DIVISION SEEN ON HOW TO HELP U.S. OIL INDUSTRY

  The U.S. Congress and the oil industry
  are deeply divided on ways the government should assist the
  industry, hurt by the sharp fall in oil prices, and the
  subsequent growth in oil imports, industry analysts said.
      "The industry is deeply divided between those who support an
  oil tariff and those who believe tax incentives are better,"
  said Daniel Yergin, director of Cambridge Energy Research
  Associates, which recently completed a survey of the U.S.
  Congress on energy issues.
      Yergin said he saw mounting support within Congress for tax
  incentives rather than an oil tariff or import fee.
      Today U.S. Energy Secretary John Herington said he will
  propose tax incentives to increase edomestic oil and natural
  gas exploration and production to the Reagan Administration for
  consideration. White House spokesman Marlin Fitzwater said the
  proposal would be reviewed.
      Herrington said, "I would like to shoot for one mln barrels
  a day (addition) to U.S. production." U.S. oil output was off to
  8.4 mln bpd in the week of March 13, down six pct from last
  year, the American Petroleum Institute said.
      Oil industry analysts have forecast oil prices to average
  about 18 dlrs a barrel for the year and many believe that a
  move above that level will be unlikey for the near term.
      Paul Mlotok, oil analyst for Salomon Brothers Inc said that
  "even with the rise in prices for the last week or two we've
  only altered our average price scenerio to about 17.50 dlrs for
  the year."
      Analysts said that at that price renewed drilling and
  exploration to reverse the decline in U.S. crude oil output
  will not take place as the companies are waiting for stable
  prices over 20 dlrs to renew exploration.
      John Lichtblau, president of the Petroleum Industry
  Research Foundation Inc in New york in recent testimony to
  Congress said "The continuing decline in U.S. oil production is
  virtually inevitable under any realistic price scenario. But
  the future rate of decline is very much a function of world oil
  prices and U.S. government policy."
      Lichtbalu said that tax breaks could be used to raise oil
  production but would only work over time.
      "Lowering the producing industry's tax burden would probably
  be a slower stimulant (to output) than a price increase but
  would not raise energy costs." Lichtblau said.
      But the small independent oil companies who do much of the
  drilling in the U.S. are looking for the more immediate relief
  which could be brought on by an oil import fee.
      Ronald Tappmeyer, president of the International
  Association of Drilling Contractors, said, "The members of our
  trade asssociation are convinced that only a variable oil
  import fee that sets a minimum price trigger can protect our
  nation." The association represents some 1,300 drilling and oil
  service companies.
      The CERA survey of Congress shows that the oil import fee
  will face a stiff uphill battle.
      Yergin said that the poll which was conducted in January by
  a former Congressman, Orval Hansen, showed support for the oil
  import fee from 22 pct of the Congressmen surveyed largely as a
  means of protecting the domestic petroleum industry.
       At the same time 48 pct of the Congressmen surveyed
  opposed the fee with the respondents saying the tariff would
  hurt consumers and some regional interests.
      But 80 pct of the sample said support for a fee could grow
  if production continued to fall and imports to rise.
      Yergin said that imports above 50 pct of U.S. requirements
  "is a critical, symbolic level. If they (imports) move above
  that level, a fee may not be legislated but there will
  certainly be pressure for some form of action."
       But Lichtblau, in a telephone interview, said, "a 50 pct
  rate of import dependency is not likely to happen before 1990.
      In 1986 U.S. oil imports rose to 33 pct of u.s. energy
  requirements and shopuld be about 34 pct in 1987, he added.
  

