FOR IMMEDIATE RELEASE ECONOMIC STABILIZATION PROGRAM COST OF news LIVING COUNCIL Office of Public Affairs Washington, D.C. 20508 Dr. John T. Dunlop, Director of the Cost of Living Council, announced today that the freeze is extended on petroleum (SIC 1311, 1321, and 2911) for one week, until August 19. Final regulations for petroleum products will be issued next week. Dr. Dunlop stated, "While all the policy questions on treatment of petroleum have been decided, the Council needs additional time to perfect and promulgate the text of the oil regulations." Noting that the Council has received numerous comments on the proposed petroleum rules, Dr. Dunlop stressed: "The Council has been very concerned that the final regulations strike a delicate balance between constraining prices while at the same time encouraging the necessary increase in supplies which the country must have. The Council is aware that energy prices must be allowed to rise in order to stimulate development of new energy reserves and make possible the purchase of higher cost foreign oil. At the same time, we must prevent. unnecessary price increases.' The final regulations cover crude petroleum and petroleum products, including gasoline and home heating and industrial fuel oils. Significant provisions of the regulations follow: 1. Rule: Ceiling prices on the retail sale of gasoline and No. 2 home heating oil will be continued according to the proposed regulations. In calculating the ceiling prices, retailers will use the actual markup in effect on January 10, 1973. However, in a change from the proposed regulations, no retailer will be required to have a markup of less than 7¢ per gallon. Reason: The 7¢ per gallon minimum will avert a severe hardship on those retailers who were involved in "price wars" or subject to abnormally low markups on January 10, 1973. The Council has determined that a 7¢ per gallon minimum markup is appropriate. It will, in fact, result in the rollback of some retail prices of gasoline and No. 2 heating oil. 2. Rule: Retailers of heating oil will be allowed to adjust their ceiling prices automatically at the beginning of each month to reflect any higher costs they have paid for imported heating oil, but only on a dollar for dollar basis. Similarly, retailers will be required to reduce prices to reflect reduced product costs. CLC-362 Reason: The automatic monthly adjustment is intended to assure that the regulations do not restrict importation of heating oil which will be vitally needed in the U.S. this winter. The ceiling price adjustment will only permit increased prices to reflect higher costs of imported foreign oil. No additional price increase will be allowed for profit or other higher costs. 3. Rule: The regulations will provide for ceiling prices on domestic crude oil. These ceiling prices of crude oil will be the highest posted prices in effect on May 15, 1973 plus an amount not in excess of 35¢ per barrel. Ceiling prices will be established so as to maintain the price differential among various grades of crude oil in geographic locations throughout the country. These ceiling prices will result in some rollbacks. Reason: A maximum increase of 35¢ per barrel of crude oil over the May 15 posted price is necessary to maintain the traditional differential among domestic crude oil prices. The normal pricing structure has been distorted by price increases put into effect on 38% of the domestic output of crude oil. This increase started after May 15 and was stopped by the freeze. The increase will permit the domestic price to move toward the higher world price. 4. Rule: A two tier pricing system is provided. Producers will have the opportunity to sell "new oil"--that above 1972 production levels--at free market prices. Reason: The "2-tier" pricing system, which allows new oil to be sold at higher prices than "old oil" is expected to stimulate domestic crude oil production while maintaining price controls on oil presently being produced. The "2-tier" system will encourage increased investment in domestic exploration and will provide an economic incentive to allow the recovery of a larger percentage of oil in existing reservoirs. 5. Rule: Rule: Retailers of gasoline and No. 2-D diesel fuel will be required to post on each pump the ceiling price for the gasoline or diesel fuel sold from that pump. Gasoline retailers also will be required to post on each pump the minimum octane number of the gasoline sold from that pump. Reason: These posting requirements will provide a mechanism to assure the public that retailers are complying with stabilization regulations. CLC-362 TITLE 6-ECONOMIC STABILIZATION CHAPTER 1-COST OF LIVING COUNCIL PART 150-COST OF LIVING COUNCIL PHASE IV REGULATIONS Establishment of Part: Issuance of Subpart Governing Construction The purpose of this amendment is to establish a new Part 150-Cost of Living Council Phase IV Regulations and a new Subpart N therein. Subpart N is a republication of the June 18, 1973, price regulations applicable to the construction industry, 38 F.R. 15821. Prior to publication on June 18, there was consultation with numerous contractor's associations, user groups, and affected Federal agencies. The regulations establish several rules applicable to prices charged for construction operations, reaffirm profit margin limitations for construction operations, prescribe reporting requirements for sales, costs, and profits by a firm in the construc tion industry, and provide a procedure for renegotiation of fixed price construction contracts where wages have been reduced. Because the purpose of this amendment is to provide immediate guidance and information with respect to the administration of the Economic Stabilization Program, the Council finds that further notice and procedure thereon is impracticable and that good cause exists for making it effective in less than 30 days. [Economic Stabilization Act of 1970, as amended, Pub. L. 92-210, 85 Stat. 743; Pub. L. 93-28, 87 Stat. 27; E.O. ------, 38 FR ·----, 38 FR ------, Cost of Living Council Order No. 38 FR ------] In consideration of the foregoing, Title 6 of the Code of Federal Regulations is amended by establishing a new Part 150 and adding a new Subpart N therein as set forth below, effective August 12, 1973. Issued in Washington, D.C., July 19, 1973. Acting Deputy Director |