so that nominally American companies can earn the "adequate profit" they need to buy control over our coal and uranium reserves. If you take a look at the profitability of most of the major oil companies, they have admitted they cannot spend the money they have made in additional exploration and development. If you take a look at the amount of money that is supposed to be coming to the U.S. Treasury from eliminating the depletion allowance, you will note that it amounts to less than 20 percent of the 1974 profits of the 8 defendants in the FTC antitrust case against the oil companies.

Mr. LAMONT. I would like to add that the less-developed nations have a rather difficult choice to make as to whether they wish to deal on the basis of a plea for mercy with the producing countries, the OPEC nations, which are at least formal sovereignties with whom they have formal relations. Their other choice is to deal with our friends, the multinational companies. They have not had all that great a record of success in dealing with those companies on prices in years past. You have an enormous common interest among these companies in the maintenance of extremely high prices of all forms of energy, not just oil because now these companies have horizontally moved into every other single field of energy that we produce or that is capable of production within any of the parameters that I can imagine within the even remote future. I thing that if I were advising one of the less-developed countries I would say that they had about as good a chance in dealing with Saudi Arabia and Algeria as they have with Exxon and Mobil and probably a lot better chance.

Mr. DIGGS. If you were further advising about U.S. policy, particularly in the aftermath of the Paris conference, which direction would you take?

Mr. LAMONT. Well, first of all, the total record of the Paris conference and all the details of what went on there has not yet been very fully developed. We have, of course, some news reports, we have some of the returning people who have discussed not the broad, general policies, but the actual day-to-day dealings, the way in which this mechanism is beginning to function as it approaches its job. But wholly apart from that, I would remain of the same view that I had before there was a Paris conference or before this program was proposed, which is that the problem of the allocation of a scarce supply of so enormous a degree of importance to this country and to the other countries is a governmental problem, and to be done by governmentally responsible people, not by private groups of companies operating totally beyond the law and totally beyond the control of any country. Mr. LOBEL. I think the problem is that the President's proposals seem to be saying that we ought to have two cartels: A company cartel and a country cartel, and that if we can set broad parameters around their activity, the public will be protected. Well, that is just not so. The interests of the company cartel and the country cartel are far different than the interests of the United States as a nation. What is good for big oil is not good for this country necessarily. What we ought to be doing is trying to move toward Government development of a rational national energy policy, which means an encouraging free enterprise and competition in the world, not a Government set price.

You heard testimony earlier today that bureaucrats sitting in Washington really aren't very good at setting prices, and yet that is exactly

what Dr. Kissinger is proposing. We heard the Government suggest a fair price would be $6.50, $7.50, $8.00 a barrel, but OECD said a rational price would be about $4.50 a barrel.

We know the cost of production in Saudi Arabia is about 20 cents, or 40 cents a barrel in Iran. So the figures Dr. Kissinger is talking about are Alice in Wonderland figures. What we ought to do is let rational businessmen operating in a freely competitive environment make those kinds of decisions so long as the Government through either national petroleum reserves or some other device protect our national security interests.

Mr. LAMONT. To add one further footnote, both Mr. Conant and Mr. Robinson referred to a process by which competition would ultimately restore an equilibrium. Competition does not now exist in foreign crude oil. Competition has not existed in the foreign trade in crude oil for 40 years. Reliance upon that in the present organization of the industry and the present structure of Government policy is a very, very vain hope.

Mr. DIGGS. I wonder if Mr. Conant or any of his associates had heard anything from these other gentlemen to which you would feel compelled to respond.

Mr. CONANT. I suspect so.

Mr. LAMONT. If not, we have failed.

Mr. BELL. If I may, Mr. Chairman, I would like to speak particularly to the voluntary agreement because that is the part with which I am familiar and for which I had had principal responsibility.

I think it is important to set out what the voluntary agreement does because it is important to understand its rather limited, albeit very vital, role in this whole set of arrangements.

First of all, the voluntary agreement as it applies to actual allocation actions would only be applicable during a period of actual emergency. Of course, planning must take place before the emergency. That is what we are trying to do, is plan in advance so we don't get caught this time without advance preparation. But actions which can be taken under the voluntary agreement could only be taken during an emergency situation. Second, it applies only to international allocations of oil and only to international allocations of oil within the framework established by the IEP. As Mr. Lamont has abserved quite correctly, the decision about international allocation of oil in terms of what countries' rights should be a governmental decision and indeed is made by governments in the IEP. Moreover, the IEP has established a mechanism for making those decisions. What is involved is not the decision of how much oil should go to each country, but the logistics of getting that oil from where it is to the countries entitled to it under the voluntary agreement. That is a difficult logistic question and that is a question which a multinational forum is not readily equipped to deal with and which requires the aid and assistance of the oil companies during an emergency. That is the purpose of having a voluntary agreement.

Within the United States it has no application. As to the volumes of oil coming to the United States, we would have authority in the legislation to allocate that oil as necessary to users, refiners, individuals, and groups within the United States. For instance, we may continue to use the buy-sell program which we presently have for the

allocation of oil from those companies which have oil to those companies which do not.

This would be a decision fully controlled by the U.S. Government. As to allocation within the United States itself, there is no role there for private decisionmakers and I agree with Mr. Lamont in that respect.

Finally, any allocation that is done, even if it is at the logistics level, must be done pursuant to what are called principles/plans in the voluntary agreement. These must be approved in advance by FEA and by the Attorney General with a review process that should allow us in advance to determine whether these are suitable mechanisms for allocation.

Moreover, actions pursuant to these principles/plans during an emergency must all be approved by FEA and the Attorney General and the Attorney General has the power at any time to revoke the operative authority in the agreement. So we have an agreement which has a narrow but important scope which does not affect domestic allocation. which is subject at each step to the approvals of FEA and the Attorney General.

We think in that respect it is a sound agreement which does accomplish a limited and important objective without having the anticompetitive types of effects that have been described here. Perhaps that is to say enough about the agreement itself at this stage.

Mr. DIGGS. Well, thank you very much.

If there is any further revision or extension of remarks you will have an opportunity to do that when the record is submitted. You have enlightened the committee immeasurably this afternoon and we appreciate your cooperation.

The subcommittee stands adjourned.

[Whereupon, at 4:10 p.m. the subcommittee adjourned.]

APPENDIX 1

TEXT OF "SOLEMN DECLARATION OF PRINCIPLES" ISSUED AT OPEC SUMMIT CONFERENCE, MARCH 6, 1975

The sovereigns and heads of state of the member countries of OPEC met in Algiers on March 4 at the invitation of the President of the Revolutionary Council and of the Council of Ministers of the Democratic People's Republic of Algeria.

1. They reviewed the present world economic crisis, exchanged views on the causes of the crisis which has persisted for several years, and considered the measures they would take to safeguard the legitimate rights and interests of their peoples in the context of international solidarity and cooperation.

They stress that world peace and progress depend on the mutual respect for the sovereignty and equality of all nations of the international community, in accordance with the UN charter. They further emphasize that the basic statements of this declaration fall within the context of the decisions taken at the Sixth Special Session of the UN General Assembly on problems of raw materials and development.

The sovereigns and heads of state reaffirm the solidarity which unites their countries in safeguarding the legitimate rights and the interests of their peoples, reasserting the sovereign and inalienable right of their countries to the ownership, exploitation and pricing of their natural resources and rejecting any idea or attempt that challenges those fundamental rights and, thereby, the sovereignty of their countries.

They also reaffirm that OPEC member countries through the collective, steadfast and cohesive defense of the legitimate rights of their peoples, have served the larger and ultimate interest and progress of the world community and, in doing so, have acted in the direction hoped for by all developing countries, producers of raw materials, in defense of the legitimate rights of their peoples.

They conclude that the interdependence of nations, manifested in the world economic situation, requires a new emphasis on international cooperation and declare themselves prepared to contribute with their efforts to the objectives of world economic development and stability, as stated in the "Declaration and Program of Action for the Establishment of a New International Economic Order" adopted by the UN General Assembly during its sixth special session.

2. The sovereigns and heads of state note that the cause of the present world economic crisis stems largely from the profound inequalities in the economic and social progress among peoples. Such inequalities, which characterize the under-development of the developing countries, have been mainly generated and activated by foreign exploitation and have become more acute over the years due to the absence of adequate international cooperation for development. This situation has fostered the drainage of natural resources of the developing countries, impeding an effective transfer of capital resources and technology, and thus resulting in a basic disequilibrium in economic relations.

They note that the disequilibrium which besets the present international economic situation has been aggravated by widespread inflation, a general slowdown of economic growth and instability of the world monetary system in the absence of monetary discipline and restraint.

They reaffirm that the decisive causes of such anomalies lie in the long-standing and persistent ills which have been allowed to accumulate over the years, such as the general tendency of the developed countries to consume excessively and to waste scarce resources, as well as inappropriate and short-sighted economic policies in the industrialized world.

They, therefore, reject any allegation attributing to the price of oil the responsibility for the present instability of the world economy. Indeed, the oil, which has contributed so significantly to the progress and prosperity of the industrial