Assailing the Giants

For about 30 years, the U.S. oil industry had all the friends it needed in Washington and little trouble winning favorable policies: maintenance until early this year of the lucrative oil-depletion allowance, now discarded quotas on oil imports, tax preferences for foreign and domestic drilling operations. Now a wave of hostility unmatched since the breakup of Standard Oil in 1911 has plunged the oil industry into big political trouble. In one of the milder manifestations of anti-industry sentiment, the Federal Trade Commission last week took only hours to overturn a recommendation by one of its own administrative law judges and resolved to press ahead with a two-year-old antitrust suit that seeks to break up eight major oil companies.

Nowhere in official Washington does sentiment against the industry ride higher than in the U.S. Senate. There, a large number of Democrats--though still a Senate minority--are threatening to dismantle the major companies and drastically reduce their scope. Last week an impressive total of 40 Senators voted for a measure drafted by Michigan's Philip A. Hart and four other Democrats. They proposed to break up the 15 largest oil companies by forcing them to split off their crude-production activities from all other aspects of the business--refining, transportation, pipeline operations and marketing.

Another proposal, sponsored by Edward M. Kennedy of Massachusetts and Ernest F. Hollings of South Carolina, got 39 votes. It would have forced oil companies to get out of such other energy businesses as uranium production and coal mining. Should it become law, Continental Oil, for example, would have to divest Consolidation Coal, the nation's second largest coal producer.

Though both measures were defeated, the votes for them illustrated how swiftly anti-oil feeling has risen in the Senate. Only two years ago, South Dakota Democrat James G. Abourezk sought support for a breakup bill and succeeded in rounding up only two cosponsors. More attempts to dismember the oil giants will be made, and the frontal assault on them could turn into a major issue for the Democrats in next year's presidential campaign. Indiana Senator Birch Bayh last week became the ninth Democrat to announce his candidacy, and he made a proposal to break up the oil companies a prominent plank in his platform. He has already held hearings on his own bill to dismember the majors.

The rhetoric against the companies is taking on an evangelical tone. Colorado's Gary Hart (no relation to the Michigan Senator) told Senate colleagues last week that divestiture "would be the best thing that could happen to the petroleum industry in the U.S. and perhaps the world. In the final analysis, it would be the best thing that could happen to the consumers."

Others disagree, and strongly, while still recognizing the scope and concentration of Big Oil. A score of companies control 93.5% of U.S. oil production: eight of those control 63.8%. (Other industries, notably autos, aluminum and cigarettes, are even more concentrated.)

$1 a Gallon. With so much under the companies' umbrellas, the fear that they will exercise a strangle hold over all energy development is not senseless. But it has yet to be demonstrated that they have in fact committed any major sins. In a decade of hearings, Philip Hart's antitrust subcommittee has never proved that the industry practiced collusive pricing. Bayh's staff, in a paper issued recently, established that oil companies operating in the Gulf of Mexico were producing at less than the most efficient rates, but could not prove that the reason was an effort to increase prices.

Critics doubt that breaking up the majors would lead to lower prices: prices of most domestic oil are now controlled by the Federal Government, and if they are decontrolled, the effective world price will be set by the Organization of Petroleum Exporting Countries. Prices could go up after a dismemberment of the oil giants. Frank Ikard, president of the American Petroleum Institute, calls breakup "the quickest and surest way to gasoline which costs $1 a gallon." In a statement last week, Shell warned that there would be no opportunity for a change of heart after dismemberment; once taken apart, the companies could never be put together again.

For now, the industry seems safe. Even if Congress did pass a bill, which is unlikely, Ford would certainly veto it. But the old days of Big Oil's muscle in Washington are over. The companies can expect continued hostility from Democrats who sense quite correctly that they have all the support they need from voters eager to strike back at someone or something for rising prices.

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