'The Biggest Rip-Off'

So said Carter, and oilmen are furious

The ingratiating smile was gone.

The blue eyes were ice cold. The voice, normally subdued, even soporific, was suddenly brittle. Not since John Kennedy assailed steel-industry leaders 15 years ago* for abruptly raising prices had an American President so harshly attacked a band of business executives. Jimmy Carter accused U.S. oil companies of seeking "the biggest rip-off in history." of trying to "rob" American consumers, of "potential war profiteering" in the battle over energy. Declaring that "enormous amounts of money" are involved in his beleaguered energy program, the President charged that "the oil companies apparently want it all."

The outburst of presidential wrath at a televised press conference last week was no accident. It was a deliberate, carefully calculated tactic in Carter's fight to salvage his priority package of energy legislation, which is being gutted in the Senate. It also reflected his genuine fear--and that of advisers like Energy Secretary James Schlesinger--that unless Congress acts soon to reduce U.S. dependence on imported oil, the inevitable consequences will be oil and gas shortages and a further mammoth, inflationary deficit in the U.S. balance of trade. The nation is now spending an appalling $45 billion a year to import oil, and the estimated trade deficit for this year is as high as $25 billion, compared with $5.9 billion last year.

Whether Carter's blast at Big Oil will be as effective in saving his mergy program as Kennedy's was in forcing a temporary rollback of steel prices remains to be seen. The attack was so free swinging that it probably amounted to overkill.

Certainly, the clash will do nothing to strengthen Carter's already tenuous links with business, which remains uncertain about the thrust and competence of his Administration and about the health of the economy. That uncertainty was mirrored on the New York Stock Exchange, where the Dow Jones industrial average dipped to a two-year low the very day of the President's press conference. The foreign exchange value of the U.S. dollar also fell to a near-record low.

Beyond the business community, however, there is a question whether Carter's blast at the oilmen will help him or hurt him with two other groups: the Senate and, even more important, the public at large. Despite repeated warnings about the energy crisis, impassioned presidential statements about energy conservation being "the moral equivalent of war" and reams of statistics about the nation's gluttonous consumption of oil and gas, nothing seems to have persuaded the public that things are that bad. But casting the oil industry as the chief villain will not necessarily persuade people that the energy crisis is "real" and that they must pay higher prices in order to conserve oil. In fact, the move could have the contrary effect on public opinion.

Carter's dramatic attack came late in the game. The Senate was moving toward approval of a package far more favorable to the hard-lobbying oil and natural gas industry than that passed by the House, which accepted most of Carter's proposals. The new White House offensive was timed to stiffen the House and apply heavy pressure on the Senate when a conference committee from both chambers sits down this week to begin trying to resolve the sharp conflicts in their bills.

Carter's new combativeness also came at a point when his popularity was slipping and his domestic problems mounting. The steel industry has suffered large layoffs and is pressing the Administration for help against low-priced foreign competition. Farmers are upset about falling prices and want bigger subsidies. The President is also struggling to convince two-thirds of the Senate that the Panama Canal treaties should be ratified. A meeting with Panama's Omar Torrijos Herrera successfully clarified differing U.S. and Panamanian interpretations of key treaty provisions--notably the U.S. right to defend the canal.

But there was little doubt that energy was his deepest domestic concern. Schlesinger talked more than half a dozen times on the subject with Carter after returning from meetings in Paris with members of the International Energy Agency. One point he stressed: U.S. allies are deeply concerned about the nation's inability to cut its energy consumption. The whole subject, said Schlesinger, is Carter's "No. 1 priority." Carter readily agreed. Said he: "It's the most important domestic issue that we will face while I am in office." He thus placed energy above tax reform (which he decided last week to delay until Congress nears completion of the energy legislation), welfare reform, inflation, unemployment and health insurance. The risky implication was that if his energy program is rejected, his presidency may be judged a failure.

The decision to gamble so much on energy--in such a fulminant style--was made at a two-hour Wednesday-afternoon White House strategy session that included top Carter aides and Vice President Walter Mondale. The participants were painfully aware that Carter needed a quick pick-me-up. His Administration seemed to have lost direction. Some people were talking about a one-term presidency. Two weeks ago, an NBC poll had given the President a discouraging 46% approval rating (down from 60% in February). Now Harris was out with figures that showed even more slippage: a 66% negative rating on his handling of the economy, 57% negative for the energy program, 51% negative for his foreign policy. Something dramatic was in order. Mondale spoke up and, using a basketball image, urged "a full-court press" on energy. Carter liked the idea.

At his press conference, the President blamed the American public for failing to reduce energy consumption. But he depicted oil and gas executives as the chief villains. He also implied that a majority of Senators were bowing to the big companies' pressure.

Carter claimed that his program would ensure that "the American people are not robbed" but would also provide adequate incentives to the oil companies to find new fields and produce more fuel. His plan would tax oil at the wellheads so as to raise retail prices to the world level set by the oil-producing cartel (OPEC). Under the Carter plan, most of the wellhead tax would be rebated to consumers. The oil and gas companies would also like to see domestic oil prices rise to world levels, but they object to the wellhead tax and rebate plan. They want to retain all of the proceeds from the higher prices--not to keep profits high, they insist, but to finance the ever growing cost of exploration.

One possible alternative to the Administration and the industry proposals has been offered by Senate Finance Committee Chairman Russell Long. He proposes the creation of what amounts to an energy trust fund, under which the Government would impose a wellhead tax and then use the revenue to stimulate new exploration and development of alternative energy sources by the oil industry. Last week, however, the Finance Committee scissored the entire wellhead tax scheme out of the bill. Instead, it proposed a $32 billion package of tax credits and grants, to be financed directly by the Treasury, that would aid industry in converting from oil-heating systems to coal-fired units; it would also help to finance the development of unconventional energy sources like shale oil.

Despite the Finance Committee's action, the wellhead tax is not dead. The House has approved the tax, and when the House-Senate conference meets, it may well be resurrected. What form it might take is anybody's guess. The conference could adopt Carter's rebate plan, Long's trust-fund scheme, or, what seems to many observers to be the most sensible compromise of all, a plan to rebate some of the money to consumers and some to the oil and gas companies.

To buttress the case for his own scheme--and against the oil industry's proposals--the President threw out some dramatic figures during his press conference. He said that in 1973, just before OPEC imposed its oil embargo and sharply raised prices, U.S. oil and gas companies had an income of $18 billion. Under his proposal, Carter said, that figure would rise to $100 billion by 1985--"an enormous increase." But, he said, the oil and gas companies are demanding legislation that would yield $150 billion in revenues by the same year. That $50 billion difference, Carter insisted, "will come out of the pockets of the American consumer and go into the pockets of the oil companies themselves." Said Carter: "Our proposal, if adopted, would give the oil companies the highest prices for oil in all the world. But still they want more." Carter also estimated that if natural gas prices were to be deregulated, the price would multiply to 15 times what it was in 1973.

Actually, both Carter's language and statistics seriously distorted the situation. When he spoke of an "annual income" of $100 billion or $150 billion, it sounded as if he was talking about profits; actually, the figures refer to gross revenues. Further, the $18 billion figure that he cited for the companies' revenues at the wellhead was in terms of 1973 dollars. But the $100 billion and $150 billion figures were in inflated 1985 dollars. In terms of 1973 dollars, the comparable three figures would be $18 billion, $50 billion and $81 billion. That still represents a huge revenue jump for the companies but not as huge as Carter indicated--and, of course, a far larger volume is involved. His gas figures also unfairly compared 1973 dollars with 1985 dollars. Carter figured the average price of all gas at 23-c- per 1,000 cu. ft. in 1973 and projected the price of new gas, if totally unregulated, at $3.63 by 1985. In 1973 dollars, however, that figure would be $1.77, an eightfold rather than a fifteenfold increase.

The oil and gas executives who chose to reply to the President did so mainly in generalities, chiding Carter for the tone of his attack. Standard Oil of Indiana Chairman John Swearingen termed it "an emotional appeal to defend a tax program that is not defensible." He also claimed that Carter's package includes "the largest peacetime tax increase ever imposed on our citizens, and none of it would be used to increase the production of domestic energy." That familiar oil-company complaint ignores the Carter proposal for offsetting the tax impact on individuals through rebates.

The smaller gas producers sounded just as resentful. A.V. Jones Jr., president of the Independent Petroleum Association of America, protested that for Carter "to single out the oil industry as if it were the lone influence that has brought his program into difficulty is unfair, unwarranted and unfortunate." George H. Lawrence, president of the American Gas Association, said the President's "highly emotional language" was "inflaming public opinion" but did nothing to provide "the production incentives so flagrantly lacking in the Administration energy plan." The Independent Gas Producers' Robert A. Hefner III, who served last year as chairman of an Oil and Gas Men for Carter campaign committee, said ruefully, "I made a big mistake."

Some members of Congress who have opposed Carter's program similarly condemned the President's attack--possibly because they saw it, correctly, as a veiled criticism of themselves. Insisted Republican Congressman W. Henson Moore, of oil-producing Louisiana: "The President ran for office urging deregulation and carried Louisiana, Texas and Oklahoma largely because of that position. For him to turn around one year later, point a finger at us and call proponents of deregulation 'energy profiteers' is nothing more than a cheap political shot." The Congressman had a point about Carter's reversal, but the contention that Republican Ford would have carried all three states if Carter had opposed deregulation is highly dubious. Louisiana's Long, mildly critical, urged a "lower level of rhetoric." Senate Republican Leader Howard Baker argued that Carter's energy program was not in trouble because of the oil lobby but because "it's a bad bill."

As the furor continued, Carter seemed pleased by what he had wrought. An aide described him as "very satisfied" with the jolt produced by his press-conference blast. Having been criticized for being too gentlemanly in supporting his energy program, he was suddenly under fire for putting on the 8-oz. gloves--and seemed to relish it. Thursday night, only hours after he took on the oil and gas industry, the President was in a buoyant mood as he played host on the White House South Lawn to 500 Georgians of the "Peanut Brigade," the group that carried the Carter campaign door to door in its early days. Old Friend Bert Lance was there, and the former Budget Director spent the night in the Lincoln bedroom. When one member of the Brigade told Carter that "on the next go round, you can count on every one of us again," a pleased President responded: "I'm not making any announcements about the future--but don't throw away those suitcases."

The President's high spirits proved contagious. "There is a strong feeling of relief here," said one presidential assistant. "A feeling of 'let's get out there and do it--let's go get 'em.' "

Carter has asked all of his Cabinet members to "go get 'em" too. In addition, he is considering another fireside TV speech on energy, possibly combined with an appeal for the Panama Canal treaties. Also under consideration: another televised phone-in on his energy proposals.

Carter is sure to follow his own advice and push the energy issue hard during a two-day, five-state political foray this weekend. On Friday, the President will join representatives of the urban poor at a town-hall meeting in Detroit--and he intends to answer questions about energy even if they are not asked. To help trim the Democratic Party's $2 million campaign deficit, he will attend a $50 per couple dinner in Des Moines, then spend the night with an Iowa family, whose identity has not been revealed for security reasons. It is expected to be a farm family, however, so that Carter can get a firsthand briefing on rural America's gripes about falling prices and low federal supports. On Saturday, he will fly to Strategic Air Command headquarters at Nebraska's Offutt Air Force Base, attend two meetings in Denver, and end the day at another Democratic fund raiser, this one in Los Angeles.

The Los Angeles event is emblematic of the President's bulky catalogue of problems, domestic and foreign. The dinner dance at the Century Plaza Hotel was initially expected to gross a cool $1 million, with 1,000 tickets going for $1,000 apiece. But Los Angeles' normally generous Jewish donors, upset by Carter's Middle East policies, are not expected to show up in their usual numbers. The result: a disappointing turnout, with no more than 700 Democrats expected to attend.

* Said Kennedy at a White House press conference on April 11, 1962: "A tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility shows utter contempt for the interest of 185 million Americans." Later he angered even more people when he was quoted as saying: "My father always told me that all businessmen were sons of bitches, but I never realized till now how right he was."

This file is automatically generated by a robot program, so viewer discretion is required.