Mr. DIGGS. Thank you very much. Mr. CONANT. Thank you. Mr. DIGGS. Our final witness is Mr. Martin Lobel, accompanied by Mr. William J. Lamont; both are with the firm of Lobel, Novins & Lamont. Mr. Lobel is a professorial lecturer of law at American University, with particular emphasis, among other things, on natural resources law. Mr. Lobel has a statement which he is prepared to submit on behalf of himself and his partner. His statement will analyze U.S. international energy policy overall, and specifically, as exhibited in the Paris preliminary conference; in the U.S. position in support of the International Energy Agency; and in the related legislation, particularly the legal implications of section 1313 of H.R. 2650 as it allows the President to waive antitrust laws, and also of section 1306 giving the President authority to control the price of petroleum. You may proceed, Mr. Lobel. STATEMENT OF MARTIN LOBEL, ATTORNEY, LOBEL, Office: Lobel, Novins & Lamont, Washington, D.C. Employment: Adjunct Professor of Law, American University (Natural Resource Law); Director, Tax Analysts & Advocates (Public Interest Tax Law Firm); Washington Editor of the Consumer Advocate published by the Consumer Affairs Committee of the American Bar Association; Legislative Assistant to Senator William Proxmire, 1968 to 1972, responsible for consumer, tax, insurance, oil and other matters of economic concern, particularly those falling within the purview of those committees which he chairs: Joint Economic Committee, Financial Institutions Subcommittee of Banking, Housing and Urban Affairs Committee and Foreign Operations Subcommittee of the Appropriations Committee: Congressional Fellow of the American Political Science Association, 1968: Assistant Professor of Law, University of Oklahoma College of Law, 1967. Taught courses in real estate development, personal property, trusts and estates, unincorporated business associations and domestic relations; Partner in Lobel & Lobel, Newton, Mass. 1966; and Intern, Massachusetts Attorney General Office, 1964 (Edward W. Brooke). Education: Harvard Law School, LLM, 1966; Boston University Law School, JD cum laude, 1965 (Law Review); Boston University College of Liberal Arts, AB, 1962; Academic Honors-Gaspar G. Bacon Essay Contest, 1st 1962, 2nd 1961: Percival W. Clement New England Intercollegiate Essay Contest; 2nd 1962, 2nd 1961; Scarlet Key (all university honorary society); Delta (Liberal Arts honorary society); and Nonacademic Honors-Who's Who in American Colleges and Universities: New England District Governor, Circle K, President CLA class of 1965. Student Council, etc. Articles: Washington Column in the Consumer Advocate; "Red White Blue and Gold: Oil Import Quotas." The Washington Monthly. August, 1970. Reprinted in the Journal of the American Public Power Association, April 1971; Federal Control of Campaign Contributions, 51 Minn. L. Rev. 1 (1966); Elections: An Analysis of the Oklahoma Corrupt Practice Act. 20 Okla. L. Rev. 381 (1967); New York Times v. Sullivan, 44 B.U.L. Rev. 563 (1964); and Gursky v. Gursky, 44 B.U.L. Rev. 407 (1964). Bar Membership: District of Columbia; Massachusetts; and United States Supreme Court. Association Memberships: American Bar Association, member Committee on Title Aspects of Real Estate Transactions, Section of Real Property, Probate and Trust Law; member Taxation of Municipal Bonds, Section of Local Government; District of Columbia Bar Associaton; Federal Bar Association; Massachusetts Trial Lawyers Association; Massachusetts Bar Association; Boston Bar Association; and American Political Science Association. Mr. LOBEL. Thank you, Mr. Chairman. My name is Martin Lobel. With me is my partner, John Lamont. We are attorneys representing consumer groups and independent oil companies who fear that the "international energy policy" being developed is simply a reorganization of the oil cartel which so long dominated our foreign oil policy. You have asked us to comment on the President's energy proposals in the international sphere, and in particular sections 1306 and 1313 of H.R. 2650. Although the President has cloaked his proposal in the rhetoric of free enterprise, closer inspection reveals that it is far from freethat it is simply a reversion to the cartel philosophy which ruled our foreign oil policy for 50 years and promises to remove any possibility that enough competition might creep in to protect the consumer. But it was this kind of policy which got us into energy trouble in the first place. There is an old quote which is still accurate that "those who do not read history are condemned to repeat its mistakes", and 50 years ago, against a background of a real threat of oil shortage, this Government encouraged "voluntary agreement" by competing international oil companies to insure an "orderly development" of the market. As hearings before Senator Church's Senate Subcommittee on Multinational Companies have so brilliantly developed, out of that encouragement came an international oil company cartel with the aim, the function and the effect of carefully regulating production on a noncompetitive basis to insure predictable profits. Now to their surprise and chagrin, they discovered that a camel driver's son with a Harvard MBA-or it could be Yale, Michigan, or Columbia MBA could play the same game-what Exxon could do, Saudi Arabia could do even better. To rescue their vast power and enormous assets the multinational oil companies ran immediately to the administration whose policies and politicians they have so long supported. And the administration responded with an executive order approving an international agreement permiting the multinational cartel companies to maintain their position astride the flow of oil in international commerce, to protect their foreign production profits, and to permit them to enlarge their profits downstream in refining and marketing. All at the expense of the world's consumers. We have gone through a large number of panic energy proposals in the past 4 years. In fact the scenario has become standard: The administration ignores its statutory obligations and delays decision to permit the giant companies to maximize their profit situation in the face of growing and obvious danger to our energy future. Then with a great show of activity, it changes administrators, policies, or both, demands immediate legislative action on a wholly new set of proposals, which, by accident, per chance, put the cartelists back in the saddle. So it was in 1971, with the infamous "safety net" agreement and its extensions; in 1973, with the "voluntary allocation program": in 1974, with the most peculiar effort to frustrate the plainly expressed purpose of the Allocation Act, and the sudden changes of policy and personnel which characterized the energy "policy" of that year. Now, in 1975, the international energy policy is in place by executive order without any review or assent by Congress. And it is in the process of being carried out, by action which is demonstrably in defiance of the Congress intention. If it is fully carried out, as this legislation proposes, the whole of our energy supply will be indefinitely priced far beyond its real free market worth. And, come shortage, it will be rationed-not by an elected government-but by an international government composed of the cartel companies. Let's examine two of the President's specific proposals-a guaranteed price floor and an antitrust exemption for the multinational oil companies. Section 1306 would allow the President to set a guaranteed floor price for oil. Such a floor price is economic idiocy. If it is intended to encourage alternative suppliers, it is the most expensive and inefficient way to do it. Why pay high prices for 98 percent of your energy to make 2 percent profitable? The real effect of such a guaranteed price is to ease the pressure on the OPEC cartel. There is, according to Mr. Robinson, by at least 12 million barrels a day of spare productive capacity in the world today which has resulted in price cutting by the cartel. Guaranteeing a price would only remove competitive pressures now undermining the cartel, but would not really bind the cartel which has ignored agreements when it was to its interest. Such a guaranteed price would also eliminate most of the competitive pressures that the companies might exert. OPEC cannot exist as a cartel without the backing of the company cartel. OPEC needs the guaranteed markets provided by the company cartel which knows and controls the flows of oil in commerce. And, both OPEC and the company cartel must guard carefully against the intrusion into that flow of any uncontrolled and competitive crude oil. Crude oil price control is highly vulnerable to the existence of a relatively small amount of free market crude. Both OPEC, with its vast oil reserves, and the cartel companies, with their own vast reserves outside OPEC territory, have a strong common interest in maintaining a high price for those enormous assets. And that common interest is precisely the glue which will bind OPEC together effectively; indeed, is probably the only thing which has made it so effective so far. Could anyone doubt, for example, that the executives of Exxon and BP, negotiating with OPEC under the "safety net" agreements of 1971 and 1972, were influenced by the fact that, if the price of Saudi oil went to $10 per barrel, the profits in their share of Prudhoe Bay Alaskan oil would go from, say $30 billion to $120 billion and more? Yet, the mechanism which has been set up to administer the international energy plan will place these same people in a position to heavily influence, indeed to dictate, the policies of the International Energy Agency. The Paris operation will depend almost wholly on the information supplied by these companies acting jointly. And when any possible embargo should produce a world shortage of available crude, these companies, acting jointly, will act as the Government agency which will allocate world supplies "fairly" among all consumer nations which are party to the agreement. For this, they will be given-have been given-absolute immunity under our laws for |