Why US petroleum lobby opposes oil import fee
New York — Last week the American Petroleum Institute (API), the oil industry's powerful lobbying group, came out against a proposed fee on imported oil.
But the official stance, cleared at its board meeting in New York, did not meet with unanimity. In fact, according to a chief executive officer of an independent oil company present at the meeting, the board ''was pretty well split, for and against the fee.''
Charles DiBona, president of the API, says that even though some top executives were in favor of such a tax, ''the preponderance'' of those present were not. The issue has had ''a pretty good sounding'' over the past three months, Mr. DiBona noted. It went through the API's Public Issues Task Force as well as two committees.
Domestic independent producers felt that if there was going to be any oil tax it should be on imported crude; the major internationals, represented on the board, were opposed to it, feeling it would put them at a competitive disadvantage.
With industry refinery utilization at less than 70 percent, the fully integrated oil companies - those that have marketing and refining as well as exploration and production capabilities - would feel threatened by such a tax. Offshore refiners, in Aruba and Curacao in the Caribbean, for instance, would have a price advantage over East Coast and Gulf Coast refiners should they ship in untaxed refined products, such as gasoline.
Supporting the tax, one participant in the discussion notes, is the fact that if a fee were placed on imported oil, only part of it would work its way to the gas pump. This is because only part of an imported barrel of crude is refined for gasoline or motor oil.
Another favorable aspect of the import fee, points out George E. Trimble, chairman of Aminoil USA Inc., a subsidiary of R.J. Reynolds Industries Inc., is that the fee can be imposed and removed by the president without the need for legislation. If there is an additional tax on gasoline, or an energy user tax, Congress must pass legislation both to impose and remove it.
On the other hand, argues John F. Bookout, chairman of Shell Oil, any import fee is ''interfering with fair trade.'' The Shell chairman, present at the API discussion, says he believes an import fee would act as a ''retardant'' in the recovery process, especially for the auto industry. And exporters, such as chemical concerns, with higher feedstock prices would be at a competitive disadvantage, he notes.
The API, in its official release to the press, listed seven reasons it considers the import fee not in the national interest. Among them:
* It's expensive. The association figures it will add to the energy bills of most consumers. The consumer group Energy Action Coalition -- which rarely sides with the API -- agrees, and also opposes the tax.
* It's inequitable. Parts of the country that rely on natural gas more than oil, for example, would feel it less.
* It would place US refiners at a cost disadvantage. Caribbean or South American refiners, unless a similar fee were tacked on refined product, would have an advantage over US refiners. This might necessitate the reintroduction of ''entitlements,'' a program that evened out the differential between domestic crude prices and overseas prices when price controls still existed. Entitlements were generally disliked by all segments of the industry.
The API also considers the tax ''anti-free trade,'' discriminating against energy-intensive businesses. It says the tax is capricious, since there is no national-security need for it. ''It's just bad for the country,'' DiBona said.
Mr. Bookout noted in an interview that Shell would probably stand to gain by an oil import tax, since it mainly uses domestically produced crude oil and gas. Nonetheless it does not endorse the tax. And, he added, he believed Congress would more likely be inclined to pass a broader-based tax.
Energy companies are back on the auction block. Buyers are not queueing up to bid for them as they did a year ago, however.
According to industry sources, at least two major energy companies are being shopped around among potential buyers: Coastal Corporation, a holding company that has international marketing and refining operations and owns a gas pipeline company, and the US assets of Husky Oil Ltd., a Canadian-based company.
In the case of Coastal, an original plan to spin off parts of the company met with shareholder resistance. Instead, shareholders indicated to management through their actions that they were interested in seeing the company sold. An investment banking firm is working on a study of the spinoffs. But sources say that an individual close to Coastal has shown the company to at least one prospective buyer. But Coastal denies this.
Husky Oil, on the other hand, is employing Salomon Brothers to seek out potential buyers. Husky had originally agreed to sell its US operations to Marathon Oil for $650 million. Husky needs the cash to expand in Canada, where government incentives make it attractive for Canadian-owned companies to operate.