Oil Fight Gets Ugly
By H. Josef Hebert -- The Associated Press
W A S H I N G T O N, Aug. 8 — In an unusual trade dispute, a group of small oil companies contends four leading foreign oil suppliers are driving them out of business by selling the valuable commodity at artificially low prices in the United States.
If the U.S. government agrees, it could impose a tax raising the barrel price of some imported oil by up to 170 percent. The four countries — Saudi Arabia, Mexico, Iraq and Venezuela — supply about 60 percent of U.S. oil imports.
The Commerce Department was to decide Monday whether to let the Oklahoma oilmen's petition go ahead.
Already the case has fractured the oil industry, pitting Big Oil against the struggling independent producers, and economists say it could put America's trade policy to a new test.
‘We've Got a Good Case'
The oilmen's request for an investigation shocked trade experts who say oil prices are highly volatile and dictated by world markets.
“What's absurd about this case is Americans have been opposed to higher oil prices for my entire adult lifetime, and here we have a case where the effect could well be to raise prices,” says Robert Litan, a Brookings Institution economist.
“This involves a commodity that no one ever would have thought would be subject to an anti-dumping case,” he says.
He is one of the most vocal critics of the federal law on illegal dumping — when an imported commodity is being sold at less-than-normal value or below what it costs to produce it.
But Harold Hamm, who helped found a group called “Save Domestic Oil” to bring the complaint, argues the anti-dumping law is supposed to protect U.S. companies in just this kind of case.
“Oil is not any different. Dumping did occur and it put 100,000 people out of jobs,” Hamm, president of an Enid, Okla.-based independent oil company, said in a telephone interview. “There's not anything absurd about it. Our only line of defense is the trade laws and I think we've got a very good case.”
The independent companies also believe the four countries unfairly are subsidizing oil production.
Airlines, Truckers, Farmers Opposed
The allegations, if found true, would amount to illegal dumping of oil in the United States and require Washington to impose tariffs and penalties.
A Commerce Department division, the International Trade Association, was expected to decide Monday whether the oilmen have the right to continue with their case. If they are denied, the independent producers can appeal to a special court, though the process could take years.
Many economists and trade specialists say the case is weak, and some contend that if the oilmen are successful, it could result in a backlash against the anti-dumping law enacted almost 70 years ago.
“There are a lot of other users of the anti-dumping (provision) who do not want this case to go further. It puts a real spotlight on it,” said Gary Hutbauer, a trade expert at the Institute for International Economics.
Already the case has had repercussions:
• The American Petroleum Institute, which represents the large, international oil companies, has pledged to fight it along every step, hiring a lawyer who specializes in bringing anti-dumping cases.
• More than 100 organizations, companies and industry groups from airlines and truckers to farmers are opposed, arguing a favorable ruling would harm consumers by raising oil prices.
• Mexico has delayed plans to phase out its tariff on U.S. natural gas imports until the anti-dumping case is resolved. Venezuela has denied the charge it is selling oil at below market value.
Who Would Benefit?
Some oil industry experts also are concerned about the fate of recent efforts to promote greater U.S. industry involvement in Saudi oil development.
“In the long term, it's difficult to see who would benefit from this action,” says Red Cavaney, president of the American Petroleum Institute.
Many economists say the nature of world oil markets argues against the petition. If Saudi Arabia faces a high tariff in the United States, it will sell its oil elsewhere and oil from another country may come to the United States, these experts say.
Further, some U.S. refineries are geared to handling certain products coming from Mexico and Venezuela and a shift in sources could require additional costs, raising prices, the experts say.
While the oilmen's petition is viewed as a long shot, trade experts say the anti-dumping provision is heavily stacked in favor of domestic companies and a favorable ruling is possible.
“The Clinton administration would prefer this case go away. The question is whether legally they can let it go away,” says Litan, the Brookings economist.
Copyright 1999 The Associated Press. All rights reserved.
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