Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

225. Letter From the Director of the Office of Defense Mobilization (Flemming) to Senator Robert S. Kerr¹

Washington, July 21, 1956.

Dear Senator Kerr: I appreciated the helpful comments in your letter of July 10, 1956, regarding the oil import situation.²

Your concern about whether oil imports are being restricted within limits necessary in the interest of national defense seems to coincide with my letter of June 26 to oil importing companies requesting a revision of planned imports for the third quarter of this year.³

The actual imports of crude oil into Districts I–IV during the first quarter of 1956 were 4.39 percent of domestic production; for the six months January–June, the corresponding ratio (partially estimated) is 4.97 percent. The corresponding annual ratio for 1954 was 4.65 percent. Imports of residual fuel oil have been in close conformity with the 1954 relationship to domestic production of crude oil.

On the basis of the information available on June 26, it appeared that, after maintaining a level of operations during the early part of the year in reasonably close conformity with the recommendations of the Advisory Committee, some companies had made plans which, if carried out, would have brought the volume of crude oil imports to a level “significantly” above the proportionate relationship to the domestic production of crude oil for 1954. For that reason, the Advisory Committee concluded that each importing company should be advised that reports would be expected in July indicating that individual voluntary action had been taken, with respect to planned imports for the third quarter, of such character as to constitute substantial conformity with the Advisory Committee’s recommendation.

In connection with your concern about the volume of “crude oil and refined products” excluded from any restriction, I should like to call attention to the following points:

(1) The program of voluntary action recommended by the Presidential Advisory Committee has been concerned so far only with crude oil and residual fuel oil.

(2) Our efforts have been limited to the implementation of the recommendations of the Presidential Advisory Committee on Energy Supplies and Resources Policy of February 1955. The first paragraph of the Committee’s recommendations dealing with crude and residual fuel oil is pertinent to the “exclusions” made in my letters to oil importing companies. It reads as follows:

“An expanding domestic oil industry, plus a healthy oil industry in friendly countries which help to supply the U.S. market, constitute basically important elements in the kind of industrial strength which contributes most to a strong national defense… .⁴ In this complex picture both domestic production and imports have important parts to play; neither should be sacrificed to the other.”

It is believed that the special treatment of oil of Canadian and Venezuelan origin is consistent with that statement of view by the Advisory Committee and with the requirements of our National Security. The special treatment of imports into District V, as stated in the May 11 letter to oil importers, rests on the fact that there is no present indication of an increase in production in District V to meet the increasing demands in that area. The Presidential Advisory Committee has made it abundantly clear to oil importing companies that imports from Canada and Venezuela and imports into District V will be watched closely for any developments which might threaten to impair the National Security within the meaning of Section 7 of the Trade Agreements Extension Act of 1955.

(3) The re-examination now in progress of the Advisory Committee’s formula relating to imports of crude and residual oils, initiated as a result of the May 11 recommendations, will provide opportunity for an evaluation of the evidence relating to the volume of imports and of the conclusions reached since February 1955. It should also provide a basis for such re-formulation of views as may appear desirable.

It seems clear that the objective which you desire is substantially in accord with the objective which the Presidential Advisory Committee on Energy Supplies and Resources Policy also desires to achieve. However, in our desire to achieve that objective we must make sure that we are not undermining some other aspect of our national policy. That is the reason for the special treatment for the time being of imports from Canada and Venezuela.

I feel that a national policy has been established that an unrestricted flow of imports into this country would impair the National Security. I do not believe that this Administration will deviate from such a policy. Methods of carrying it out may vary from time to time, but I feel sure that you can rely on the continuance of the basic policy.

I think you will agree that the letter of June 26 to oil importers indicates clearly that we are following up vigorously in an effort to achieve our objective on the basis of individual voluntary action by importing companies. You will be pleased to know that the replies so far received indicate a very satisfactory degree of cooperation with respect to planned imports for the third quarter of this year. If this approach does not bring about substantial conformity with the February 1955 recommendations of the Advisory Committee, I will proceed to initiate hearings under the provisions of Section 7 of the Trade Agreements Act.

I shall be very happy to hear from you at any time regarding this matter.

Sincerely yours,

Arthur S. Flemming⁵

1. Source: Department of State, Central Files, 411.006/6–2156.
2. Not printed. (Ibid.)
3. Not printed. (Ibid., 811.2553/6–2556)
4. Ellipsis in the source text.
5. Printed from a copy that bears this typed signature.