Date: 1981-01-29
Speaker: ROBERT C. BYRD (democrat)
Chamber: S

Mr. President. in an effort to reduce Americas alarming dependence on foreign oil. President Carter initiated the phased decontrol of domestic crude oil prices. This step was recommended by industry experts and independent analysts alike as the most effective means of spurring domestic production and energy conservation. This action has proved correct over the past 18 months. Rising domestic prices have led to increased exploration for oil and natural gas. while oil imports have recently averaged about 23 percent less than in 1979. Higher petroleum prices have also encouraged investment in a multitude of alternative energy sources. Phased decontrol helped to diffuse the drastic inflationary impact which immediate decontrol would have had. At the time decontrol was announced in April. 1979. OPEC oil sold for approximately $14.50 per barrel. now the average world price is about $38 per barrel. Even then. it was predicted that higher prices for domestic oil would fuel inflation. slow economic activity. and increase unemployment. It was also recognized that the inflationary impact of decontrol would be considerably higher if OPEC continued to raise the World price of oil. It is certain that the graduate approach has cushioned the shock which otherwise would have rocked the American economy. Phased decontrol allowed the American consumer to adjust gradually. albeit painfully. to these new energy realities. Even as the predicted benefits of decontrol have been realized. so have the economic consequences. In the recently issued Presidents Economic Report. the passthrough of oil price increases into other commodities was labeled as the most important single factor in the acceleration of inflation. Skyrocketing energy prices. resulting from OPEC hikes and the phased decontrol of domestic crude oil prices. was directly responsible for onefifth of the overall increase in consumer prices in 1979 and nearly onethird of the price surge in the early part of 1980. Personal consumption expenditures for gasoline rose 29 percent between 1979 and 1980. reflecting price increases of about 20 cents per gallon. Home heating oil and utility costs also rose dramatically. Yesterday. President Reagan signed an Executive order authorizing the immediate decontrol of domestic crude oil. gasoline. and propane. accelerating this process by almost 9 months. The President justified this action on the grounds that it will boost production and stimulate energy conservation. Decontrol was also billed as the first step to "deregulate America." Mr. President. I supported President Carters wise decision to begin the process of decontrol. It was critical for the United States to adopt a more realistic policy on oil pricing. It was also imperative that the overly complex and burdensome allocation system. which had at least contributed to severe shortages. be dismantled. I do not challenge the policy of decontrol. I merely question the timing of this latest decison. The most recent economic statistics indicate that inflation is still raging at an unacceptably high level. The Consumer Price Index increased 1.1 percent in December and 12.4 percent for the whole year. Unemployment is still too high at 7.4 percent. and economic growth has been uneven. According to the Department of Energy and the Congresional Budget Of.. fice. immediate decontrol of crude oil and gasoline could add from 5 to 14 cents to the price of gasoline at the pro p and could cause a 0.5 to 0.6 increase in the CPI. In the midst of a record cold winter in the Northeast. decontrol could raise the cost of home heating oil by 8 to 10 cents a gallon. The decision leaves refiners and retailers free to charge whatever the market will bear. In those States which are dependent on heating oil the effects of this could be severe. There are some other hidden costs connected with the Presidents decontrol decision. There are some other hidden costs connected with the Presidents decontrol decision. The end of controls also means an end to the entitlements program. which has helped to equalize costs and insure the availability of crude oil supplies for small- and mediumsized refiners. Although complex allocation regulations may not have been the answer. decontrol has now been accomplished before any accommodations have been made to assure the continued viability of our domestic refining industry. This could especially hurt the Midwest and Appalachian States as the summer driving season approaches. Early decontrol also means that Government outlays for the strategic petroleum reserve could rise as much as $1.6 to $2.4 billion in the current fiscal year. depending on world oil prices. To help finance acquisitions of oil for the reserve. the Department of Energy has participated in the entitlements program. This advantageous arrangement will end with immediate decontrol. Mr. President. immediate decontrol means that energy will cost more. inflation will worsen. and the oil companies will prosper. These consequences cannot ultimately be avoided. In the long run. the expected benefits of increased production and conservation should outweigh these costs. But in the short term. as we struggle to right our economic ship. immediate decontrol may not prove to be the most advisable co.se of action to take at this time. Mr. President. I suggest the absence of a quorum.