Chevron Opposes Oil Import Duty, Anti-Dumping Petitions

Chevron 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 duties be levied on crude oil imported from those nations. "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 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 U.S." 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. 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 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 U.S. 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 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, if adopted, this petition would have major adverse effects, not only on the U.S. economy, but also on relations with foreign producing countries.