This I do know: I visited with several of the distributors of fuel to the farmers, and it is going to increase their production costs more. In addition to that, the farmers owe bills back 2 or 3 years through this declining price period and through drought areas that we have existing there in the whole Southwest, in several States there in the Midwest, and I do not know what they are going to do. Senator O'MAHONEY. You are superintendent of utilities for Lenox, Iowa? Mr. MILLER. Yes, sir. Senator O'MAHONEY. What has been the effect on the utilities of Lenox? Mr. MILLER. The effect is that so far we have not raised rates because we have, like everybody else, adjusted rates since World War II, and we have absorbed steadily increasing prices on all operating materials that we have to have. Senator O'MAHONEY. Will you file with the committee a statement, by mail, which will give the exact effect upon the Lenox utilities? Mr. MILLER. Yes. I have the increased cost here. Did you want it now, or did you want it in writing? Senator O'MAHONEY. If you have it with you, you might as well put it in now so we will have it. Mr. MILLER. We have exactly a 13-percent increase in the price of fuel for generating purposes. Senator O'MAHONEY. I want the details. Let us have a detailed statement. Mr. MILLER. All right, sir. Senator O'MAHONEY. You do not need to give it now. Prepare it and send it in, please. Mr. MILLER. All right; I will do that; all right, sir. (The information referred to follows:). LENOX, IOWA, February 15, 1957. TESTIMONY FOR OIL-PRICE HEARINGS, AS REQUESTED BY SENATOR JOSEPH C. O'MAHONEY, AT THE HEARINGS ON FEBRUARY 13, 1957 My name is Leo H. Miller. I am presenting the following testimony at the request of the committee, in writing, for the records of the oil-price hearings. Lenox, Iowa, is a small town of 1,175 population. Increased price of oil will cost the utilities, annually, $2,050. This will cost the consumer, annually, $3.44 (includes power and commercial users). The State of Iowa used 447,188 barrels of oil in generating last year. The oil-price increase will cost the utilities in Iowa $212,235.42 annually, which will have to be absorbed by the consumer. Oil constitutes 35 percent of the cost of generating electricity. Labor constitutes 40 percent of the cost of generating electricity. It should be of interest to the Senate committee that the oil costs have increased 13 percent since December 1, 1956, and labor costs have increased only 9 percent in the last 5 years for the Lenox generating plant. I think that the cost percentages should interest the Senate committee oilprice hearings inasmuch as the petroleum industry, in its testimony before the committee, has blamed, in large part, increased labor costs as reasons for price increases on petroleum products. Please refer to that part of my testimony before the committee on February 13, wherein I stated facts, obtained from the labor union, which definitely discredit those presented by representatives of the petroleum industry before the committee hearings. I want to thank the committee for the opportunity to present this additional testimony in this manner. [SEAL] LEO H. MILLER. Senator O'MAHONEY. The committee will be very glad to have any further information of that kind with respect to any other public utilities in the State of Iowa. Mr. MILLER. Yes. It is affecting the whole State of Iowa, not only public powerplants, but some private concerns, REA's, and, for example Senator O'MAHONEY. In order to make a report to the Senate about the facts of this matter, the committee will have to have as much of the definite effect as can be shown by statistics. Mr. MILLER. Yes, sir I realize that. Senator O'MAHONEY. In other words, we want to lay all the cards on the table. Mr. MILLER. I realize that, and I will furnish it for you. I planned to bring it with me, but I did not have time. Time did not permit me to get this ready. Senator O'MAHONEY. Very well. If you do that, we will very much appreciate it. Mr. MILLER. Yes, sir. Senator O'MAHONEY. Thank you, sir, for having come. Mr. MILLER. Thank you, sir, and I thank the committee. STATEMENT OF THOMAS A. WALSH, MANAGER, LIGHT AND POWER DEPARTMENT, HUDSON, MASS. Mr. WALSH. My name is Thomas A. Walsh, and I am the manager of the light and power department of the town of Hudson, Mass. I am also secretary-treasurer of the Municipal Electric Association of Massachusetts, which is comprised of 40 municipal electric departments. In addition to representing the light and power department of Hudson, I have been authorized to represent the Municipal Electric Association of Massachusetts. The light and power department of Hudson used last year 1,520,000 gallons of No. 2 fuel oil. It cost the department $166,967.26. This year we estimate that we will use 1,680,000 gallons. The price of No. 2 fuel oil advanced 1 cent per gallon January 11, but this is only part of the story. There was a 3-mill price rise October 1 and a 12-mill rise January 1. Our average cost of No. 2 fuel oil was 11 cents per gallon in 1956, but the present cost of fuel oil is now 12.44 cents per gallon. This means that our fuel costs will increase $24,360 this year over the 1956 costs. The city of Peabody will use about 1,750,000 gallons of No. 2; the town of Ipswich, 800,000 gallons; and the town of Marblehead, 75,000 gallons this year. In addition, three municipal departments, Braintree, Holyoke, and Taunton, have plants that use residual fuel oil. They use approximately 750,000 barrels of residual fuel per year. The price of residual fuel has increased 50 percent per barrel within the past 4 months and will cost these departments an additional $375,000 this year. We feel that the available evidence very definitely points to the possibility that these increases in fuel cost are due to collusion. Never in history has there been as much products and crude in storage as when the price of crude and products increased in January. As of January 11 there were 132,942,000 barrels of light fuel in storage, 25,763,000 barrels more than last year. There were 42,731,000 barrels of residual fuel in storage, 3 million barrels more than last year. Bear in mind that this fuel was in storage before the price of crude was increased. Nor was there any shortage of crude; there were 260 million barrels of crude in storage. I appeared at a hearing conducted by the Office of Defense Mobilization beginning October 24, 1956. At that hearing it was testified that there were 2 million barrels a day shut-in capacity in this country; that the Texas operators were restricted to 16 days operation per month; that they were starving and unless they could operate their wells more days per month they would all go bankrupt. Well, the importation of foreign oil has been stopped, "but what happened? The Texas Railroad Commission turned down an increase in the January allowables because "available crude stocks are too high." The allowable for February was increased to 3,543,672 barrels per day, an increase of 92,970 barrels per day, or a magnificent 3-percent increase. In comparison, Venezuela has increased its production to 2,766,000 barrels per day, up 300,000 barrels, or an increase of over 10 percent. I feel sure that this investigation by the Congress will expose such collusion as may exist in the oil industry and that laws to protect the ultimate consumer could be enacted. That is my story, sir. Senator O'MAHONEY. Any questions, Mr. McHugh? Mr. MCHUGH. Mr. Walsh, I understand from your statement that you appeared as a witness at the hearings held by the Office of Defense Mobilization concerning the import of oil? Mr. WALSH. That is right. Mr. McHUGH. What position did you take in connection with this import problem? Mr. WALSH. We opposed the petition of the Independent Petroleum Association on the grounds that we felt sure that it would result in an increase of fuel-oil prices. Mr. McHUGH. Do you have any information concerning the effect which additional imports into the United States have, in fact, had upon prices in the United States? Mr. WALSH. I did not quite follow you. Mr. McHUGH. Did your association compile any information concerning the actual effect upon prices in the United States from a large influx of imports? Mr. WALSH. No, I have no compilations; no, sir. Mr. McHUGH. Do you have any reason to know whether or not oil imported into the United States is sold more cheaply or at any different price than oil produced here of comparable grades? Mr. WALSH. I do not believe it is. I do not believe that the oil that we get on the east coast is any cheaper. I feel some of it is Texas oil, or rather domestic oil, and some of it is foreign oil, but the price is no different; no, sir. Mr. McHUGH. I understand from this it is just your position that with greater available supply the ultimate effect would be to keep prices lower? Mr. WALSH. That is right; that is right. If the law of supply and demand holds true in the oil industry, certainly with all this oil in storage, the prices should be coming down instead of going up. Mr. MCHUGH. I have no further questions. Senator O'MAHONEY. Mr. Walsh, will you give me the number of municipal electric plants that belong to the association for which you speak? Mr. WALSH. There are 40, Senator. Senator O'MAHONEY. All over the State? Mr. WALSH. That is right. We cover the State pretty generally. Senator O'MAHONEY. Have they all felt the effect of this price increase? Mr. WALSH. Not all of them, because not all of them generate their own electricity. A great many of them-in fact, the larger percentage-buy their electricity, and they would feel it, of course, through Senator O'MAHONEY. How many generate their own electricity? Mr. WALSH. Seven of us. Senator O'MAHONEY. Has the effect been uniform on all seven? Mr. WALSH. That is right. Senator O'MAHONEY. What is the percentage of increase in the cost of fuel? Mr. WALSH. With the light fuel it has been a little better than 10 percent. Our price has gone from 11 cents to 12.44. On the heavy fuel, it has gone up 50 cents, from about $2.75 to $3.50; so that it is, let us say, about 8 percent. Senator O'MAHONEY. What effect has it had upon your rates to your customers? Mr. WALSH. Well, very definitely we have to raise rates. We are just working out the details of it right now. We certainly cannot operate with this price increase. Senator O'MAHONEY. So that your complaint to this committee is that because of the increased costs of residual fuels and fuel oil, the oil products that you need, you definitely will have to increase your rates, to the consumer? Mr. WALSH. That is right, Senator. Senator O'MAHONEY. No disagreement about that among your members. Mr. WALSH. No, sir. Senator O'MAHONEY. Thank you very much, sir. We are obliged to you for your testimony. Mr. WALSH. Thank you for your courtesy in listening to me. STATEMENT OF M. H. ROBINEAU, PRESIDENT, THE FRONTIER REFINING CO., AND PRESIDENT, INDEPENDENT REFINERS ASSOCIATION OF AMERICA Mr. ROBINEAU. Senator and members of the committee, my name is M. H. Robineau. I am here to represent a small independent refiner, the Frontier Refining Co., of Cheyenne, Wyo. I am also here as the president of the Independent Refiners Association of America, representing small independent refiners like Frontier throughout the country. Basically we are all in the same boat. We face a common problem insofar as the oil-to-Europe program is concerned. Senator O'MAHONEY. Pardon me. First, may I ask whether the Frontier Refining Co. is a member of MEEC? Mr. ROBINEAU. Yes, Senator. not one of the original 15. We are the 16th member. We are Senator O'MAHONEY. How did you happen to become a member? Mr. ROBINEAU. Well, primarily, I think, through the efforts of yourself, Senator, in trying to get some independent on the committee, and I assume we were the one that was selected, but I am sure it was based on your efforts to get someone on the committee that was not one of the original European international oil companies. Senator O'MAHONEY. You did come to me to complain about the lack of representation of the whole industry on the MEEC, did you not? Mr. ROBINEAU. Yes, sir; a lack of representation in the whole program, whether it was MEEC or the Government's part of it. We feel that our segment of the industry was not being represented and did not have an opportunity to protect itself. Senator O'MAHONEY. You are personally aware of the fact, are you not, that I protested, before you came to my office, to the Department of the Interior, to the Department of Justice, to the Office of Defense Mobilization, and to the Department of State, that only a segment of the industry was managing the Government program? Mr. ROBINEAU. Yes, sir. Senator O'MAHONEY. Did you confer with any of the officials of the Department of Interior-Mr. Stewart or Secretary Wormser-with respect to going on this committee? Mr. ROBINEAU. Following the conversation with you, yes; I conferred with Mr. Stewart. Senator O'MAHONEY. You got an invitation to go on the committee, did you not? Mr. ROBINEAU. Yes, sir. Senator O'MAHONEY. It came from whom? Mr. ROBINEAU. Well, the invitation came from the Office of Defense Mobilization. Senator O'MAHONEY. The Office of Defense Mobilization? Mr. ROBINEAU. Yes, sir. Senator O'MAHONEY. Thank you very much. I want this in the record merely for the purpose that I have been told that a claim has been made on behalf of one of the Government departments that the appointment of an independent refining company on the committee was urged somewhere else. Mr. ROBINEAU. No; it was urged by you, sir. Senator O'MAHONEY. Do you recall the date on which you became a member? Mr. ROBINEAU. Well, the invitation was January 16. I do not know when they Senator O'MAHONEY. When did you accept it? Mr. ROBINEAU. We accepted it by return wire, and then we received notification, oh, along about the 1st of February-I cannot give you the exact date. |