U.S. Won’t Probe Complaints About Oil Prices

Noting that most U.S. oil companies oppose the case, the Commerce Department refused Monday to investigate complaints that oil imported from Mexico, Saudi Arabia, Venezuela and Iraq is unfairly priced and hurts domestic producers.

The government’s decision averts an inquiry sought by small U.S. oil producers that could have led to duties on almost half the crude shipped to the U.S. It sent gasoline prices soaring.

The decision prompted Mexico to say that it will quickly lift tariffs on imported natural gas, reversing a step it had taken in retaliation against the oil-dumping complaint.

The 4% tariff on natural gas had originally been scheduled to be lifted in 2004. The end date was later accelerated to last month, but Mexico decided to leave the tariff in place in reaction to the complaint. The tariff’s removal is expected to speed the development of Mexican markets for natural gas from California and other U.S. and foreign producers.

The Commerce Department said it decided not to investigate because most oil companies it surveyed opposed the idea. “Without adequate industry support, Commerce is prohibited by law from initiating investigations,” the agency said.

Independent oil producers vowed to appeal, but most analysts give that effort little chance. Crude oil prices have nearly doubled this year, undercutting their claims of injury.

The decision is a victory for Texaco Inc., Occidental Petroleum Corp. and other large companies that get much of their oil overseas.

It also removes a political headache for the Clinton administration, which could have found itself in the position of acting to drive up prices for consumers.

Small U.S. companies sought duties after oil prices began dropping, leading to bankruptcies and costing thousands of oil workers their jobs.

However, oil prices have nearly doubled since early this year, when they had dropped to as low as $11.37 a barrel on the futures market. Crude oil for September delivery stood near a 21-month high of $21.24 on Monday on the New York Mercantile Exchange in after-hours electronic trading.

Foreign producers welcomed the decision. The stakes were extraordinarily high for Mexico, which exports 70% of the crude oil it produces to the U.S.

Mexican Energy Minister Luis Tellez, who lobbied Washington heavily, voiced relief and promised to scrap the natural gas tariff “as soon as the paperwork is finished.”

Efforts to apply the U.S. anti-dumping law to oil baffled many experts.

“The price is not determined by imports,” said former Commerce Department official Gary Horlick, a lawyer who now represents Mexico. “The prices of oil go up and down around the world in lock-step.”

Indeed, slumping prices wreaked havoc on the economies of all oil exporters.

Struggling independent oil companies are getting other assistance from Washington. Congress has already approved loan guarantees of up to $10 million to shore up oil and gas producers, and more concessions could be on the way.

Small independents produce mainly from older U.S. fields, where the oil is costlier to pump and refine and fetches several dollars a barrel below world prices.

“This was driven by the small and medium-sized operators who are really hurting,” said Dan Kramer of the California Independent Petroleum Assn.