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What I am saying is that, if the present price can be held for 2 or 3 years, partially, at least, as a result of these cooperative efforts, we would have considered that very well worthwhile and would have justified the cooperative effort.

Mr. SOLARZ. Well, in what way do our efforts in cooperation with the other consuming countries bring about a situation likely to keep the price at a constant level?

That is where I am not sure that I understand the argument, because it seems to me the oil-producing countries, in a certain sense, are immune by virtue of their cartelization of oil production to the normal economic forces that would ordinarily operate here.

Mr. ROBINSON. Well, we should not be unaware of the pressures that have been imposed on the individual OPEC countries as a result of the reduction of demand. There has been an absolute reduction in demand for OPEC oil and the rate at which they are exporting oil. This has created great strain between individual countries.

We have seen, in terms of the differentials, a quality differential of 40 cents in Abu Dhabi which resulted in a very abrupt drop in the volume of their export. They finally eliminated the differential to bring the volume of their exports back to a level more in line with the other countries.

We have seen, in the Mediterranean countries, Algeria and Libya, a substantial reduction in the premium that they had as a result of their geographical location in terms of transportation costs.

All of these have brought, in effect, a reduction in the price. There is also increasing pressure to provide credit terms and every 1-month extension in the payment of terms constitutes a price reduction of something on the order of 10 cents. So, we are seeing evidence of price weakness.

Now, under those circumstances, it is much less likely that there will be a political decision to raise the price.

Mr. SOLARZ. Well, wouldn't one possible response on the part of the producing countries be to reduce supply and increase price as a way of dealing with reduced demand?

Mr. ROBINSON. It is always a possibility, and I don't mean to imply that it is not. It am just saying that, under the circumstances, all of the OPEC nations have different problems-Algeria has a $2 to $3 billion anticipated deficit this year; their income is $2 to $3 billion below their anticipated expenditures. Various countries are in different. positions, and it is going to be very hard, much more difficult to hold OPEC with a solid front in an effort to raise prices under these circumstances.

That doesn't guarantee they won't. I am saying it is less likely as a result of the reduction in demand that has been brought about by a combination of things: cooperative efforts between the consuming countries combined with the recession, combined with a warmer than normal winter, a reduction in inventories and other factors, but it has created a situation in which it is much less likely that price will be arbitrarily increased for political reasons.

Mr. SOLARZ. You indicated, in your testimony, that the IEA called for a reduction in oil consumption by 2 million barrels a day by the end of 1975. My understanding was that that agreement also called

for a reduction of a million barrels a day by the United States as part of the overall cooperative effort.

Mr. ROBINSON. That is correct.

Mr. SOLARZ. I think, it seems fairly clear by now, on the basis of the congressional response to the President's proposal, in this regard, that it is exceedingly unlikely that legislation will emerge from the Congress calling for a reduction of 1 million barrels a day; to the extent that there is a conservation program forthcoming from the Congress, I think it is likely to result in a savings of substantially less than that. I would rather doubt more than, say, half a million barrels a day, if that much. Now, in your judgment, what would be the implications of that kind of shortfall, as it were, in the amount we can conserve compared to what the administration pledges us to conserve with the IEA countries, in terms of continuing prospects for cooperation between the consumer countries?

In other words, if we fail to conserve a million barrels a day, will this, in effect, disrupt the cooperative effort; because other countries will feel that we haven't been willing to live up to our commitments here; or do you think that it will not have a seriously disruptive effect on the cooperative efforts?

Mr. ROBINSON. I have covered that in my testimony, that I feel it is absolutely essential that we proceed in this country with a program that evidences our intent to reduce our dependency on imported oil and to increase our degree of self-dependency, and that this is essential to the cooperative program that has been undertaken in IEA.

Mr. SOLARZ. Well, are you saying that any conservation program designed to conserve less than a million barrels a day would necessarily be taken as a lack of determination on the part of the United States to join in this cooperative effort and to reduce its oil consumption?

Mr. ROBINSON. Well, I don't think anyone can talk in precise terms. about the amount of savings that will result from any one step, other than import quotas. So that, it is to a certain extent a judgment factor, an estimate in any event.

However, unless we are prepared to take meaningful steps in an effort to bring our oil consumption and therefore our requirements of imported oil down, that could have a significant impact on the attitude of our partners in the IEA program.

Mr. SOLARZ. Thank you, Mr. Chairman.

I hope you will excuse me, if I leave for another vote, but I will be back.

Mr. DIGGS. Thank you very much, Mr. Robinson.

Mr. ROBINSON. Mr. Chairman, with your approval, if I may depart, I would appreciate it very much.

Mr. DIGGS. Yes. I had understood that you had to leave, and we appreciate your contribution and look forward to your response to the questions for the record.

Mr. ROBINSON. Thank you very much.

Mr. Dicas. I might also add, Mr. du Pont may have some questions for you, and obviously, he is tied up on the floor, so I think perhaps you might prepare to respond to his questions if he might want to submit them in writing since he is not here.*

Our next witness is Hon. Melvin Conant. He is the Assistant Administrator for International Energy Affairs, Federal Energy Administra

Mr. du Pont had no questions for the witness.

tion, and he will discuss the Agency's role in development of our international energy policy and also offer insights into specific questions regarding H.R. 2650.

You have a prepared statement, Mr. Conant, so you may proceed.

STATEMENT OF HON. MELVIN A. CONANT, ASSISTANT ADMINISTRATOR FOR INTERNATIONAL ENERGY AFFAIRS, FEDERAL ENERGY ADMINISTRATION

Melvin A. Conant, age 50; married to Christa Maria Gaul; children, Amy, Ian and Alan.

Educated Harvard University majoring in International Law, Far Eastern and Russian Studies. M.A. Degree 1949.

Subsequently a number of visits to South and Southeast Asian countries attempting to determine the extent of Communist movements.

1951 to 1955 Executive Director of the Pacific and Asian Council, a political and economic research group founded by Hawaiian business interests; founding trustee of the then territory's First Economic Development Committee; acted as go-between Oriental and Western business and banking interests.

1955 to 1960 on the directing staff on the Council on Foreign Relations in New York responsible for strategic studies and the meetings program involving largely experts from all over the world.

1960 to 1961 Professor International Security Affairs at the U.S. National War College, Washington, D.C.

1962 to 1973 Senior Government Relations Counselor for Exxon Corporation (formerly Standard Oil of New Jersey) on political and inter-governmental relations with regard to energy supplies, at varying periods on the Middle Eeast, Far East and Europe.

January 1974 to December 1974, Deputy Assistant Administrator, International Energy Affairs, Federal Energy Administration.

Nominated by President Ford to the position of Assistant Administrator for International Energy Affairs on December 13, 1974.

Author of strategic studies and annual lecturer at the Royal Naval College (Greenwich), the Canadian National Defence College and U.S. Senior Defense Colleges.

Mr. CONANT. Thank you, Mr. Chairman.

I apologize for the fact that you didn't get the prepared statement until shortly before this meeting.

Mr. Chairman and members of the committee, I appreciate this opportunity to appear before you to discuss the role of the Federal Energy Administration in the development and carrying out of U.S. international energy policy and our evaluation of the International Energy Agency. In addition, I will address some specific questions on title XIII of H.R. 2650, the administration's Standby Energy Authorities Act.5

To assist in your inquiry, Mr. Chairman, with your permission, I would like to introduce two associates from FEA who are deeply versed in this whole experience. Mr. Wynne James, who is Director for Consumer Country and International Organization Affairs, and Mr. Joseph Bell, Assistant General Counsel, International Conservation and Resource Development.

Mr. DIGGS. Do you want the gentlemen to join you at the witness. table?

Mr. CONANT. I would appreciate it.

Mr. DIGGS. Gentlemen, you may do so.

Mr. CONANT. Thank you.

See text of title XIII of H.R. 2650 in appendix at p. 70.

The FEA Act of 1974 contains numerous charges and provides the necessary authority for FEA to be a principal participant in the area of international energy policy. The principal references to international energy matters in that legislation are as follows:

Section 5(a)

*** the Administrator shall be responsible for such actions as are taken to assure that adequate provision is made to meet the energy needs of the Nation. Section 5(b) (1) (the Administrator shall):

*** advise the President and the Congress with respect to the establishment of a comprehensive national energy policy in relation to the energy matters for which the Administration has responsibility, and, in coordination with the Secretary of State, the integration of domestic and foreign policies relating to energy resource management ***

Section 5(b) (3) (the Administrator shall):

*** develop and recommend policies on the import and export of energy resources ***.

In other sections of the FEA Act, there is a recognition that domestic and international distinctions are difficult to draw. For example, in the basic data needed to assist in policymaking, world supply and demand figures are essential. In this and other areas, the energy responsibilities placed on FEA are not limited by geography.

As you know, the Project Independence Blueprint published last November constituted a major research and analytical framing of the area in which policy decisions would largely need to concentrate. In the months required to complete the review, virtually every energyinterested department and agency in Washington participated in executive groups, working groups, subgroups and so forth. Many of the U.S. officials and staff personnel who were later to be involved in the 18-nation international energy program were engaged in that effort. I make this point, Mr. Chairman, because I find sometimes that I forget that the Project Independence effort did constitute perhaps the largest and most comprehensive effort ever made by this Government to enunciate the parameters of of energy policy. And in contacts that I have had and my colleague, Mr. James, has had, we know that from the viewpoint of other governments who are seized with many of these same problems that the precedent set in that particular activity has been an important ingredient in U.S. leadership in the energy area. One message began to evolve very early in the work on Project Independence, and we began to hear the term Project "Interdependence." It was becoming increasingly clear, from our preliminary study, that narrow U.S. isolationism on energy matters would not be practical alternative. In a number of areas, the Project Independence Blueprint turned out to be a document of major importance to the international energy policy of the United States.

By January of this year, the President and his key advisers, including the Federal Energy Administrator, had assembled a number of proposals into the omnibus economic and energy message and associated legislation.

FEA is involved, in varying degrees, in the large area of the international energy policy of the United States. As the energy agency, that is. with responsibilities to help assure adequate energy supply, the FEA-and my branch of it, IEA- has played a significant role in ongoing discussions with Canada on a very broad range of energy issues. At the other end of the spectrum, we are largely an observer as far

as relations with other countries in the area of research and development, with one exception-R. & D. on energy conservation measures. În between, there are widely differing levels and intensity of FEA participation in policy matters involving the President's total energy interests.

My opening remarks today on how the Federal Energy Administration participates in and contributes to international energy policy will focus on FEA's part in the 18-nation International Energy Agency (IEA), including how we were involved in the policy process beginning with the Washington Energy Conference of February 1974. I will conclude with some observations on the status of the IEA as it appears today and in the period ahead.

INTERNATIONAL ENERGY AGENCY

In January and February 1974, as you heard from Secretary Robinson, the preparatory phase of the Washington Energy Conference moved toward a new objective in U.S. international energy policy. Let me add, at this point. Mr. Chairman, the emphasis is on a new objective in U.S. international energy policy.

Those of us who have been involved in earlier years with questions of emergency supply were always haunted by the fact that, while the U.S. Government was a member of the OECD in Paris and a member of the Oil Committee, we had never formally and fully involved ourselves in the planning considerations of that group. We had always remained somewhat apart, relying upon the fact that we had a domestic production that was perhaps more than adequate to our needs and, if an emergency occurred, we could weigh in at that time.

The subsequent change in the U.S. picture and our greater vulnerability made it imperative that we have a new objective, and that was to involve ourselves formally and fully in a new undertaking which would commit governments in advance to the kinds of steps that would be taken, and this is the significance behind the use of the words "new objective" in U.S. international energy policy.

The then Administrator of FEO-this was back in the very early part of 1974-William Simon, had met with Secretary Kissinger and AEC Chairman Dixy Lee Ray frequently to discuss the ways that the conference might promote solidarity among the oil importing countries. Producer-country policies, as you will recall, had touched off almost hysterical bidding among importers of oil, reaching as high as $25 a

barrel.

It was clear to all three U.S. officials and their support staffs that the whole apparatus of the U.S. Government must be represented in the background and follow-on work of the conference. Therefore, by the time the conference opened in February 1974, FEO and other departments and agencies were fully at work, as the United States moved toward a new relationship in the international energy framework.

As Secretary Robinson mentioned, 12 of the 13 countries at the Washington Energy Conference agreed to establish an Energy Coordinating Group and to pursue the new goal of increased solidarity. The 13th country-France-decided not to join, but did not invoke any clauses of the Common Market agreement which might have prevented the other eight European countries from joining.

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