APPENDIX II

Additional Statements for the Record

Testimony

of

L. D. Thomas

President, Amoco Oil Company

Submitted to the

Senate Energy Subcommittee

on

Energy Conservation & Regulation

June 4, 1985

On behalf of Amoco Oil Company, I am pleased with the opportunity to provide our thoughts on the current situation in the refining industry to this Committee.

During and after the 1973-74 Arab Oil Embargo, the U.S oil industry was often emotionally criticized for not having foreseen an unprecedented supply disruption and prevented it

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or at

least reduced its impact. By contrast, this hearing is a recognition that a strong private sector refining industry is a vital part of the nation's total energy security. Amoco welcomes the change in perception and is happy to contribute to your analysis of this most important issue.

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I would like to begin by focusing on actions and investments which refiners have taken that benefit the U.S. supply security of crude oil and products. Then I'll turn to some problems that could return the country to greater vulnerability and to supply

disruptions.

Although the U.S. has seen some serious threats to supply in the past ten years, today, we face no shortages of either crude oil or products. But we haven't by any means solved the problems of continuing dependence on foreign energy.

As a realist, I believe that we can view the present

adequate supplies and lower prices as a breathing space at best. But as an optimist, I believe we can capitalize on this breathing space and examine:

A) the impact of the Embargo and its aftermath;

B) the strategic steps we have taken to reduce our dependency; and C) what we can do in the future to

enhance our future energy security.

From World War II to 1973, the U.S. oil companies largely owned and produced the world's crude oil. The involvement by host governments or by the U.S. government was relatively small.

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The market for petroleum products was characterized by

extreme competition.

Service station dealers attracted customers

not only with different grades of gasolines but with premiums like green stamps, or glassware, or free road maps. "Gas wars" or price wars were a common occurrence.

Petroleum products were among the best bargains in the economy. From the middle 1950s through 1973, the price of gasoline slowly but steadily declined in real terms.

The favorable market conditions created by the private sector began to change with the involvement of various governments in the early 1970s. At first governmental involvement took the form of tougher stands in crude price negotiations. Gradually a willingness to use oil as a foreign policy weapon emerged. Ultimately, the idea of an Embargo passed from a threat to a reality. As it did so, the decisions of foreign governments were substituted for those of U.S. companies

and the free market.

When the control by foreign governments over U.S. energy was made explicit during the Embargo, the domestic psychological impact was incredible.