press release

Chevron Press Release - Chevron Opposes Oil Import Duty And Anti-Dumping Petitions

SAN FRANCISCO, July 22, 1999 -- Chevron said today that it has reaffirmed its opposition to the anti-dumping and countervailing duty petitions filed against imports of crude oil from Mexico, Venezuela, Saudi Arabia and Iraq. The company's position was presented in a second letter from Chevron Chairman Kenneth Derr to the U.S. Department of Commerce.

A coalition of independent oil producers petitioned the Department of Commerce to determine whether Mexico, Venezuela, Saudi Arabia and Iraq are illegally "dumping" crude oil into the U.S. market, or selling it for less than "normal" value. The coalition is also requesting that duties be levied on crude oil imported from those nations.

Moreover, in order to meet the mandatory threshold requirements that producers of at least 25 percent of total domestic production support the petitions and that at least 50 percent of those domestic producers expressing an opinion support the petitions, the coalition asked Commerce to exclude from consideration crude oil produced in Alaska and California, two of the most important producing regions in the United States, and to exclude from the domestic industry U.S. producers that also import crude from the targeted countries. If the Commerce Department agrees with the petitioners on this point, it would deprive U.S. producers accounting for a majority of domestic crude oil production of their right to vote on whether the petitions have the support of the domestic crude oil industry

"The basic laws of supply and demand in worldwide markets determine the price of oil -- as it should be," said Derr. "Chevron is a strong supporter of allowing market forces to determine price levels with minimal government intervention. We believe that imposing the suggested duties on crude oil imports is not supported by the majority of the domestic oil industry, is not in the best interests of U.S. consumers, and is contrary to the interests of the United States," Derr's letter stated, reflecting Chevron's concern that imposition of the requested duties would have adverse effects on relations between the United States and oil exporting nations.

In effect, the petition asks Commerce to recognize an artificial regional market, invented for the sole purpose of improperly invoking antidumping laws. If successful, this petition would increase the cost of crude for refiners, in some cases possibly making it less economic for refineries to use crudes they are configured to run. Resulting cost increases could be reflected in prices paid by U.S. consumers.

"As one of the largest domestic producers, Chevron is committed to the long-term health of the U.S. oil industry," said Derr, noting that Chevron's 1998 domestic crude oil production was about 118 million barrels. The company's 1998 capital expenditures related to domestic exploration and production alone amounted to $1.2 billion.

"Although we are a major producer of domestic crude, we do not produce sufficient volumes of the crudes we need to operate our refineries economically. Therefore, it is necessary to supplement our domestic production with imported oil," Derr explained.

Chevron believes that a domestic crude oil industry that competes in the worldwide marketplace is the best formula to ensure the industry's long-term viability, and that U.S. oil producers should not seek government intervention to insulate themselves from competition.

Derr's letter to Commerce pointed out that crude oil is a heavily traded commodity -- not only in the traditional market for "physical barrels," but also in the futures and options markets, and explained that location and quality of crude oil is critical to determining its value. "Because oil is a widely traded global commodity, it is unrealistic to consider specific regions of the United States as different from others in determining the pricing of crude oil," said Derr.

"If duties were imposed on the targeted imports, the economics would change and the crudes would likely move to other destinations where no special tariffs are imposed," said Derr. He explained that this could result in less suitable crudes being moved greater distances to reach U.S. refineries, which could raise costs of incremental crude supplies to the U.S. -- and, correspondingly, the price of petroleum products to consumers could be affected as well. The Chevron chairman cautioned that, if adopted, this petition would have major adverse effects -- not only on the U.S. economy -- but also on relations with foreign producing countries.

Updated: July 1999