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Call ICK Before You Pack FOR HOUSTON Enjoy real money-saving value, and relax at the ALBERT OK MOTOR INN 3301 Southwest Freeway at Buffalo Speedway heliport and Airport Bus Terminal near by Color TV in every room Restaurant & Lounge Heated Pool Family Plan Free Parking Meeting and Convention Facilities for up to 375 ALL AT MODERATE RATES RESERVATIONS: CALL TOLL FREE 800-621-4404 In Illinois: 800-972-7200 Happiness Is Newspapers Magazines Political Specialists Printing By 1? IFTURA Signs and Placards Bumperstrips Office Supplies 100% Union Shop PRESS INC Phone 512/442-7836 1714 SOUTH CONGRESS P.O. BOX 3485 AUSTIN, TEXAS 1973 profits Increase in 3rd Quarter Increase Company 1973 Over 1972 Exx on $2,440 81% 52.3% Mobil 843 64% 46.7% Texaco 1,292 48% 45.4% Gulf 800 91% 79% 843 51% 54% Shell 333 23\(70 28% 511 37% 36.4% ARCO 270 16% 40.3% could be made against a general rollback. My proposal is not a general rollback. That last argument is that we should not reverse incentives generated by oil prices in 18 The Texas Observer MARTIN ELFANT SUN LIFE OF CANADA LIFE HEALTH DENTAL 600 JEFFERSON SUITE 430 HOUSTON, TEXAS 224-0686 the $10 and up range that are bringing independents back into exploration and development of oil in the bold and enterprising way that they used to operate when new discoveries, largely by independents, were swelling known domestic reserves. There is evidence that they were leaving this field. Data developed by Chase Manhattan and the National Petroleum Council show that in 1956 major companies spent $2.621 billion and independents $2.454 billion in such activity. By 1971, the majors remained stable at $2.74 billion and independents had declined to $1.16 billion, a drop of some $1.3 billion. This means that their domestic exploration and development investment must increase to bring them back into the game at the level that they used to play it. WHAT WE have pointed out in the last two sections of this report is not apposite to the independents in all respects. As we have said, the majors’ production is about three fourths in old oil. The increase in price for old oil, which is not much more expensive to produce than it was at the beginning of 1973, is producing a higher proportion of old oil but a vastly greater amount than do the independents. Therefore, both in order to afford a sufficient flexibility in the legislation to permit the development of all feasibly recoverable reserves, and to be sure that undue restraints are not placed on the most vulnerable and speculative elements of the industry, the price of new oil by independents is left uncontrolled. This proposal would have the following desirable effects: It could save consumers billions of dollars next year by curbing that part of this coming year’s inflation caused by the “oil factor.” It also takes care of two objectionable features in the Energy Emergency Conference Report. First, it does not provide an available and possible “roll forward” of the price of oil oil to $7.09. Second, it takes care of a legitimate concern of independents concerning financing of their exploration which the Energy Emergency Conference Report did not do. It would permit the majors enough earning margin to meet exploration and development expense by $4.25 level for old oil \(about 75 percent of their prices for new oil are rolled back only to the price of new oil on Nov. 1, 1973, which averaged $6.17. It would leave independents free of price restraint in recovering the really hard-to-get, high-priced new oil. But as their production increased, their advantage in producing new oil without price restraint would be curbed by price competition from the majors. Thus, while demand outruns supply, they would be given a needed stimulus; and the economy would benefit by their discoveries and resultant increase in U.S. productive capacity. Curbing inflation and carefully devising legislative machinery that does not dampen incentive to discover and bring into production new petroleum reserves is a job for Congress. Congress must undertake it without fear of presidential veto or special interest opposition. I Ronnie Dugger’s new book .. . OUR INVADED UNIVERSITIES: :::74;:w i t’a7:7; Published by W. W. Norton Co. at $14.95. Observer subscribers may order Our Invaded Universities at the customary 20% discount on titles stocked by the Texas Observer Bookstore: 11.90 plus, for Texas residents, 60q sales tax. No charge for postage if remittance accompanies your order. THE TEXAS OBSERVER BOOKSTORE 600 W 7 AUSTIN 78701