oil companies to ask their views of the effects of this proposed requirement. Of the responses received, two companies said that this requirement may dampen interest in refinery expansions because of economic penalties but did not have sufficient time to develop supporting data. One company did not mention this disincentive, but did raise another important objection. The needs of customers for products from refinery expansions will probably not fit existing distributing patterns. This requirement would force a pro rata share to existing independent branded and nonbranded customers. As a result, the distribution system would not match future customer requirements and could create considerable inefficiency in the product distribution system of the petroleum industry.

This was timely advice but was ignored. The bill was passed and the predicted problems arose-problems which could have been avoided.

The Johnson letter raised one other point. It stated, and I quote:

Several companies have also indicated concern that allocation of imported product would cause imports to be curtailed. I concur and also urge that imported products be excluded from this act.

This advice, too, was ignored. No wonder a recent poll indicated a 21 percent public confidence factor in the Congress. It was all that we earned. So long as the Congress refuses to act responsibly, the American public will continue to distrust us.

As these oversight hearings are convened, one fact must be understood. The issue is: Is the Emergency Petroleum Allocation Act a bad law? The issue is not: What has the Federal Energy Office done wrong? You can't make a silk purse out of a sow's ear; nor can a sound allocation program be fashioned out of a bad law.

The overriding problem with the law, and necessarily with the program which implements the law, is that imports of crude are discouraged.

The pro rata sharing requirement coupled with the pricing requirement spells disaster. Certain major oil companies are permitted, in fact encouraged, to buy crude from their competitors at "rip-off" prices. The result is not only anticompetitive but it discourages crude imports which, in turn, must be sold to competitors at less than cost. Worst yet, the only means of improving costs for crude which must be sold to competitors is for the penalized major oil companies to punish their own customers with higher priced products. What kind of protection is this for the American consumer?

There is only one energy resource that can provide national energy self-sufficiency within the next few years and that resource is petroleum.

Regardless of what anyone may think of the major oil companiesand I understand the urgency in identifying whipping boys and scapegoats when things go wrong every shotgun blast such as the Emergency Petroleum Allocation Act and the Energy Emergency Act aimed at the big oil companies also knocks the feathers out of about 10,000 independent oil and gas drillers and producers. And they are the ones who account for most of the domestic exploration and drilling inland in the lower 48 States.

The TV inquisition of the major oil companies may get some votes in the short run but it won't get any more oil or gas to the pump.

Since the Senate passed Senate Resolution 45 almost 3 years ago, this committee, assisted by three other committees, has labored mightily in

its deliberations on a study of national fuels and energy policy and brought forth one bill that has anything to do with increasing oil and gas supplies. That one bill was the Alaska Pipeline bill.

Failing to pass positive, forward-looking legislation is one thing. But enacting counterproductive, punitive legislation such as the Energy Emergency Act-with the price rollback requirement—is something else. By creating such an atmosphere of uncertainty, we are actually discouraging the industry from making the long term decisions and capital commitments that are the only real solutions to our problems.

If this allocation act isn't changed, instead of a 76 percent national refinery supply/capacity ratio, we will soon see even that go down. There will be no choice then but to implement a Federal rationing program. If our purpose is to prove that we must have rationing, we're on the right track. The Emergency Petroleum Allocation Act moved us a long way down that road. If it becomes law, the Energy Emergency Act will get us the rest of the way. Under these circumstances, rationing could be with us a long time.

This miserable law must be amended so that the allocation program will no longer discourage imports, discourage competition, discourage new refinery construction, and penalize the American consumer.

Just as important, Mr. Chairman, as my colleague from Arizona has so adequately demonstrated, we must also stop penalizing domestic production by threats of price rollbacks.

While some may doubt it, we can make matters worse. But, on the other hand, we could try to demonstrate to the American public that Congress can, and will, act responsibly. The decision is ours.

As a final comment, Mr. Chairman, I note in the Washington Post this morning that you advised Secretary Simon yesterday that, and I quote: "We will have to dig a big bomb shelter for you by April if the lines are longer."

I would suggest, Mr. Chairman, that the bomb shelter be big enough for a few Senators to share it with Mr. Simon if this allocation law isn't changed.

I don't believe Mr. Simon subscribes to the dictates of that ageless verse of Alfred Lord Tennyson in the "Charge of the Light Brigade," that

"Ours is not to question why,

Ours is but to do and die."

The CHAIRMAN. I have no plans to die.

Senator Stevenson, do you have a comment?

Senator STEVENSON. Mr. Chairman, I think I will resist the temptation to escalate the rhetoric. We are here to listen to the witnesses, and I would prefer to reserve my time for questions.

The CHAIRMAN. Does anyone else wish to comment?
Senator JOHNSTON. Very, very briefly.

STATEMENT OF HON. J. BENNETT JOHNSTON, JR., A U.S. SENATOR FROM THE STATE OF LOUISIANA

Senator JOHNSTON. My heart leaped with joy to find the crisis has been downgraded to simply a problem. My service station operator

did not get the word. I wish you would let him know. I am afraid that most Americans throughout the country have not gotten the word either.

I think perhaps the basis of the President's feeling that we now have a problem rather than a crisis has been the President's feeling that the embargo will soon be lifted. I hope he is correct. I share some of his optimism. I think there is emerging a new era of a good feeling and cooperation between the Arab world and the United States-a new era of economic development in which we can share with the Arab

countries.

However, I think one comment is appropriate in this regard. I think we are approaching the time when our Arab friends need to be told that our patience is not without limit, that our forebearance has some finite bounds, and that if we are a helpless giant now or foundering without energy we will not permanently occupy that position.

Thank you.

The CHAIRMAN. Senator Buckley.

STATEMENT OF HON. JAMES L. BUCKLEY, A U.S. SENATOR FROM THE STATE OF NEW YORK

Senator BUCKLEY. Thank you, Mr. Chairman.

Mr. Sawhill, I want to welcome you to a very important hearing. I believe you and Mr. Simon occupy the least enviable positions in the United States today. You are the lightning rods for the discontent and frustrations of more than 200 million Americans. Yet you are required to operate within the confines of laws that have been rushed through the Congress on inadequate information, laws that merely compound the problems with which you are directed to cope.

As if the Emergency Petroleum Allocation Act as originally enacted was not bad enough, it will be made still worse, still more counter-productive if the price rollback amendments contained in the Emergency Energy Act adopted by the Senate become law.

These amendments, I might add, were enacted in total disregard of the overwhelming weight of evidence presented in 3 days of hastily scheduled hearings whose input could not possibly have influenced the deliberations of the joint conferees.

During the debate on the orginal allocation legislation I stated, "No evidence was presented which suggested the nature of possible. shortages so that appropriate congressional response could be framed." I went on to say that, "a bill as fraught with built-in arbitration distribution schemes could deprive many consumers of gasoline and other petroleum products while allowing still other users to bask in ample supply."

S. 1570 will hurt producers and consumers alike and make less likely the early resolution of any energy shortages that may develop. That is why I voted against the legislation and I hate to be in a position of saying "I told you so." This assessment of mine, of course, was made before the Arab boycott.

We are now suffering from the serious consequences that were predictable from the moment the Arabs announced their cutoff of further shipments to the United States. Yet in the months that

have intervened, the Congress has taken no actions that are reasonably designed to help alleviate the problems with which the FEO is required to cope. The Congress has enacted no law that would increase the supply of gasoline or crude oil by one thimbleful. Indeed, the only actions taken by the Congress thus far have had the effect of reducing the available supply; for example, price controls over energy sources, price rollbacks and a generally high level of vitriol directed against the petroleum industry. All of the evidence that we have seen during the current shortage supports the view that the price mechanisms must be allowed to function if we are to reduce domestic shortages to a minimum of adverse social consequence.

For example, Dr. Thomas Stauffer, the research associate of the Center for Middle Eastern Studies at Harvard, testified before the Interior Committee that engineering type calculations lead to the suggestion that there should be about a 50-percent increase in potential production for every doubling of the price of a barrel of oil. And it was recently brought to my attention that one commodity broker has an opportunity to purchase 150 million gallons of gasoline from a foreign supplier but that the uncertainty posed by United States price controls and mysterious allocation processes make it impossible for this broker to contribute to the alleviation of the endless gasoline lines that today burden too many drivers.

Believing as I do, Mr. Sawhill, that the problems the FEO faces are in large measure the creation of the Congress, I hope the great burden of your testimony will be to advise us, on the basis of your actual experience, on how we can return to a more rational, workable approach to coping with critical energy problems an approach that will not only result in an equitable sharing of the burdens posed by shortages but one that will encourage increased production so we may ultimately work our way out of the current crisis.

The CHAIRMAN. Thank you.

Senator Metzenbaum.

STATEMENT OF HON. HOWARD M. METZENBAUM, A U.S. SENATOR FROM THE STATE OF OHIO

Senator METZENBAUM. Mr. Chairman, I hope that when Mr. Sawhill testifies today, he will shed some light on what I found in the hearings conducted by Senator Jackson in Ohio recently: that the Mandatory Allocation Act, upon reading it, really would appear to do the job as it is very inclusive. But the gap between what the act provides and what the people in Ohio, and probably in every State in the Union as well, know about the act's efficacy in helping to solve their problems is just as wide as any gap could possibly be. This is because they have ne knowledge whatsoever, they do not know where they are supposed to turn, and there is nobody advising them; it is as if the act were nonexistent.

We had testimony from farmers who said they just could not get a petroleum supply. Yet the act specifically provides that there be the maintenance of agricultural operations, including farming. I would guess that there are probably not 200 farmers in the United States who know that language is in the act, and nobody is doing anything to tell them about it.

30-060-74-pt. 1-3

The act provides that there shall be the preservation of an economically sound and competitive petroleum industry, including the priorities needed to restore and foster competition in the marketing of such industry, and to preserve the competitive ability of nonbranded independent marketers and branded independent marketers.

Yet we had testimony about one company closing down 200 stations and cutting off the supply last year. We had additional testimony with respect to independent gasoline dealers who said they were not getting their fair share of the allocation, and company stations getting more allocation than the independents. Again we have an instance in which, as I see it, there is no communication. It is not a matter of a two way type of communication, but not even a one way communication where anybody is trying to keep the independent gasoline operators aware of what their rights are under the law.

I hope that this oversight hearing will not fail to cover that language in the act that provides for a dollar for dollar passthrough of net increase in the cost of crude oil. As you know, Mr. Sawhill, Mr. Walker, I have been raising questions as to how the largest marketer in Ohio, a chain that controls more of the market in Ohio than any other comparable company controls in any other State in the Union, has been able to raise its prices 312 cents more than any other marketer in the area claiming it is doing so on the basis of passthrough rights. Yet the facts are that that company's profits between 1972 and 1973 have increased from $97 million to a figure which I originally stated was $175 million. I now believe this to be $200 million, almost four times the amount of their actual reported earnings.

As I see the facts, I think we have good legislation but good legislation without good implementation. I recognize you have only been under this law for a reasonably short period of time, but I think that we have another instance where we must concern ourselves with not what the Government does legislatively, but with the implementation of that legislation. I think this is the real concern of the people of this country.

The CHAIRMAN. Thank you, Senator Metzenbaum.

Senator McClure.

STATEMENT OF HON. JAMES A. McCLURE, A U.S. SENATOR FROM THE STATE OF IDAHO

Senator MCCLURE. Thank you, Mr. Chairman.

The energy crisis which the United States is now experiencing was not unexpected. For several years there had been warnings and predictions of shortages, predictions which unfortunately became too

accurate.

As Chairman of the House of Representatives Task Force on Energy and Resources from March 1971 to January 1973, I consistently urged recognition of the true energy situation facing us. During April 1972 I joined with former Chairman Aspinall in hearings before the House Committee on Interior and Insular Affairs, which proved conclusively that our energy situation was indeed a crisis. But the administration and the national news media refused to present this fact to the people.