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Chevron Chairman Urges Federal Price Floor on Oil

November 12, 1986|DONALD WOUTAT | Times Staff Writer

HOUSTON — A top oil executive called Tuesday for a government-imposed floor on oil prices to prevent further deterioration of the U.S. oil industry.

George M. Keller, chairman of San Francisco-based Chevron and president of the American Petroleum Institute, hinted that he thought the price should be around the $15 currently commanded for a barrel of a benchmark U.S. crude oil.

Keller said he doesn't claim to be speaking for the influential lobbying organization that he heads. But his comments attracted attention because of his stature in the industry and the forum for his remarks--a speech before the institute's annual meeting.

The executive said he hopes that industry leaders can form a consensus around his proposal and present a united front to President Reagan and Congress in seeking relief from this year's collapse of world oil prices.

He didn't prescribe a way to maintain a minimum price for domestically produced oil, but the most likely mechanism would be through a fee or quotas on imported oil that would have the effect of driving up the price on all oil sold here.

The notion of an import fee is fraught with obstacles, ranging from philosophical opposition in the White House and within the oil industry itself to resistance from consumers and such oil exporting allies as Canada and Mexico.

But many energy experts in and out of the industry say that without stronger oil prices to encourage production and exploration, U.S. oil output will decline and oil consumption will rise to the point where the nation's reliance on imported oil--principally from the Middle East--could exceed 60% by 1990. The import share of U.S. consumption last year was about 30%.

"From the standpoint of America's economic and energy security, our nation cannot afford an extended disruption of domestic drilling," Keller said.

But the irony of oil leaders asking for more government intrusion after the dismantling of the highly unpopular price controls of the 1970s wasn't lost.

"This kind of shenanigan will come back to haunt us," one top oil executive said.

Keller said that to be politically expedient, the floor price would have to be pegged at a "survival" level rather than a level that makes the industry "comfortable." Privately, industry officials say it couldn't win political support if the price were any higher than prevailing prices.

"The key is not so much the number as the stability of it," Keller said.

Chevron joins such companies as Texaco and Unocal, and hundreds of smaller independent oil producers, in backing some form of price support. But opposition remains widespread within the industry itself.

"It could be harder to get the industry together than to get the government together," joked Robert O. Anderson, the retired chairman of Atlantic Richfield and a proponent of Keller's plan.

Another obstacle was exemplified by the man who followed Keller to the speaker's podium Tuesday, Mario Ramon Beteta, director general of the Mexican national oil company.

He said a U.S. import fee on oil from Mexico, which is already hard hit by the oil price collapse and heavily in debt to U.S. banks, would have this effect:

"It would reduce our capacity to buy goods abroad, the majority of which come from the United States. And it would limit our capacity to fully service our debt obligations."

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