil problem in the Northeast area can only be understood, of course, in terms of the inequities of the overall mandatory oil import program. The Cabinet Task Force studied the cost.

of this program to the Nation's consumers in great depth. They place the current cost at about $5 billion annually. Moreover, they show that this already outrageously high cost is going to get larger and larger as the years go by-reaching almost $812 billion by 1980. The inefficiencies in the petroleum sector of our Nation's economy are a direct result, unfortunately, of Government intervention in the marketplace. The practice of State prorationing effectively eliminates meaningful competition among domestic oil producers. The mandatory oil import program simultaneously prevents the U.S. oil industry from facing any effective competition from abroad.

Now, I know that all of us get callous at times about inefficiencies and are not impressed sufficiently with economic excesses of one kind or another, but we can't ignore the task force findings. We can't ignore a documented study which tells us that this Nation's consumers will be paying between $60 and $70 billion over the next decade more than they should be paying under a free enterprise system for oil products. That $60 to $70 billion is direct price inflation. It is unconscionable to let that situation stand if the administration is even halfway serious about controlling inflationary forces now operating in our economy. The President has now appointed a new Oil Policy Committee to study the overall oil import problem some more. In the interim, the President says, action can be taken to correct some of the inequities of the present program. Just last month, the Director of the Office of Emergency Preparedness, who is chairman of the new Oil Policy Committee, reemphasized the need for "greater effectiveness and equity in the system we have." One area he singled out for priority action was home heating oil. We agree. It is only a small part of the overall import problem, but it is a part that hits hard at New England

consumers.

Accordingly, we urge that there be a substantial increase in imports of home heating oil authorized immediately by allowing our independent terminal operators to bring in a portion of their requirements from abroad. This would create competition in the marketplace once more and serve to blunt the inflationary price trends for at least this one vital product.

Mr. Chairman, on the basis of all the statistical data and evidence generated over the last year and a half, I could document my points at far greater length. The factual record is voluminous. It seems to the New England Council, however, that the time for assembling data has passed and the time for action is at hand. At a minimum, it is our urgent recommendation that this committee restate and reemphasize the simple fact that New England needs relief now.

Finally, Mr. Chairman, let me congratulate you and all of the public leaders from New England who have been in the thick of this fight for so long. We would understand if you grew frustrated with the battle. We certainly have felt frustrated. But we keep coming back to the fact again made by the Federal Reserve Bank of Boston at yearend that the New England economy is not growing as are other sections of the country. Part of the reason for that relates directly to this Nation's restrictive oil import policies. In view of this, we can't give up. We must persist. As Coach Lombardi, who is now well known here in Washington, once put it, "The harder you work, the harder

it is to give up." I think that's an apt motto for all of us and that's why we're here today.

Thank you, Mr. Chairman.

Senator MCINTYRE. Thank you, Mr. Easley.

I would say, Mr. Easley, that all along it has appeared that we have such a good case really in District I, that it hasn't been too difficult to keep trying to be as bulldoggish about this as we can. And your reference to Coach Lombardi, I hope we will find him continuing to fight the same way, so the Redskins will be moving up.

But as an expert on the economy of New England, and as a representative of the New England Council, you state that one of the reasons that the New England economy is not growing as fast as the rest of the Nation is this oil import policy.

Could you expand on that somewhat for the record?

Mr. EASLEY. Yes. To the extent that energy cost is a significant factor in the cost of production, for example, to the extent that it is a significant factor in our ability to be competitive in world markets, and being at the far end of a long transportation haul, having no indigenous fuels, this is a very important factor in our cost of doing business in New England.

Senator MCINTYRE. You will remember that back in December 1968 those of us who were concerned about the high cost of No. 2 fuel oil and other oil products in New England saw an opportunity through the petition of the State of Maine in Machiasport foreign trade zone application.

Now, many times I have been asked how is Machiasport doing, and this remains a great vague question. I can see no reason, and the task force says there is no reason that the Machiasport foreign trade zone shouldn't be granted, why the license has not been issued. But is it not true that we are not tied to Machiasport as the solution to our problems in New England; are we?

Mr. EASLEY. Definitely not. An indigenous refining capacity, responsive to the needs of the region, I think would be very helpful, particularly a major size unit of production. It would inject competition into the market that has not heretofore existed. Relief is also possible, as you and others and we have been pleading, in a material relaxation, not elimination, of the mandatory oil import program, thus allowing access to lower cost world sources of petroleum.

Senator MCINTYRE. All over the country and certainly in New England you have seen the effects of the inflation in the last 2 to 3 years. What would be your comment on the possibility that number two fuel oil might be coming into the New England area at 1 or 2 cents less than the current price? Would that be a factor in this inflation problem?

Mr. EASLEY. Very definitely. As was previously testified, each 1 cent a gallon reduction in the cost of home heating fuel is $40 million. That is important money in any region. And similar savings are possible to consumers throughout the country. Again I would like to, as Congressman Conte mentioned, say that this is indeed a national problem. New England is hit particularly hard, relatively, to other regions, but all consumers of the country are similarly affected.

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