Texas free-traders knee deep in foreign oil

The free-market thinking of the Southwest's energy-producing states, traditionally as strong and independent as the Texas longhorn, is being challenged as rising imports eat away at domestic oil and related industries in the region. As the issue of foreign trade and its impact on domestic jobs heats up in Congress, calls are mounting here for a tariff on oil imports (usually $5 a barrel) and other trade barriers to help stem the flow of foreign gasoline and oil products into the United States.

These protectionist proposals come primarily from oil companies that are normally anxious to keep the government out of their business affairs.

At a meeting of Southern governors in Miami last week, Texas governor Mark White reiterated his opposition to barriers on imported oil, calling instead for retention of oil production tax incentives that would be eliminated under President Reagan's proposed tax reform plan.

Others recognize that, even if the region were united in a call for an oil import tariff, there is little reason to believe the rest of the country would turn a sympathetic ear. ``Three or four energy-producing states, even if they're hollering for protection, are unlikely to persuade the Midwest and Northeast to give up cheaper oil,'' says Harry Glenos, an economist with Republic Bank in Dallas. ``They'd say, `You guys have been gigging us for all these years with your prosperity, and now t hat the times are rough for you, you want protection?' ''

But other observers here believe support for protectionism could spread if job losses, already topping 150,000 in the oil industry, continue to mount.

``Most people around here are philosophically opposed to this kind of [government intervention],'' says Buddy Temple, chairman of the Texas Railroad Commission, the agency charged with regulating production of oil and gas. ``But people are also coming to recognize that we don't have fair trade in the world today.''

Mr. Temple, who favors oil-import barriers, says he believes efforts will be made to convince elected officials and the public of the need for protection. Texaco, Diamond Shamrock, and Ashland Oil are among the companies supporting an import tariff.

``Even people who may not think their job is directly connected [to the oil industry], if they see their area being affected, then the trade issue has more vitality,'' says Max Sherman, dean of the Lyndon Baines Johnson School of Public Affairs at the University of Texas at Austin.

A report recently published by the Independent Refiners Coalition (IRC) says oil imports could cost domestic refiners 4,000 jobs by 1990, with an indirect job loss 10-to-15 times higher. The report predicted that refined foreign oil products, which accounted for a negligible 2.2 percent of US demand in 1982, will approach 10 percent by next year, and 13 percent by 1990.

Oil industry analysts are beginning to speak of a national security threat as US refining capacity, which has dropped by four million barrels per day since 1981, continues to fall as refineries close.

But resistance to protectionist measures remains strong in the region, even in areas where the impact of imports has been greatest.

``I've been surprised at how even [on the Gulf coast] where refining has been such a big employer, the people are such strong free-market thinkers,'' says John Dosher, managing partner of the Pace Co., the consulting firm that prepared the IRC's study. ``Even though their economies have been devastated [by cheap imports] I don't see much interest in tariffs. They seem to look at [the downturn] as the kind of risk that goes with any business.''

There is also some public realization that protection could lead to retaliation and thus hurt exports. ``I think people recognize that in the energy area we've been pretty active in exporting the tools used for refining and exploration,'' says Fred von der Mehden, professor of political science and international business at Rice University in Houston. He says that even as people experience greater conflict between their free-trade beliefs and concerns about local industry, ``I don't expect an import oil

tariff to have much support down here.''

Adds Republic Bank's Harry Glenos, ``People are wary of protectionist measures because they see that it usually flies back against us in the form of quotas'' against agricultural products.

But Mr. Glenos adds that calls for protection of the domestic oil industry could grow in Texas, Louisiana, and Oklahoma if, as expected, imports continue to drive down the price of oil -- reducing state revenues on oil production. All three states have experienced tax-revenue shortfalls at a time when states in other regions are enjoying budget surpluses.

Texas's state budget reportedly will fall into the red if the price of oil drops below $22 a barrel, which some oil analysts believe could happen as early as next year.

``If oil drops down towards $20 a barrel, I think you'll hear a lot more hollering,'' says Glenos. ``And if falling oil revenues force Texas to start considering a state income tax, then I think trade barriers would become a pretty live issue.''

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