DIVISION SEEN ON HOW TO HELP U.S. OIL INDUSTRY
The U.S. Congress and the oil industry
are deeply divided on ways the government should assist the
industry, hurt by the sharp fall in oil prices, and the
subsequent growth in oil imports, industry analysts said.
    "The industry is deeply divided between those who support an
oil tariff and those who believe tax incentives are better,"
said Daniel Yergin, director of Cambridge Energy Research
Associates, which recently completed a survey of the U.S.
Congress on energy issues.
    Yergin said he saw mounting support within Congress for tax
incentives rather than an oil tariff or import fee.
    Today U.S. Energy Secretary John Herington said he will
propose tax incentives to increase edomestic oil and natural
gas exploration and production to the Reagan Administration for
consideration. White House spokesman Marlin Fitzwater said the
proposal would be reviewed.
    Herrington said, "I would like to shoot for one mln barrels
a day (addition) to U.S. production." U.S. oil output was off to
8.4 mln bpd in the week of March 13, down six pct from last
year, the American Petroleum Institute said.
    Oil industry analysts have forecast oil prices to average
about 18 dlrs a barrel for the year and many believe that a
move above that level will be unlikey for the near term.
    Paul Mlotok, oil analyst for Salomon Brothers Inc said that
"even with the rise in prices for the last week or two we've
only altered our average price scenerio to about 17.50 dlrs for
the year."
    Analysts said that at that price renewed drilling and
exploration to reverse the decline in U.S. crude oil output
will not take place as the companies are waiting for stable
prices over 20 dlrs to renew exploration.
    John Lichtblau, president of the Petroleum Industry
Research Foundation Inc in New york in recent testimony to
Congress said "The continuing decline in U.S. oil production is
virtually inevitable under any realistic price scenario. But
the future rate of decline is very much a function of world oil
prices and U.S. government policy."
    Lichtbalu said that tax breaks could be used to raise oil
production but would only work over time.
    "Lowering the producing industry's tax burden would probably
be a slower stimulant (to output) than a price increase but
would not raise energy costs." Lichtblau said.
    But the small independent oil companies who do much of the
drilling in the U.S. are looking for the more immediate relief
which could be brought on by an oil import fee.
    Ronald Tappmeyer, president of the International
Association of Drilling Contractors, said, "The members of our
trade asssociation are convinced that only a variable oil
import fee that sets a minimum price trigger can protect our
nation." The association represents some 1,300 drilling and oil
service companies.
    The CERA survey of Congress shows that the oil import fee
will face a stiff uphill battle.
    Yergin said that the poll which was conducted in January by
a former Congressman, Orval Hansen, showed support for the oil
import fee from 22 pct of the Congressmen surveyed largely as a
means of protecting the domestic petroleum industry.
     At the same time 48 pct of the Congressmen surveyed
opposed the fee with the respondents saying the tariff would
hurt consumers and some regional interests.
    But 80 pct of the sample said support for a fee could grow
if production continued to fall and imports to rise.
    Yergin said that imports above 50 pct of U.S. requirements
"is a critical, symbolic level. If they (imports) move above
that level, a fee may not be legislated but there will
certainly be pressure for some form of action."
     But Lichtblau, in a telephone interview, said, "a 50 pct
rate of import dependency is not likely to happen before 1990.
    In 1986 U.S. oil imports rose to 33 pct of u.s. energy
requirements and shopuld be about 34 pct in 1987, he added.
 Reuter
