Some Oilmen Call for Tax On Fuel Imports Into US

Move would benefit domestic production and cut reliance on Gulf

By , Staff writer of the Christian Science Monitor

FOREIGN oil supplies a lot of power for the United States, but it can generate bad news, too. Just look at some items reported last week:

* A Liberian-registered tanker grounded off the Shetland Islands in the north Atlantic broke open, creating one of the world's largest oil spills.

* Merely two years after the Gulf war, US troops were again returning to Kuwait to protect it from aggression by Iraq. The American Petroleum Institute reported that domestic US oil production fell last year to the lowest level since 1960. Meanwhile, rising consumption boosted US dependence on petroleum imports.

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* The Commerce Department reported that foreign oil cost the US $17.72 per barrel in November, down from $18.15 a month earlier. However, oil prices rose on the news that the president of the Organization of Petroleum Exporting Countries will visit Middle East members to orchestrate a production cut to achieve OPEC's target price of $21 a barrel.

Because of the cost and risk of foreign oil, imports should be taxed, says a trio of independent oil and gas executives.

They are urging Bill Clinton, who moves into the White House tomorrow, to impose such a tariff during his first 100 days in office. Other analysts dispute the usefulness, fairness, and likelihood of an import tax.

President-elect Clinton is considering several measures, including a tax on oil imports or an increase in the levy on gasoline, to cut the federal budget deficit.

The oil company chairmen - Apache Corporation's Raymond Plank, Enron Oil and Gas Company's Forrest Hoglund, and Mitchell Energy and Development Corporation's George Mitchell - estimate that an import fee of $2.50 a barrel would put $7.3 billion in Uncle Sam's wallet.

It would also fill their own wallets. Independent companies usually do not import oil, but sell only their own domestic production. They would be able to raise their price by the amount that a tax increased the cost of foreign oil.

"Yeah, there's an element of [the call for an import fee] that is self-serving," admits Roger Plank, Apache's vice president of communications and the chairman's son. However, he argues that the US benefits from domestic production, while foreign oil bears the added, unrecognized cost of sending troops to protect foreign producers.

Mr. Plank accuses OPEC of practicing "predatory pricing" to drive US producers out of business. "There's no free market in oil," he says. As a result, the US oil industry lost 450,000 jobs in a decade, the most of any industry.

Other industry observers view OPEC as a failed cartel, prevented by a very lively free market from keeping oil prices at the artificially high level it and US independent producers would like. And Plank neglects to put any blame for the shrinkage of the US oil industry on the scarcity of viable prospects that remain here after more than a century of intensive exploration.

Apache is willing to commit in advance to reinvesting some of its windfall from an import tax in stepped-up exploration, Plank says.

Independents could find "quite a bit" of fossil fuel, mostly natural gas. He acknowledges that the US would remain significantly dependent on imported oil.

If it comes to a choice between taxing oil imports and increasing the gasoline tax, Clinton will probably do the former, says Bob McNally, environmental policy analyst at Energy Security Analysts.

Clinton promised during the campaign not to raise the gasoline tax. If he breaks his pledge "the Republicans will be reading his lips in '96," Mr. McNally says.

However, an import tax "has about as much chance of happening as the Vatican has of launching a rocket to the moon," argues Edwin Rothschild of Citizen Action. Every other industrial group, non-oil-producing states, and consumers will oppose the tax, which also violates trade agreements.

For the American consumer, "basically neither" tax is desirable, he says. A higher gasoline tax might be acceptable if some of the money were redistributed to the poor, who would be hardest hit, Mr. Rothschild says. Other analysts question how that could be done.

Philip Verlager, a visiting fellow at the Institute for International Economics, recalls studies that found that 90 cents of every dollar collected by an oil import fee would be offset by the impact on consumers.

An increased gasoline tax would be better at raising revenue and stimulating conservation. But it would do nothing to stimulate domestic production, the oil economist says.

"Who's better looking, Dracula or Frankenstein?" That's how Jerry Levine, director of corporate studies for Amoco Corporation, compares an import tax and an increased gasoline tax.

He says major oil companies, which produce US oil and import foreign oil, do not want any tax on energy for the purpose of balancing the budget.

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