Secretary MORTON. The dispute was that you said that the facts and figures were not in the back sheet. We are saying that they are.

The CHAIRMAN. Well, they are scattered all over the place.

Let me ask you this question. Where in here do you have what the total increase in cost will be in the deregulation of the old oil? Where is it on the fact sheet?

Mr. ZAUSNER. I think it is on page 23. It is a thing called windfall profit tax.

The CHAIRMAN. I didn't ask you that. That's a tax bill.

Mr. ZAUSNER. Senator, the windfall profit tax, in fact, is the exact measure one uses to gage the affect of decontrol. Because the whole concept is decontrol allowes prices to rise.

The CHAIRMAN. Are you taking all of the increase from $5.25 a barrel to $13.40 a barrel as being a windfall tax in the sum of $12 million?

Mr. ZAUSNER. In fact, Senator, what we have done is that it is our estimate that the decontrol of old oil would in fact in of itself generate about $9 billion; roughly $9 billion, an increase profit for all producers of oil.

And in fact, the windfall profit tax not only collects that $9 billion, which would be consumer cost.

The CHAIRMAN. Let me ask you the question, and you said that it is in here. Where do you show what the total cost of the decontrol of old oil will be?

Mr. ZAUSNER. The number is $9 billion. That is one of the two parts of the windfall profits.

The CHAIRMAN. You say that cost will be $9 billion?

Mr. ZAUSNER. Yes, Senator.

The CHAIRMAN. Where does that show?

Mr. ZAUSNER. It shows in the windfall profit number.

The CHAIRMAN. How in the world would you figure that out?

I looked at page 23. You say that everything is in here. Windfall tax $12 billion. What does that have to do with the decontrol? Or how do I know that that relates to the decontrol of oil price?

Secretary MORTON. You know where $2 of it is.

Two dollars would come off as far as the $2 excise tax on oil. So, that gets us down to $11.

The CHAIRMAN. Again I repeat, Mr. Secretary, let us get the total cost in one column. You know, just very simple. This is the last question that I am going to ask.

The total cost of all the taxes that you propose to impose, and they are basically the tariff and the excise tax?

Secretary MORTON. $30 billion.

The CHAIRMAN. The total cost of the decontrol steps that you will take that affects the old oil and affects natural gas; the new gas?

Third, the indirect impact that it will have, utility cost, the airline's cost, it goes right down. The ripple affect.

Then over in the other column the deductions, and how it washes out. That is all.

Mr. PARSKY. Senator, let me clarify the explanation. If you look again at the back sheet, starting with pages 12, but focus on page 15, the explanation of the windfall profits tax itself, I think you will see how we arrived at the $12 billion figure. The fact is that it is in addi

The CHAIRMAN. Mr. Parsky, I don't want to belabor this point. The debate is over your taking more out than you are putting in.

Why in the world don't you meet it head on?

Mr. PARSKY. We would be delighted to. I just think it is worth focusing on the fact, that the factsheet is an extensive explanation of the proposal.

I think you should focus on the fact that it does cover all of the proposals. The windfall profits tax, the affect of decontrol is covered in the factsheet.

The CHAIRMAN. One of the controversies is the cause of decontrolling oil.

Mr. ZARB. If you look at that explanation.

The CHAIRMAN. Where?

Mr. ZARB. Page 15, item No. 3, windfall profits tax, it shows you the relationship between that tax and price decontrol.

The CHAIRMAN. Why don't you give us the simple figure? This is a big item. It is 60 percent of all of the production.

Mr. ZAUSNER. Senator, I don't think-as I remember, a study released by the Interior Committee estimated the total cost of the Presi

dent's program.

The estimate of that committee's study for oil was $24 billion. In fact, your estimate was $23.8 billion, but our estimate was $24.2 billion.

So, the cost associated with decontrol, and the excise taxes which have been put out by the Interior Committee staff, is almost exactly the same as the numbers that we have used.

The CHAIRMAN. On that particular item, but the accurate balance, of course, we show a deficit of $20 to $25 billion, when you add it all up. We have a tremendous difference on natural gas. We have the intrastate contracts expiring in 3 years.

Mr. ZAUSNER. Senator, the intrastate question, as I understand your calculation, is the result of putting these excise taxes on oil.

Intrastate gas would rise 60 percent of all intrastate contracts would rise over $2 per million cubic feet. In fact, there is such a large quantity of that gas under contract today that while the spot price today is already $1.50, the average price is only 50 cents.

The CHAIRMAN. Well, we can go on and on, let's get down to figures. This is all I want, and I think the press of the country would like to know as well.

Secretary MORTON. I understand that, but I think you've got to be sure that there is a clear understanding of that money that is taken out of the economy one way, and then that money that is recycled in the economy through another. That is what Senator Case addressed himself to.

The CHAIRMAN. I would like you to just add up the column of figures and get the facts. We can end a lot of controversy here.

Secretary MORTON. I think the facts are, we are going to take $30 billion out and put $30 billion back plus $16 billion back from refund based on the 1974 taxes, and you get $46 billion.

Senator CHURCH. Mr. Secretary, I have been listening with great interest to the exchange of questions and answers magnified for the moment the immediate stimulus of $16 billion, and looking at the long

if your figures are accurate, and all of the cost to the American consumer when added together, both cost by virtue of the fact that the tariff would be imposed?

And the indirect cost by virtue of the impact of higher prices for upon the economy passed onto the consumer.

fuel

If your figure is correct, this amounts to $30 billion.

Then your argument leads me to conclude that no more money will be returned to the economy than will be taken from the economy, laying aside, as I said, the initial $16-billion rebate.

If that is so, how does this program-looking ahead beyond the present year-how does this program possibly stimulate a recovery when, by your own figures, and on the basis of your own argument, the program strikes a balance?

Mr. ZAUSNER. Senator, I think the answer is we are not trying to stimulate a recovery with the energy program.

What we are trying to do is make it neutral to the economy. Use the other economic stimulus to the economy, by using this to stimulate energy conservation without an adverse impact on the economy.

Senator CHURCH. Very well. I'm glad to get that answer because it makes it clear then that the energy program is not really intended to stimulate the economy, or be a tool in promoting recovery; correct? Secretary MORTON. Senator, the energy program is designed to do two things.

It is designed to increase our domestic supplies, and to become less dependent on foreign sources of energy across the board through technology, and so forth, and it is designed, certainly, in the foreseeable short run to conserve energy.

Senator CHURCH. Very well. I would like to get to that aspect of the program, but I want to move beyond that only after making this

comment.

The figures that are used here are very much in question. Our own congressional studies, such as I have seen, indicate that the cost to the consumer is going to be much higher than $30 billion.

We must look at those figures as well as yours, because if those figures are correct then this program would have a further depressing effect upon the economy.

Mr. PARSKY. Which we do not intend.

Senator Church. So the accuracy of these figures is very critical to the appraisal of the program, is it not?

Mr. ZAUSNER. I would just add one fact.

The numbers, if you look at them carefully, don't really question whether we actually collect $30 billion of revenue, and get $30 billion back.

What they are talking about, and I will go back to Senator Case's argument is, those numbers which we question, and talk about increases in other sectors of the economy not from the tax proposals, and of course those dollars are merely moved between consumers and other people in the economy not removed from the economy in any

sense.

Senator CHURCH. I understand, but they are going to be translated

Let me move ahead then from the economic impact, which really does depend upon careful appraisal of the figures, to the points mentioned by you, Mr. Secretary.

You said in your original presentation, that we must recognize that the cost would reach a new plateau and that this high cost would be with us for years to come.

That puzzles me because we all know that the present cost of oil is an artificial cost. We all know that it is not related to the economics of oil.

We all accept the fact that the actual cost of oil in the Middle East is about 25 cents a barrel, but that the delivered price in the United States is above $11 a barrel.

And as late as 2 months ago, major spokesmen of this administration, including Secretary Kissinger, Secretary Simon, and Arthur Burns, were all in agreement that those exorbitant, artificially high prices for oil we imposed by the mechanism of the cartel, had to come down.

They all said that if it did not come down, the inflationary impact on the economy is going to be catastrophic. The problem as related to the recycling of such large profits from the Middle East back into the Western economy will product such strains on the banking system that the necessity of the United States to subsidize wheat to European countries in order that they can continue to borrow to pay these exorbitant prices, would be too heavy, and the price of oil would have to come down.

I take it from your statement this morning that the administration has abandoned this position, and is now ready to accept the high price of oil.

Secretary MORTON. I think we have no choice but to accept it in a short term. It is a seller's market.

Obviously, we will do everything we possible can through negotiations, through all of the diplomatic channels, through cooperative efforts with other consuming nations, new relationships that we hope we can develop with the selling nations, and exporting nations, to get a more reasonable price of oil.

The one thing that probably would help us to get it down quicker than anything else would be to lower our demand. This would have a quicker and probably more positive impact on the price of oil than anything else.

It is my personal speculation that this is going to take quite a lot of doing, and that in 1975, 1976, and 1977, we are looking at a ball-park figure of somewhere near where we are.

This is the program that we are trying to impact against that by reducing by the end of 1977 our requirements for foreign oil by 2 million barrels a day.

Senator CHURCH. I am not disagreeing with the need to decrease consumption in this country, and I wouldn't even argue with you about the 2 million barrels by the end of 1977, but I would suggest after exhaustive study that has been done by my subcommittee on these national cooperations, that a program could be designed that would be far more effective in bringing down the price of oil than the present

In fact, I don't see how the President's program, apart from the consumption level, will bring much leverage to bear on the open cartel at all.

Yet, let me suggest that there are ways that we can do this. I have introduced a bill just yesterday, which has as its centerpiece the establishment of a Federal purchasing agency for the purpose of beginning to introduce some measure of competition in the international oil market.

As long as we rely upon the big oil companies and long-term contracts with the big oil-producing governments, thus creating a marriage between the two, to determine both the price and the terms by which we purchase foreign oil, then we have no chance, in my opinion, to break the cartel.

I think that even the reduction of 2 million barrels would have so little impact upon OPEC. That unless you break the connectors that now combines the companies and these foreign governments, you will never bring sufficient pressures to bear on these cartels, and that is why I think your program is going to fail.

I would like a comment on the proposal to establish a purchasing agent to give the Government of the United States maximum leverage in dealing with this situation.

VOICE. This is a question that has no definite answer.

I don't know with any certainty what will motivate the producing companies to reduce their price. I think that has been clear. It has been consistent.

The present price is artificially high, and in the long run must come down. However, until the consumers can develop a sense of solidarity, commonality of purpose, and intent, it seems unlikely that we are going to be able to bring industrialized nations together in a program of cooperation, particularly in the area of conservation, and in the area of development of alternative sources which will have the kind of impact on the price that we hope for the longer run.

There is pressure being brought on the producers today. They are producing at a level of between 20 and 25 percent reduction capacity. We are beginning to see evidence of weakening in certain areas. So, that there is an indication that we are moving in the right direction. Senator CHURCH. Let me say this. I don't mean to cut you off, but I am aware of these arguments and these figures.

What I am asking you to do, since it seems to me that your program is designed to bring a minimum amount of pressure to bear upon the cartel, but look at the Federal purchasing agency and examine its utility in this picture. Would you do that?

Secretary MORTON. Ves; sure.

Senator CHURCH. All right.

Let me move on to the general line of questioning that I would like to explore.

We are in agreement. Mr. Secretary, that consumption should come down. You are using, it seems to me, the most expensive and least reliable device to reduce consumption.

The inflationary impact of this program is clear. The inflation is