Chart No. 2, changes in consumption, 1952 compared with 1946 (in equivalent tons of coal)-I think the main points are these:

(a) Bituminous coal, large decrease in railroad use, increase in public utility use, and decrease in space-heating use.

(b) Significant things about the heavy fuel oil: All relatively small changes, none anything like big enough to account for important fraction of total change in the bituminous coal use.

(c) Diesel fuel. Increase in railroad use accounts for much larger part of coal's decrease in this category because of superior efficiency of diesel engines.

Then in the case of natural gas: Striking increases in utilities, space-heating, and industrial fuels are interesting.

Then going to other oils, the heating oils, home-heating, and that sort of thing: Large increase in space-heating use, which I spoke about in my paper.

I think those are the highlights of that particular chart. This shows United States oil production in thousands of barrels per day. The yellow bars show domestic-crude production, with striped portion showing exports.

The black and red bars show imports, with the black portion indicating crude and the red portion indicating heavy fuel oil. I think the main points are:

(a) Crude-oil production rose every year except 2, 1942 and 1949. (b) Domestic production increased at same time as imports increased.

(c) Imports relatively small compared to domestic production. The fourth and last chart, imports by industry and by Jersey affiliates.

The yellow and green bars show industry figures; black and red and white bars show Jersey affiliates' figures.

The main points here are: (a) Jersey affiliates' crude imports have been about the same over whole postwar period, with slight increase in 1948, when severe winter caused special efforts; and

(b) That heavy fuel oil imports have been substantially the same for each of the last 3 years.

Those are the highlights of the charts that I have to show you, Chairman Reed, and that completes my testimony, sir.

The CHAIRMAN. Thank you very much for your presentation to the committee and the information you have furnished.

Are there any questions?

Mr. Simpson will inquire.

Mr. SIMPSON. Mr. Holman, I regret that I could not be here for all of your statement.

I would like to ask whether you believe in unrestricted imports of oil, either by tariff or any other way?

Mr. HOLMAN. In general, we believe in imports to supplement our domestic production, Congressman.

Mr. SIMPSON. Would you under any circumstances restrict them by law?

Mr. HOLMAN. What is that?

Mr. SIMPSON. Would you under any circumstances restrict imports by law?

Mr. HOLMAN. I do not think it is desirable. As the figures show here, it seems to me that there is no particular reason to do that at the present time, Congressman Simpson.

Mr. SIMPSON. Do you recognize there could be a time when it should be done?

Mr. HOLMAN. It could happen, of course, but I do not think there is any likelihood of it. I do not think it has happened now, and I do not think the situation is acute now.

I do not think it is likely to happen at any time. I would deal with it when it did happen.

Mr. SIMPSON. Do you see no relation of cause and effect as between imports and loss of employment in the railroading and the mining industries?

Mr. HOLMAN. Congressman Simpson, I do not know whether you got to see the charts or not

Mr. SIMPSON. I did not.

Mr. HOLMAN. I am sorry you did not get to see those, because it was my idea that as far as I suppose you refer to unemployment in the railroads ——

Mr. SIMPSON. And in mining.

Mr. HOLMAN. And coal mining, and that sort of thing.

My idea about that is that I do not see how you can lay that onto imports, really, because I do not think the statistics really back that up. It seems to me the coal business has lost its markets through the dieselization of the railroads and through the invasion of natural gas into their markets. What little additional residual fuel oil has been imported did not any more than make up for the normal residual oil, that normally would be made in this country.

Mr. SIMPSON. Do you believe-and I think I am quoting from one man-do you believe that no producer should be forced to cut back below the level at which he wishes to produce under State-approved conservation practices, merely to make room for imports?

That is alleged to have been a quote of yours.

Mr. HOLMAN. I think it depends altogether on the conditions that exist at the particular time. At the present time, the Governmentand I think wisely so-has asked the oil industry to carry some surplus capacity in case of an emergency. I think that we should do that. Of course, a surplus capacity of a million barrels is in excess of the MER (maximum efficient rate (of production)).

Mr. SIMPSON. I am confused now. Do you mean that we should or should not restrict imports if it is found necessary to cut back domestic production under State-approved conservation practices?

Mr. HOLMAN. Yes. At the present time, I think we should, for this reason: The Government has asked us to carry a million barrels of excess capacity, which I think is a very good thing in the interest of national defense. In that case, that million barrels' capacity could be produced, you see, under good conservation laws.

Mr. SIMPSON. But now the companies have been requested to cut back on their production; is that not correct?

Mr. HOLMAN. Not on the potential, sir.

Mr. SIMPSON. Not on the potential. no; but on the actual production for which they get dollars. Are they not cut back in certain areas? Mr. HOLMAN. Yes; they have been cut back.

Mr. SIMPSON. Do you believe that to the extent they have been ordered to cut back, imports should be correspondingly reduced! Mr. HOLMAN. Yes; I think they should.

Mr. SIMPSON. By law?

Mr. HOLMAN. I think it should be by voluntary action.

Mr. SIMPSON. By voluntary action between

Mr. HOLMAN. By voluntarily doing it.

Mr. SIMPSON. By voluntary action by whom?

Mr. HOLMAN. I think it is in our own interest to do it, actually.

Mr. SIMPSON. Between?

Mr. HOLMAN. Between no one.

Mr. SIMPSON. Between the importers?

Mr. HOLMAN. Not between the importers. Just individually to do

it, such as we have done.

Mr. SIMPSON. Do you do that?

Mr. HOLMAN. How is that?

Mr. SIMPSON. Do you do that, speaking individually?

Mr. HOLMAN. Yes, we do.

Mr. SIMPSON. Do the other companies do it, speaking individually! Mr. HOLMAN. Their reports have been published of what they did, Congressman.

Mr. SIMPSON. What I am driving at, of course, is, in the event Congress does decide that something should be done about imports, is there any way under which it can be or would be restricted other than by legislation?

Mr. HOLMAN. Congressman Simpson, this import situation, as you probably know, has been going on for 25 years. This is not any new problem, and I think over the years these charts and my testimony show, in my opinion at any rate, that the oil industry has gone along and done all right. It seems to me that self-imposed restrictions in a thing like that is a much better way of going about it than to go to a lot of legislation on it.

Mr. SIMPSON. Yes; but there has been no self-imposed limitation in the last couple of years, when, according to my persuasion, serious damage has been done. I agree that you do not make that same finding that there is serious damage.

Mr. HOLMAN. I just do not agree with that.

Mr. SIMPSON. Yet we have oil producers coming before this committee alleging quite forcefully that they are not able to do the exploration work that they should be doing because, for a couple of reasons: First, they are afraid of imports continuing to increase; and, second, they do not have the earnings.

Mr. HOLMAN. That is just a cinch to be an honest difference of opinion. I have presented the story that I believe in, and you will have to decide which one you think is right, I guess.

Mr. SIMPSON. Yes; we have to make the decision.

Can we rely on reserves of oil abroad to such an extent that we can afford to cut down on exploration here?

Mr. HOLMAN. I think we should have exploration going on here and abroad, too, Congressman. I look at foreign reserves as complementing domestic reserves both in peace and in war and I think that the oil industry should go ahead as it has done for the past many, many years, and develop the crude oil reserves here and abroad for expanding markets, both here and abroad.

I think that is the best protection, both in peace and war, for a virile industry as well as for the economy, not only of our own country but abroad, which I think is very necessary for peace and war conditions.

Mr. SIMPSON. Would you care to state: Do you anticipate big increases in the importation of petroleum in the next several years? Mr. HOLMAN. We do not; no, sir.

Mr. SIMPSON. Do you with respect to crude oil, if that is a different category?

Mr. HOLMAN. It defends, of course, altogether on the finding rate in this country.

Mr. SIMPSON. Do you subscribe to what was suggested some time ago about a division of the growth?

Mr. HOLMAN. A division of the growth?

Mr. SIMPSON. Yes; share the growth.

Mr. HOLMAN. I do not believe I understand that.

Mr. SIMPSON. That was suggested by someone a while ago, and I think they meant as new business becomes available to the petroleum market, it should be divided between the domestic and the foreign produces.

I should have asked the gentleman who suggested it, and I will not push it with you, although I would like to know on what percentage and how they would do that, or whether just freehanded competition would be the answer.

Mr. HOLMAN. The latter would be my idea of the best way to do it. Mr. SIMPSON. Always subject, though, to the importer's discretion as to whether he should not curtail it, for some reason or other, voluntarily?

Mr. HOLMAN. As far as we are concerned, speaking as an importer, Congressman, we would be the last one in the world ever to wreck our own investments here in the United States, for we have, dollarwise, greater investments in the United States than we have abroad. So I think it is in our own interest to protect our domestic industry, to protect the domestic investments.

Mr. SIMPSON. You will not wreck your own business, and you do not wreck your own by shipping in residual oil, because you do not have much of that here.

Mr. HOLMAN. Oh, yes, we do. We produce more residual oil here than we do abroad.

Mr. SIMPSON. Do you not buy it abroad and ship it in, that which you do not make?

Mr. HOLMAN. No. The amount of domestic fuel oil produced domestically by us, I imagine-I haven't checked the figures recently, but I imagine we produce more domestic residual oil in the United States than we do in the Caribbean area. Certainly I think we produce more than we ship in.

(Mr. Holman later submitted the following information :)

Mr. GORDAN GRAND, Jr.,

STANDARD OIL COMPANY OF NEW JERSEY,
New York, N. Y., May 20, 1953.

Clerk, House Ways and Means Committee, New House Office Building,

Washington, D. C.

DEAR MR. GRAND: On Wednesday, May 13, 1953, I testified before the House Ways and Means Committee on H. R. 4294, the Simpson bill, and I refer you to the portion of my testimony appearing in the transcript partly on page 1985

and partly on page 1986. I commented, in connection with the production of heavy fuel oil by the Jersey affiliates that I had not recently checked figures but, since that date, I have checked and would like for the accurate figures to be made a part of the record. They are as follows:

The total production of heavy fuel oil for the year 1952 by Jersey affiliates in the United States amounted to 121,700 barrels daily. Imports by Jersey affiliates in 1952 were 150,000 barrels daily.

Sincerely yours.

EUGENE HOLMAN.

Mr. SIMPSON. Is it true that the oil from abroad-I refer to residual oil-is a waste product if it were not for the market available in the United States?

Mr. HOLMAN. No; no such thing as a waste product.

Mr. SIMPSON. Is it true that the price jumps up and down and is kept just low enough to take the coal market?

Mr. HOLMAN. No, sir. As I cited in my testimony, our residual oil sells in the United States to our customers at precisely the same price that domestic residual oil is sold to our customers.

Mr. SIMPSON. That would be natural.

Mr. HOLMAN. Yes, sir.

Mr. SIMPSON. Otherwise, what would you do with the American residual oil if you took the market value of the imported? You would have to keep the price the same there.

You also have residual oil, that which remains after you make gasoline and other derivatives, do you not?

Mr. HOLMAN. That is right, sir.

Mr. SIMPSON. I have lots to learn about the oil business. Thank you very much.

The CHAIRMAN. Any other questions?

We thank you very much for your contribution.

Mr. HOLMAN. Thank you, sir.

The CHAIRMAN. The next witness is Mr. R. G. Follis, chairman of the board of Standard Oil Co. of California.

Mr. Follis, if you will just give your name and the capacity in which you appear for the record, we will be glad to hear you.

STATEMENT OF R. G. FOLLIS, CHAIRMAN OF THE BOARD, STANDARD OIL CO. OF CALIFORNIA, SAN FRANCISCO, CALIF.

Mr. FOLLIS. R. G. Follis, chairman of the board, Standard Oil Co. of California, San Francisco.

I welcome the opportunity to appear before your committee to present the views of Standard Oil Co. of California on the important subject of petroleum imports into the United States.

Our company is opposed to the adoption of the Simpson bill insofar as it bears on quota limitations that may be imposed on petroleum imports.

Our reasons for taking this position are:

Petroleum is one of the most vital of all commodities, both for the domestic economy and for military use. The United States is consuming its reserves at a much faster rate than other important producing countries. The potential productive land area in the United States is considerably less than in the balance of the world; we have only a fraction of the lands favorable to oil production. Yet, in spite