Mr. SYNAR. We would like you to submit those for the record. We appreciate your bringing them with you today.1 Mr. LODWICK. Mr. Chairman, as a result of going through these reports and analyzing other data, I would like to share with you 10 observations which hopefully will be of assistance to you and your colleagues, and I will make these 10 observations very curt, very concise, and should you wish to follow up on them I would be glad to try to respond to questions or give you the answers later on, or in the detailed statement that I believe you indicated would be part of the record. There is considerable explanation there. The first statement is that the U.S. trade deficit for petroleum, natural gas and related products declined 47 percent from 1981 to 1984, while world crude petroleum output declined 4 percent. Second is that the value of U.S. crude petroleum imports decreased 41 percent from, again, 1981 to 1984, whereas petroleum product imports increased 46 percent. The current soft market conditions for crude petroleum have caused U.S. producers to reduce spending for exploration. The fourth is from 1981 to 1984 the number of U.S. refineries decreased by 35 percent. World refining capacity for petroleum products is in excess of demand. The extent of economic growth and the domestic regulatory climate could influence U.S. producers' strategies. Energy-rich nations have developed export-oriented primary petrochemical industries based on low cost feedstock advantages. The eighth one is that traditional petrochemical producers, including those in the United States, will have a lower share of world production capacity and of the world net exports in the future. As a result of profitability problems, U.S. petrochemical producers have adopted new operational methods. Tenth and last is the U.S. producers of petroleum products and petrochemicals will remain competitive to the extent of their reliance on technology advances and innovative applications. In conclusion, Mr. Chairman, U.S. producers of petroleum products and petrochemicals will have to compete against greater pressure from foreign sources, especially from energy-rich nations. For example, U.S. refiners are attempting to maintain the flexibility to handle any type of crude petroleum, including the heavier crudes, to produce the desired slate of demanded products. Individual companies, by selectively divesting certain commodity petrochemical operations, are enabled to expand in specialty chemical manufacture which usually provides a superior profit level compared to the so-called commodity petrochemicals. Through emphasis on technological innovation and developing new applications for special product lines, a higher growth rate may be achieved than presently exists with commensurate stabilization of the U.S. industry's world trade position. Again, Mr. Chairman, I thank you very much for this opportunity to present the testimony for the U.S. International Trade Commission. Due to the volume of the studies submitted by Mr. Lodwick, they will not be reprinted, but will be available for review in the subcommittee's office. Thank you. Mr. SYNAR. Thank you very much, Mr. Lodwick, for your testimony. And, as I pointed out, your complete testimony will be made a part of the record. Mr. LODWICK. Thank you, Mr. Chairman. [The prepared statement of Mr. Lodwick follows:] Statement by Seeley Lodwick, Commissioner Before the Subcommittee on Environment, Energy, and Natural Resources April 2, 1985 World Oil Outlook Thank you, Mr. Chairman, for your invitation to provide testimony on the involvement of the International Trade Commission in the oil product import issue and to provide details, to the extent possible, of any data or studies underway or completed. By way of introduction, my name is Seeley G. Lodwick, one of the Commissioners of the U.S. International Trade Commission. With me is John J. Gersic, Chief of the Energy and Chemicals Division of the International Trade Commission. The U.S. International Trade Commission was created by Congress in 1975 as a successor to the U.S. Tariff Commission which was established by Congress in 1916. It is an independent, bipartisan, quasi-judicial agency with broad powers to investigate all factors relating to the effect of U.S. foreign trade on domestic production, employment, and consumption. Although not charged with a policymaking role, the Commission contributes substantially to the development of sound, equitable international trade policy. Commission activities include- --Making recommendations to the President regarding relief for industries seriously injured by increasing imports; --Determining whether U.S. industries are materially injured by imports which benefit from pricing below fair value or subsidization; --Directing action, subject to Presidential disapproval, against unfair trade practices such as patent infringement; --Advising the President whether agricultural imports interfere with price-support programs of the U.S. Department of Agriculture; --Conducting studies on trade and tariff issues and monitoring import levels; and --Participating in the development of uniform statistical data on imports, exports, and domestic production, and the establishment of an international harmonized commodity code. Among the commodities falling under the purview of the Commission are crude petroleum, natural gas, petroleum products, and chemicals. The Commission's staff has, in the past, conducted several general studies under section 332 of the Tariff Act of 1930 relating to the world trade situation in petroleum, petroleum products, and petrochemicals. These studies provided both a statistical evaluation of shifting trade patterns, and an analysis of world industry strategies along with a description of the competitive position of the U.S. domestic industry. In addition, these studies evaluated the domestic industry's future position in world trade should changes occur in market conditions. One example of published studies is "Possible Effects of Changing World Crude Petroleum Prices," which evaluated the world competitiveness of certain energy-rich nations having an added advantage of low production costs that are developing energy-intensive industries. The study outlined the possible effects of both increasing and decreasing petroleum prices on domestic petroleum and petrochemical industries and pointed out the advantages and disadvantages in both situations. In two other studies, "The Probable Impact on the U.S. Petrochemical Industry of the Expanding Petrochemical Industries in the Conventional-Energy-Rich Nations," and a "Study of the Petrochemical Industries in the Countries of the Northern Portion of the Western Hemisphere," the Commission covered the world situation in shifting petrochemical commodity trade. Presently, the Commission is finalizing four separate studies, one concerning "Possible Effects of and Recommendations Concerning the Proposed Tariff Reclassification of Catalytic Naphtha and Other Motor Fuel Blending Stocks, scheduled to be delivered to the Senate Finance and House Ways and Means Committees by April 15. Another dealing with "Potential Effects of Foreign Governments' Policies of Pricing Natural Resources" is to be delivered to the House Ways and Means Committee on May 20. One other study, to be completed this summer, is entitled "Possible Impacts of Changes in U.S. Chemical Trade with the Developing Countries," which addresses the current problems faced by the domestic chemical industry in conducting trade with individual countries or groups of countries with established tariff and non-tariff barriers to foreign goods. The fourth study, to be released this month, deals with "The Shifts from U.S. Production of Commodity Petrochemicals to Value-Added Specialty Chemical Products and the Possible Impact on U.S. Trade." The latter study delineates the strategy of U.S. producers of basic petrochemicals confronted with foreign competition from energy-rich nations producing similar chemicals almost exclusively for export. Beyond these studies, the Commission maintains a series of summaries, each of which discusses specific areas of commodities traded by the United States. The Commission also publishes a report on "U.S. Trade Shifts in Selected Commodity Areas," on a quarterly and annual basis which gives statistical data on all U.S. trade including petroleum and petroleum products and provides a brief analysis of changes. Also, the Commission publishes an annual compilation of the production of synthetic organic chemicals by domestic manufacturers. This report, called "Synthetic Organic Chemicals, United States Production and Sales," contains production and sales figures reported and certified by appropriate officers of U.S. refining and chemical companies. This report along with the Bureau of the Census statistics on U.S. exports and U.S. imports for consumption enables the Commission and others to watch closely the trends in U.S. international trade and to follow the economic climate domestically. A copy of each of the studies I have described is here, and if you wish, I will place them in the record. Should you or your colleagues on the Committee or any other members of Congress or any interested members of the public need copies, the Commission will be happy to furnish them. In reviewing the above publications along with other data which is available to the Commission, I would like to share with you 10 observations which hopefully will be of assistance as you pursue your responsibilities. O THE U.S. TRADE DEFICIT FOR PETROLEUM, NATURAL GAS, AND RELATED The U.S. trade deficit for crude petroleum, natural gas, and related products decreased 47 percent from $77 billion in 1981 to $53 billion in 1983. The period of strong U.S. economic recovery in 1984 led to a slight increase in the deficit to $56 billion in 1984 as oil consumption increased in the United States. World crude petroleum output declined from 56 million barrels per day in 1981 to 54 million barrels per day in 1984. U.S. production of crude petroleum remained relatively constant during the same period, and averaged 8.8 million barrels per day. The U.S. price per barrel, which is an indicator of the world price, declined from $31.77 in 1981 to $26.01 in 1984, reflecting the world oversupply of crude petroleum. O THE VALUE OF U.S. CRUDE PETROLEUM IMPORTS DECREASED 41 PERCENT FROM 1981 TO 1984, WHEREAS PETROLEUM PRODUCTS IMPORTS INCREASED 46 PERCENT. Between 1981-83, the quantity of imported crude petroleum went from 1.8 billion barrels, valued at $62 billion, in 1981 to 1.3 billion barrels, valued at $37 billion, in 1983. In 1984 U.S. imports of crude petroleum increased by 3 percent in quantity but remained unchanged in value as the unit value dropped from an average of $28.44 per barrel in 1983 to $27.67 per barrel in 1984. From 1982 to 1984 Mexico was the largest trading partner with the United States for crude petroleum with 19 percent of total imports. A total quantity of 253 million barrels of crude petroleum, valued at $6.7 billion, was imported in 1984 from Mexico at a unit value of $26.54. Imports of this commodity from Saudi Arabia declined from a high of 434 million barrels at a unit value of $32.31 per barrel in 1981 to 127 million barrels in 1984, while the unit value declined by $4.97 per barrel to $27.34. Crude petroleum imported from Venezuela and Ecuador increased by 30 million barrels to a total of 124 million barrels, valued at $3 billion, from 1981 to 1984 while imports from other OPEC countries have been diminishing. |