Up the Quotas

Oil import quotas have been something of a sacred cow through four successive U.S. Administrations, certainly including Richard Nixon's. Yet last week Nixon signed a proclamation allowing importers to bring in an average 230,000 bbl. more a day for 1972, about 15% more than before. Because there are just over seven months left in the year, the daily increase will really amount to 400,000 bbl.

The President had little choice. For the third straight year, the U.S. faces a fuel and energy shortage. This, combined with heavy overloads on power systems at peak periods of use, may well dim lights and shut down air conditioners on sweltering days this summer. State restrictions on domestic output, which accounts for about three-fourths of the 12 million bbl. of oil that the nation needs each day, have been loosened; Texas wells are now allowed to produce at 100% of theoretical capacity. But the U.S. industry has been unable to meet demand, and even some oilmen have been asking for a boost in the imports. The heaviest pressure has come from independent refiners; unlike those controlled by big, integrated producing companies, they must buy crude wherever they can find it.

On the other side, independent oil drillers grumbled that the quota increase will hold down prices and thus make it hard to get bank financing for further exploration. The increase in quotas, however, was a victory for consumers, who presumably will be spared the price boosts that a shortage would cause. Nixon knew that such boosts would damage his anti-inflation campaign. Still, the quota increase underscores the growing U.S. dependence on overseas oil supplies that could be shut off by wars or political blackmail.

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