Mr. HALE. In this country the Diesel engine is replacing the coal burner.

Ambassador DOUGLAS. That is right.

Mr. HALE. And I suppose the Diesel engine is much more efficient. Can the British railways resist that?

Ambassador DOUGLAS. I think that they will have to for a substantial period, Mr. Hale, for a variety of different reasons. First, there is the shortage of steel, and secondly, a shortage of petroleum, and thirdly Britain should not, I believe, and I think does not contemplate the diversion of the raw materials that she has from fabrication for export to any very great internal improvements, except those that are directly associated with increasing her production and reducing her costs.

Mr. HALE. The increasing cost of coal in England is making Briti costs of production higher all along the line.

Ambassador DOUGLAS. You are quite right.

Mr. HALE. And consequently, British products are higher in the consumers' markets.

Ambassador DOUGLAS. That is right. There are some exceptions, of course, including the precision-instrument industry and some others; but what you have said is true of the industries in which energy plays an important part as an item of cost.

Mr. HALE. That is one of the things that disturbs me about the British economy.

Ambassador DOUGLAS. Yes, sir.

Mr. HESELTON. Mr. Ambassador, just one final observation, because I do not know when I will have the pleasure of seeing you again, and I realize that although you have indicated that you will give some thought to the over-all question I asked you, I have been looking for some time for the table of exports in the last quarter of 1947. It was my understanding as of yesterday afternoon it was not available. I find it is contained at page G-33 of your commodity report, table 14; and table 15 reflects the January 16 program so that we can now modify that three ways.

If one of your staff will just jot these points down, I think they might be important. You will note on table 14, 120,000 barrels of kerosene of the last quarter of 1947, and table 15, 130,000, an increase of 10,000, and on January 16 an increasing provision to 50,000, back to 50,000. Gas and Diesel oil, 1,800,000 for the fourth quarter of 1947 and 1,200,000 January 16, back to 200,000 now. Fuel oil, 500,000 in the fourth quarter, and 300,000 in table 15, and nothing now. As I indicated before, perhaps some of you made some notes as to the percentages. Certainly the 100 percent is clear on fuel oil, and various percentages of reductions to possibly 20 to 50 percent in the other two categories.

Copies of a bulletin were sent to me which I gave to the committee. It states:

On February 4 the Canadian export program will be continued through voluntary arrangement to the end of April, so that we have established again a base upon which to examine these proposals, I do desperately hope that you will find it within your province to endorse at least the resolution which covers the 50percent reduction similar to the Canadian reduction I think is reflected very

definitely in the recent announcement of the department as to Great Britain, but unfortunately not as to many other countries.

The CHAIRMAN. If there are no further questions from members of the committee, I would like to submit for the record a list of questions to which answers are requested by the State Department for the purpose of the record. It is not my intention to direct those questions at this time to our witness, because it would require considerable data to make appropriate answers, and the committee is anxious to have the best information that will be possible on the subject.

Therefore, I will make as a part of the record at this point this request for information. Copies of it will be supplied to the witness and to the other witnesses who are here from the State Department in order that the answers can be given as full as possible for the benefit of the record.

(The list of questions submitted to the State Department and their reply of February 25, 1948, with attached exhibits, are as follows:)

The State Department has been asked to be prepared, among other matters, on the following:

1. Petroleum requirements under the European recovery program:

(a) Total requirements estimated by CEEC and by State Department. It is understood these are undergoing revision, and are likely to be different from the suggestions earlier contained in the Outline.

(b) Such requirements by types of products by years, by countries; comparison with current and prewar years.

(c) Such requirements by source of supply, i. e., United States domestic, United States foreign, other foreign, by chief supply areas, by years; comparison with current and prewar years.

(d) Such supply itemized not only as to crude source, but area of refining, and amounts from these areas.

(e) Total requirements under the plan for investment in crude production, refining, transportation and distribution facilities; itemized to show crude or refinery capacities involved, dollars or other source of investment, areas and ownership of expansion, and steel or other critical material involved, together with source of such material, with amounts.

(f) Uses by participating countries of products involved, i. e., maintenance of existing demand, increased demand, conversion from other energy sources.

(g) Investment required to meet any expansion in oil-burning facilities, especially as it relates to supply from the United States, under the plan, of such equipment, together with indication of amount of such equipment, with dates. 2. Contemplated supplying such requirements from the Middle East:

(a) Full discussion of the "degree of confidence" which we justifiably may have in imports and foreign reserves, under changing political situations, especially in view of "the reliance which hitherto has been placed on greatly expanded production in the Middle East" (committee report, January 26, 1948, P. 17).

(b) Full discussion of whether it is proposed to meet all or any portion of the requirements from the United States which are now contemplated will come from the Middle East in the event such Middle East supply is not forthcoming in the estimated amounts; together with discussion of the consideration which have been given, in such circumstance, to the effect upon the meeting of the domestic United States growing demand.

(c) Alternative plans for meeting European energy and fuel requirements in the event it is not proposed to meet any deficiencies as outlined in (b), i. e., additional European coal production, United States exports of coal, additional European hydroelectric power; and in the latter event, the amount and kinds of equipment planned on export from the United States.

(d) The basis upon which the plan's contemplated development of Middle East production is predicated, i. e., the determination regarding amount of expansion by United States companies and by foreign companies, whether on some historical pattern or otherwise, and the effect upon competitive positions in this area of United States and foreign companies.

Mr. ANDREW STEVENSON,

Adviser to the Committee on Interstate and Foreign Commerce,
House of Representatives.

Mr. ANDREW STEVENSON,

DEPARTMENT OF STATE, Washington, February 25, 1948.

Adviser to the Committee on Interstate and Foreign Commerce,

House of Representatives.

MY DEAR MR. STEVENSON: I am writing to you with reference to your letter of February 2, 1948 wherein it is indicated that the Department of State should be prepared to provide to the House of Representatives Committee on Interstate and Foreign Commerce certain information regarding (1) petroleum requirements under the European Recovery program; and (2) the contemplated supplying of such requirements from the Middle East.

It is my understanding that in the informal discussions in your office between you and representatives of the Department of State it was considered that the information sought in part 1 (a), (b), and (c) and part 2 (a) has been furnished through (1) testimony given by Mr. Loy Henderson, Director of Near Eastern and African Affairs, Department of State, and the American Ambassador to Iraq, Mr. George Wadsworth, in an executive session of the committee on February 5; (2) the testimony of the American Ambassador to Great Britain, Mr. Lewis Douglas, before the committee on February 6; and (3) the information contained in the document entitled "Commodity Report, European Recovery Program, Chapter G, Petroleum."

In accordance with our understanding and your request, the Department has sent you a further document, which it had prepared in connection with its Commodity Report on Petroleum, entitled "Detailed Analysis of the CEEC Estimates for the Petroleum Requirements of the Participating Countries and Their Dependent Overseas Territories, Fiscal 1949 Through Fiscal 1952." It will be noted that this document, as well as the above-mentioned Commodity Report on Petroleum, contain estimates by countries of the required imports and requirements of the participating countries and their dependent overseas territories, in varying forms, for the 4-year period of the European recovery program, fiscal 1949 to fiscal 1952, inclusive. At the end of the report you will find a break-down of estimated requirements summarized by country and by products for these years. The primary purpose of these estimates was to compute a total for each year which would represent the minimum funds, which in the opinion of the executive branch are needed in order to carry out a petroleum program consonant with the policies, purposes and objectives of the European recovery program. It should be borne in mind that these figures, particularly those for the last 3 years, represent only the best possible estimates based on information presently available to the executive branch. It is contemplated that the Administrator will subject these estimates to careful screening before use is made of the funds available for essential purchases of dollar oil, and will arrange that such supplies to the maximum extent practicable are obtained from sources outside the United States. Provision is made for the foregoing in section 12 (b) of the present Senate Foreign Relations Committee draft legislation, whcih reads as follows:

"The procurement of petroleum and petroleum products under this Act shall, to the maximum extent practicable, be made from petroleum sources outside the United States; and, in furnishing commodities under the provisions of this Act, the Administrator shall take fully into account the present and anticipated world shortage of petroleum and its products and the consequent undesirability of expansion in petroleum-consuming equipment where the use of alternate fuels or other sources of power are practicable.'

With respect to the points in your letter not covered above, the additional information available at this time is given in the following paragraphs which are numbered to correspond to the points in your letter:

1 (d). Chapter 5 of the Petroleum Commodity Report deals with this question, as does chapter 4, particularly tables 6 and 7. As indicated in these references, it is estimated that European import requirements in 1948 and 1951 will be drawn from the following sources:

358

These figures are based upon the best estimates of the executive branch of total exports, both crude and refined from the respective areas, and upon estimated availabilities. A detailed break-down between crude oil and refined products by source cannot be made with any degree of accuracy because of the interHowever this much can be said: changeability between the various sources. The United States will largely supply finished products except for small quantities of crude oil which may be shipped abroad for commercial or quality considerations. The bulk of European crude oil requirements are likely to be satisfied from the Middle East with the remaining quantities originating in the Caribbean area. It is expected that the bulk of the products going to Europe from the Caribbean will be refined products.

1 (e). An Interdepartmental Committee on Machinery, under chairmanship of the Department of Commerce, has jurisdiction over study of petroleum equipment requirements for the European recovery program. Thus far the Committee has not completed a petroleum equipment study, but it is understood that such a study is in course of preparation. It is also understood that the American oil companies concerned have been requested to supply the necessary details on their petroleum equipment needs and that the participating countries have been asked to furnish additional information on their requirements, some of which has been received. The Department is informing the Machinery Committee of the information requested under this subhead so that it can be taken into account in the study now being prepared.

1 (f). In connection with this point it is suggested that you refer to the four tables attached to the Detailed Analysis of the CEEC Estimates for the Petroleum Requirements of the Participating Countries and Their Dependent Overseas These tables show in detail the Territories, Fiscal 1949 through Fiscal 1952. estimated consumption of the participating countries by products for the four You will also note that in this docuyears of the European recovery program. ment an explanation is given for each country of (1) the reductions made in their estimated requirements varying from 12 percent to 47 percent; (2) the quantities contained in the CEEC reports; (3) the uses for which the product will be consumed; (4) the restrictions regarding consumption applied by each country; and (5) the inability of these countries to carry out any substantial coal to oil programs based on the reduced figures.

1 (g). With reference to expansion in oil-burning equipment it should be pointed out that nearly all of such units will be produced in the participating countries. Some exports from the United States, however, of trucks and tractors are contemplated. This part of the program is discussed in the Inland Transport Report and in the Agricultural Machinery Report, and three copies of each of these reports are attached.

On

2 (b) and (c). The Department has not developed any alternative plan for supplying the requirements of the participating countries in the European recovery program in the event that Middle East oil will not be available in the amounts necessary to meet their reduced requirements. As indicated in 2 (d) below, the studies and estimates of the executive branch with respect to availability of oil in the Middle East are based upon the commercial plans of the petroleum companies for the expansion of their oil production in that area. the basis of those plans, it is expected that the required quantities of Middle East oil will be available for shipment to Europe during the 4-year period of the program in amounts necessary to satisfy presently estimated requirements. As indicated in the Petroleum Commodity Report, and in the testimony of Ambassador Douglas, should Middle East oil not be available on the basis as now estimated, a full review of the energy requirements under the program would be required. Such a review necessarily would take into account all factors which relate to the energy requirements under the program, to possible expansion in oil production in other areas, such as the Latin American countries and the tidelands of the United States, and to the possible reduction in nonessential fuel consumption in other areas.

2 (d). The estimates of availability of Middle East oil used in preparation of the Petroleum Commodity Report are based upon the commercial plans of the oil companies for expanding their production in the Middle East. These plans were made by the companies prior to the development of the European recovery program and, it is assumed, were based in the case of each company upon the company's estimates of its market requirements and its ability to expand its production to meet these requirements. The table below shows the daily rate of crude oil production in the Middle East in 1947 and the estimated rate of production in 1951, together with the percentage oewnrship of American companies in such production:

In the informal discussion referred to above, you indicated an interest in knowing when the estimates of the requirements of the participating countries and their dependent overseas territories were prepared by the executive branch. The first tentative estimates were prepared in October and November 1947. As more of the information requested from the participating countries became available, and as data were obtained on estimated future supplies of dollar oil, the requirements were further examined on a country by country and product by product basis all through December and January. The Petroleum Commodity Report was completed on February 5 and includes all revisions made up to that date.

Sincerely yours,

ROBERT H. S. EAKENS, Acting Chief, Petroleum Division

DETAILED ANALYSIS OF THE CEEC ESTIMATES FOR THE PETROLEUM REQUIREMENTS OF THE PARTICIPATING COUNTRIES AND THEIR DEPENDENT OVERSEAS TERRITORIES, FISCAL 1949 THROUGH FISCAL 1952

INTRODUCTION

In the following country statements an attempt has been made to examine the petroleum requirements of the various participating countries on the basis of a preliminary analysis of a use and product break-down of consumption for the years fiscal 1949 through fiscal 1952.

The principles that have been followed have been outlined in the Commodity Report on Petroluem. Attention should, however, be drawn to the fact that the estimates include military requirements and also considerable quantities of petroleum products needed to replenish stocks. This is of particular importance in any evaluation of the fiscal 1949 and fiscal 1950 estimates of requirements as these figures include a considerable element of stock build-up to make good the serious reductions in reserves suffered during the second half of 1947. Stocks in many countries have fallen in 1947 below the level necessary for economic and efficient distribution.

Total petroleum requirements of the participating countries and their dependent overseas territories during the recovery period have been estimated as follows: Total Petroleum Requirements of the Participating Countries and Their Dependent Overseas Territories, 1938, 1947, and Fiscal 1949 to Fiscal 1952

1 CEEC estimates refer to calendar years for the period 1948 to 1951. * Unrevised; actual consumption in 1947 was probably some 5 to 10 percent below the CEEC estimate.