Quota for the West

OIL & GAS

To 18 West Coast oil importers last week went a request from Washington to cut their imports of crude oil during the first half of 1958 from a recent rate of 300,000 bbl. a day to 220,000. The import curb was no surprise, since Washington last July forced oil companies east of the Rockies "voluntarily" to reduce crude oil imports to protect the market for politically powerful U.S. independent oil producers. Nevertheless, the latest pronouncement drew sharp and angry protests from such companies as the Richfield Oil Corp., which was ordered to import no more than 9,100 bbl. daily v. a recent rate of 22,000. Said a Richfield vice president: "This is ridiculous. We have no information from Washington how this allocation was arrived at."

Still stronger protests came from Venezuela and Canada, which export oil to the U.S. Canada's Finance Minister Donald Fleming angrily declared: "The Canadian government cannot accept the view that there is any justification for U.S. limitations on oil coming from Canada on either economic or defense grounds."

"Jack Up the Protection." What peeved the Canadians as much as the request itself was the reason given for it. As before, Washington justified the cut on "security" grounds, i.e., the argument that in time of war, when tanker imports might be cut off by submarines, the U.S. will be thrown back on its own oil production, thus must keep the independent producers healthy. But Canadians sensibly pointed out that their oil is shipped in pipelines and would not be cut off. Warned former Canadian External Affairs Chief Lester B. Pearson: "Any further restrictions on Canadian imports into the U.S. would make further defense cooperation more difficult." The Canadian press seconded him. The conservative Toronto Telegram's Washington Correspondent James M. Minifie snapped: "Are safety-pin assembly lines closing down? Jack up the protection. Who cares about friends?"

In terms of actual oil sales, Canada's hurt is less in the present than in the future. Canadian oil exports to the Pacific Coast are running around 82,000 bbl. a day. At most, they are likely to go down no more than 5%. But Canadian oil economists projected a major increase in shipments, anticipated that in five or six years oil-rich Alberta, for example, would be pumping 400,000 bbl. of oil daily into the U.S. market. Any move to set limits on Canadian oil imports was a signal to Canada not to count too much on the U.S. to absorb her rising oil production. Moreover, the curb fell at a bad time for the new Tory government. As part of its campaign for greater economic independence from the U.S., it had been holding up approval for the export of Canadian natural gas to the U.S. Now, to help oil companies, which also own gas, Canada may be compelled to let natural gas that she wanted to keep back for her own development flow to the U.S.

Cure for the Surplus. Meanwhile, the U.S. oil glut that prompted the import curbs is being cured. Oil imports were well under the quotas, and inventories of U.S. crude stocks were down to 279 million bbl. from 288 million last July, when import curbs were first applied. This was only 14 million bbl. more than companies reporting to the Texas Railroad Commission, a potent instrument of the domestic oil producers, recently set as desirable and normal operating stocks. During the next two months, Washington is expected to consider whether voluntary import quotas will be needed for the year beginning July 1 and, if so, how restrictive they need be. By acting in time the Government hoped to keep the oil import curbs at a minimum.

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