Now the Heating Fuel Furor

The U.S. subsidizes some imports--and enrages its allies in Europe

The energy debate is turning into a finger-pointing fiasco. While trains and other forms of mass transit choke up with riders and driving in the U.S. declines for the first time in years, Americans go looking for scapegoats. Consumers accuse the oil industry of pushing up prices by holding back supplies. Oilmen blame Washington for snarling them in red tape and overregulation. Congress blames the White House for not providing effective leadership. The President blames the public for not believing that the peril is real.

Last week Europeans got into the blame game. Government officials, editorial writers and just plain folks by the millions were griping that if Jimmy Carter were to get his way, Europeans would wind up shivering through next winter in unheated homes. To the Europeans, it looked once again as if the world's most powerful nation--and premier petro-pig--was trying to push its energy agonies off on its allies. At issue was the Carter Administration's quiet announcement three weeks ago of a "temporary" U.S. subsidy of $5 per bbl. on imported diesel oil for trucks and tractors and heating oil for homes, factories and office buildings.

Stockpiles of these so-called distillate fuels are dangerously low, down some 15% from a year ago, and they will not be replenished quickly because the Administration is urging oil companies to step up their refinery runs of gasoline instead. The $5 subsidy is supposed to help ease the pinch by boosting diesel and heating oil imports from refineries in the Caribbean. Yet Europeans are every bit as dependent on scarce supplies of diesel and heating oil as Americans are, and they too get deliveries from the Caribbean refineries. The Carter Administration claims that the Europeans' panicky, pay-any-price mentality has lured so much Caribbean production to the Continent that U.S. importers are no longer receiving their fair share. The Europeans retort angrily that Washington's subsidies are just pushing up prices even higher and that the U.S. is actually getting all the oil that it normally does in the first place.

Neither side so far has produced convincing statistics, but by last week the squabbling had degenerated into some of the nastiest transatlantic name-calling in years. The West German Economics Minister, Count Otto Lambsdorff, expressed "surprise and regret" at the U.S. subsidy. One of his assistants captured the prevailing sentiment: "It hurts when your friends stab you in the back." In Washington, French Foreign Minister Jean Franc,ois-Poncet led a weeklong parade of protesting diplomats through the White House. Franc,ois-Poncet got a mere 15-minute meeting with President Carter, and that reflected the crisp indifference that the Administration seemed to be showing.

At the least, the $5 subsidy is destined to set off a whole new surge in the price of the fuel, which in some parts of the U.S. has jumped by more than 30% since last autumn. When news of the subsidy reached Rotterdam, dealers marked up their quoted prices $5 to $6 per bbl. A $60-million shipment of heating oil from the Caribbean to Rotterdam actually jumped $10 million in value during the week as nervous traders on both sides of the Atlantic bid against each other to acquire the precious cargo before the ship reached port.

The subsidy plays directly into the hands of the OPEC cartel. By risking a wild scramble for imported heating oil, the Administration is, in effect, encouraging oil producers to raise their already extortionate crude prices all over again. After all, why not do so if the U.S. keeps coming up with fresh schemes for paying the money? That seemed OPEC's view, as its secretary general, Rene Ortiz of Ecuador, declared last week that he would like an increase of at least 25%, to a new base of $20 per bbl., when the cartel meets in Geneva on June 26.

The heating oil subsidy also undermined the U.S.'s pleas for unity among the oil importing nations. Last week Energy Secretary James Schlesinger said that the U.S. has met its pledge to the 20-nation International Energy Agency in Paris to cut consumption of petroleum by 1 million bbl. daily. But the reduction has been caused largely by the lack of gasoline, which Schlesinger's department is struggling to correct.

So far, most other industrial nations have escaped the supply problems that are troubling Americans, but that is beginning to change. Oil consumption in Japan, which grew last year by only 1.5% because of slack in its economy, is now climbing at 5% annually. Japanese officials expect a supply shortfall of perhaps as much as 5% by midsummer. Even Britain, whose oil output from the North Sea is already 1.5 million bbl. daily and climbing rapidly, is experiencing sporadic but spreading shortages at the pump. Last week West Germany as well suffered its first gasoline delivery cutbacks.

Instead of competing with others for scarce supplies, the U.S. might be wiser to take the lead in developing alternative sources, like making oil from shale rock and coal, which would help break OPEC's lock. More and more, energy experts are coming to the view that Government will have to provide grants and guarantees to help get alternative energy industries going, much as the Government's Reconstruction Finance Corp. helped establish the synthetic rubber industry during World War II. The Administration is beginning to show some interest in such ideas, but it wants the money to come from President Carter's proposed windfall profits tax, and Congress could wind up deciding not to enact the levy at all. The truth is, when it comes to erratic policymaking, the U.S. need point the finger only at itself. -

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