The National Oil Jobbers Council has appreciated the high degree of involvement granted to it by the present administration with respect to the energy deficit problem. We have had the privilege of consulting with the Council of Economic Advisors, the Office of Emergency Preparedness and the Department of the Interior. Both General Lincoln and the Council of Economic Advisors have requested the results of the questionnaire on fuel oil shortages which we have sent to our members. Despite the continuing efforts and interest of the Executive Branch, we do feel that congressional studies such as this play an important part in the scrutiny of the web of issues underlying our nation's apparent entry into the energy deficit column.

It would be our hope, Mr. Chairman, in addition to examining possible shortrange solutions to this vexing problem, your study might also entail an examination of the probable causes of the current shortage and their long-range implicationsparticularly with respect to policies and practices which might prevent or minimize the recurrence of hardships resulting from the shortage of fossil and other fuels. Mr. Chairman, it is my intent, hopefully, to be both brief and broad. Mr. Robert DeBlois, president of the New England Fuel Institute, an organization in the process of becoming affiliated with NOJC, will give you detailed particulars. Since my role is primarily that of laying foundation for Mr. DeBlois, I shall confine myself to a broad-brush treatment of the national problem.

During the last few months we have witnessed the transformation of our economy from an energy-surplus posture to that of an energy-deficit economy. It would be difficult-almost impossible-to even list the implications of this transformation. It is, however, apparent that the thoughtful implementation of the correct policies can make a real difference as to the future impact of this deficit. The National Oil Jobbers Council has already made a number of specific recommendations to the administration that we feel must be taken to ensure that the people of our nation receive this winter the heat and other energy forms essential to their comfort and well-being.

These recommendations which have heretofore been made to the President's Council of Economic Advisors and the Office of Emergency Preparedness include: immediate action to increase the flow of Canadian crude, finished product and natural gas into critical U.S. marketing areas; use of Navy tankers for shipment of needed fuel; use of military supply and distribution officers for the emergency operations; consideration of the "bonus barrel" concept to encourage additional output of residual; increase of the 40,000-bbl. emergency allocation to 70,000 bbls.; extension of the period through the 1970-71 winter season; consideration of temporary waiver of sulfur-content requirements to allow low-sulfur No. 2 oil now being used as blend to be rechanneled into normal fuel markets; considering as imperative the need for full supply now; increasing Venezuelan production for fuelshort areas; taking a positive stand on the President's Council of Economic Advisors' Bonus Quota Plan on No. 2 Oil; considering implementing the 1957 voluntary tanker arrangement for more efficient tanker use; investigating the possibility of importing additional Bunker "C" from Mexico; arranging for emergency withdrawals from Defense Department depots, with product to be returned in kind when available; and conducting an immediate survey of supply and demand on energy products to determine where supplies are and where potential shortages might appear.

At the request of the Council of Economic Advisors and the Office of Emergency Preparedness, we have sent a questionnaire to each of our state associations asking them to secure from individual jobbers data as to the amounts of No. 2, No. 4 and residual oil shortages they have encountered.

We have, to date, received almost 1,000 returns. This, of course, is still fractional. We do feel, however, that it is highly significant that over a quarter of the jobbers responding-25.9 per cent-indicate that they are encountering crucial shortages. In New England, this amounts to almost 30 per cent of those queried or 29.7 per cent. We do not, as yet, contend that these returns wholly justify extrapolation to the national situation. But it is most clear that they reveal an extremely alarming trend.

Mr. Chairman, I herewith ask permission to submit for the record at such time as it becomes fully documented the aggregate data on our questionnaire concerning the fuel oil shortage. Additionally, I feel that selected comments from individual jobbers can do much to enlighten you as to the seriousness of the situation.

COMMENTS

Maine: No shortage now-worried about critical months of December, January, February when demand is high.

Colorado: Turned down buyer for 36,000 gallons of No. 6 per day due to unavailability of product.

Iowa: Supplier guarantees product, but says shortage will naturally cause price increase.

Maryland: Anti-pollution laws causing sudden increase in demand for No. 2, already in short supply with resulting price increase.

Minnesota: Unable to bid or supply our schools No. 5 requirements. Unable to find supply.

Tennessee, Georgia: Our supplier has TVA contract-that will cause a shortage of product in our area.

Georgia, South Carolina: Expect shortage of natural gas to cause shortage of No. 2 and No. 5.

Illinois: Unable to bid on 200,000 gallons to our high school or 120,000 gallons to our grade school for '70-'71 season. No supplier would guarantee firm supply or price.

South Carolina: Gas utility refused to furnish commercial gas and several coal users are going to No. 2 oil.

New Jersey: Rough, dangerous, unpredictable, expensive. Supplier will allow us to have the same amount of oil as purchased last year-one must draw 40% of the quantity by January 1, 1971 or we will be prorated for the rest of the year. Our supplier advised us that we would be supplied 20% less on #4 and #6 this coming season.

Massachusetts: No. 2 could be short if many of the cities and utilities convert to No. 2 from No. 6. This could move the price up very high for the consumer. New York: We are receiving many inquiries for No. 4 oil from customers who have been cut off for a supply.

Received state contract on No. 6 based on receiving product from supplier, however, due to shortage they cannot supply. Don't know where I can buy No. 6. Major supply sources have reduced commitments by 20%.

Independent sources have been established on non-contract basis. Severe winter with gas interruptions will greatly magnify shortage. Probability of crisis appears imminent late February, '71 through April '71.

Wisconsin: My supplier will not make a contract price with me for a year. He can change the price at will.

Connecticut: Concerned about adequate supply in area plus pricing of products being kept in proper proportions.

Pennsylvania: Buy from two suppliers. Both will give no contract but say not to worry.

Mr. Chairman, as you know, even though distillate inventories are greater than a year ago, (although down from two years ago) there is a massive shortage of heavy fuels such as No. 4, Bunker "C" and No. 6 oil. This has led to the use of distillate (No. 2 oil) or residual intermixed with distillate for boiler fuel by utilities and some industrial users. Additionally since nuclear electrical generation has not come on line at nearly the rate hoped for and because of sulfur content requirements obviating the use of coal coupled with an increasingly troublesome coal export situation and many transportation problems, the situation continues to worsen. It must be observed that not enough emphasis has perhaps been placed on the No. 4 situation. This is the oil used by some of our factories, laundries, and public institutions. Since most of the attention is being paid to No. 2 and residual fuels, No. 4 is rapidly developing into the stepchild of the industry. We feel that this is most unfair, and that those in policy-making position must become increasingly aware of the use of No. 4 oil.

We feel, too, that oil import regulations should be amended to permit purchase and import of No. 2 into District No. 1 from Puerto Rico without penalty to those refiners. It would also be helpful, if, effective January 1, 1971, the historic finished product import allocation for No. 2 oil in District 1 were to be abolished or changed upward to 60 mbbl. The increase should become an additional quota for the independents in District 1. We feel, too, that every effort should be made to eliminate the No. 2 fuel oil price increase from 61⁄2¢ per gallon to 81⁄2¢ per gallon, made by certain major refiners in the Caribbean last August.

Obviously, Mr. Chairman, if one grants for the purpose of discussion that the 40,000 bbl granted as an addition to the independents in District 1 is correct, then since this covers that period of the year encompassing approximately 1⁄2 of the degree days, it is obvious that for the balance of the heating season the figure necessarily would need to be 70,000 to 80,000 bbl. to be consistent.

The great imponderable here is the degree to which utilities and industrial users will be converting from other fuels-natural gas, coal and residual oils to No. 2 oil. It is, of course, possible, by putting on blinders, to simply say that stores will be a bit higher than a year ago; historic users will show only slight increases and, ergo, there is no shortage. In the real world, however, it is clear that there is a shortage. That it is here and it is now. It is equally clear that responsive action to the shortage must be taken by the administration here and now. Mr. Chairman, I do not know how-within the proprieties of this forum to sufficiently underscore and emphasize the point that unless the administration moves to correct this shortage, there are going tobe cold and justifiably angry people in many portions of the country within the next few months.

Oil Jobbers are the best marketers in the industry. They are responsive to and aware of local needs in a way that major refiner competitors never will be. Nonetheless, they are not magicians. In order to plan for the heating season ahead, they must know now what supplies will be available. It is our most fervent hope, Mr. Chairman, that you and your distinguished colleagues will take such action as may be necessary to ensure that adequate supplies may be guaranteed at the earliest possible moment. Needless to say, if these small businessmen were to lose customers to other energy forms, that those customers, having made the expenditures incident to conversion, i.e., buying new furnaces, will be lost forever.

In closing then, I am here to entreat you on behalf of small business oil jobbers and, indeed, fuel oil users as well, to take such action as you may deem appropriate to ensure a swift and thorough solution of the present dilemma.

Thank you for your courtesy in allowing me this opportunity to present our views.

Recognizing that the best interests of consumers of petroleum heating products are served when afforded the widest choice of fuels at the lowest possible cost in an open, free and competitive market, the National Oil Jobbers Council endorses a policy of urging the petroleum industry, state and federal government officials and agencies, and consumer groups, to take whatever steps necessary, including imports on a nonpreferential basis to guarantee adequate supplies of petroleum heating fuels for the consuming public at the lowest possible price. Full compliance with local standards for environmental pollution abatement is also recognized as being of prime importance.

So long as an import system remains in effect, the Council shall seek import rights for the independents of the industry, including jobbers, marketers, and terminal operators serving the wholesale function and the producer.

Mr. SMITH. Mr. Conte.

Mr. CONTE. I have no questions, Mr. Chairman, but I do want to compliment Mr. Jones on his fine statement. I concur with it 100 percent. I have known him for a good many years. And I must say that he certainly has done a tremendous job in helping the small businessman.

And I am glad he has with him today the General Counsel of NOJC, my good friend Gregg Potvin, who served with such distinction as general counsel to this committee.

I might say, Gregg, we miss you greatly. There is a tremendous void. But our misfortune was NOJC's good fortune. It is good to have you here.

Mr. JONES. I am most thankful that you can say those kind words even after I took him away from you.

One statement that the Secretary made which is not in my statement, he brought up the fact that there is an adequate supply of No. 2

oil unless I think this hinges on the word unless-the No. 2 oil is being mixed or supplanted by other fuels. I don't think that the word "unless" should be used quite that way, because we all know that fuel is being manipulated in that fashion, and that there is a shortage, the result of our survey shows that. And I think that more work should be done by the necessary Government agency to make sure that there is no supplanting of the other fuels by No. 2 as long as No. 2 is needed for heat.

Mr. SMITH. IS No. 2 or No. 1 going up in price?

Mr. JONES. Yes.

Mr. SMITH. Very fast?

Mr. JONES. I don't know how fast it is moving up. It has moved up for me in the last 2 weeks, and probably will move up again shortly. Mr. CONTE. And if the new antipollution regulations in Boston go into effect on schedule, we will really be in serious trouble. We are in serious trouble anyway.

Mr. JONES. There is another problem in Congressman Hungate's area. And this has not been brought up before. The Mississippi River, of course, is one of the largest carriers of fuel oil into the northern markets. And it freezes over. It freezes over some 70 miles south of him and about 50 or 60 miles north of me. And when that happens if they don't have their product at that time, they don't use it.

Mr. SMITH. Of course, farmers in the wintertime use No. 1 and in the summertime No. 2. And the tractors are about 60 percent of what they were 10 years ago. We were here about that number again.

Mr. CONTE. Was there any reason given why NOJC was dropped from the National Petroleum Council? I noticed that Mr. Dole was completely taken by surprise, and didn't seem to know much about it. Mr. JONES. Mr. Potvin.

Mr. POTVIN. Mr. Conte, Mr. Jones having been away during the period in question, I handled most of what might charitably be termed negotiations on this. First, that is an anomaly here in that Mr. Jones is serving ex officio as the president on the NPC and in fact, had in his possession a perfectly valid signed letter of reappointment by Secretary Hickel.

Strangely, nonetheless, when the list of NPC members came out, his name was not included. Frankly, I think what happened was this: That one of the resident intellectuals at the White House-and we were told this by a high official in Interior-decided that these advisory bodies should be screened for party affiliation. And as it happens, Mr. Jones is a lifetime Democrat, although what that has to do with his labor or with the Council, as you well know, sir, is less than nothing. This is what happened.

We feel that it is highly unfortunate, and that it should not be partisan, and it never has. The Council is bipartisan. And certainly the proposition that a small business member on the NPC should be subject to this kind of screening is, I think, wholly unfortunate and uncalled for.

Mr. CONTE. I agree with you.

Mr. SMITH. Mr. Hungate.

Mr. HUNGATE. Thank you, Mr. Chairman.

I, too, applaud your fine statement, Mr. Jones. And I appreciate your contribution to the committee. And I join my colleague from Massachusetts in somewhat lamenting the loss of our very able counsel. It was my privilege to work with three committees here in the House, and none of them have any finer counsel.

Thank you.

Mr. SMITH. Thank you very much.

Mr. POTVIN. Mr. Chairman, if I might just embroider for about 30 seconds on two points, first, this use of the word I cannot tell you how shocked I was to hear the head wampus, so to speak, from Interior, misrepresent to you in this manner. In other words, by his saying "unless" this would have to mean that he is not aware of the trade press, he is not aware of his own statistics, he is not aware of the general press stories, that there are indeed hundreds of thousands, even millions of gallons of No. 2 being burned either blended with resid or straight, by industry, and by electric utilities.

This is typically the blinders attitude. Our stocks are a little higher than last year, although not as high as 2 years ago. We are just going to look at historic users, and if that is all you do, there is no shortage. It is preposterous at this late date for a high-ranking member of this or any administration to use the word "unless." I think he was less than frank when he failed to concede to you that the fact of the matter is today—as he well knows-is that there are millions of gallons of No. 2 responding to the massive shortage of resid, and that is what is causing the crunch.

Secondly, I cannot express to you the frustration, sir, at some of the bureaucratic attitudes that we have encountered. In June, the declaration was made that 40,000 barrels a day would come into Mr. Conte's district No. 1. On September 8 those tickets were finally issued, sir. And this is why you heard today that they are not even using the tickets they have got. Of course they are not. They just got them is the answer. It is ridiculous.

Now, extrapolating on this latest increase, if they are going to take until the equivalent of September 8 again, it is going to be too warm to need fuel oil. I hope you can get them to move. I just can't overemphasize that.

Mr. CONTE. A very good point.

Mr. POTVIN. Finally, sir, on this question on page 7, Mr. Jones makes the point that it would also be helpful if effective January 1 the historic finished product import allocation for No. 2 oil in district I were to be abolished or changed upward to 60,000 barrels a day.

This increase should become an additional quota for the independents in district II.

Let me embroider that to this extent, sir. Here is what happened. In 1959, back in the days when the program was set up, as you so well recall, they decided that anyone that was importing finished products into district I as of 1957 could continue to do so. This resulted mostly in large refiners, of course, being written in. Now, it was a total of 76,000 barrels a day. Fifteen thousand of that presently belongs to the Hess Refining Co. on a 10-year basis. I think it still has 8 years to run.