FOR IMMEDIATE RELEASE:  April 29, 1987


   IMPOSING TARIFFS ON PETROLEUM IMPORTS COULD COST CONSUMERS
NEARLY
      $17 BILLION PER YEAR IN INCREASED GAS AND OIL PRICES,
            ACCORDING TO A BUREAU OF ECONOMICS STUDY


     Imposing tariffs to restrict the imports of crude oil and
gasoline into the United States would increase costs to consumers
by between $14 billion and $16.7 billion per year, according to a
study issued today by the Federal Trade Commission's Bureau of
Economics.  The study also finds that tariffs or other policies
designed to limit petroleum imports or to increase current
domestic production will deplete U.S. reserves, make the country
less energy secure in the long run, and create windfall gains for
special interest groups.
     The Bureau of Economics study analyzed the costs and
benefits that would result if tariffs were imposed on imported
crude oil and gasoline and found the net cost to the economy
would be approximately $3.6 billion per year.  The analysis
assumed a $5 per barrel tariff was placed on both.  Proposals for
petroleum tariffs have ranged from $2 to $10 per barrel.
     According to FTC Chairman Daniel Oliver, "This study backs
up my belief that government regulation and interference with
competition hurt both the market and consumers."
     According to the study, tariffs have been suggested as one
method of decreasing dependence on foreign oil.  The study
concludes that such a policy would have negative consequences and
would:


     --  undermine U.S. long-term "energy security" because it
         would result in increased consumption of U.S. oil
         reserves;

     --  impose substantial costs on U.S. consumers and the
         economy; and

     --  likely be a complicated and inefficient method of
         achieving any national objective.

     According to the study, "Any attempt to increase our energy
security by limiting imports will actually reduce our long-run
energy security by speeding the depletion of domestic
reserves."  The study recommends against government intervention,
but concludes that if it is needed, other methods of reducing
dependence on foreign oil would be more effective than tariffs.
For example, the government could purchase oil at current,
relatively low prices and increase its stockpile for emergency
use.
     Keith B. Anderson and Michael R. Metzger, economists with
the Bureau of Economics, wrote the study.  They concluded that a
$5 per barrel tariff on crude oil and gasoline would:


     --  increase consumer costs by $13.9 billion to $16.7
         billion per year;

                             (More)
     --  reduce petroleum refiners' profits by $7.5 billion to
         $10 billion per year;

     --  increase profits for domestic crude oil producers by
         approximately $13 billion per year;

     --  increase government revenues by $6.7 billion to $8.2
         billion per year; and

     --  on net, cost the economy about $3.6 billion.

     According to the study, the estimated costs are conserva
tive, "because any tariff is unlikely to be as simple as we
assume."  The study points out that individual firms or countries
can seek exemptions from the tariff, and that some are likely to
be granted.  "To the extent such exemptions are granted, they
increase the costs and may reduce the benefits of the tariff
program," the study concludes.
     In addition, the choice of refinery inputs that are subject
to the tariff can also change the program's costs and benefits.
For example, if partially refined products, such as motor gaso
line blending stocks, are not covered, refiners will have strong
incentives to avoid the tariff by importing these unprotected
products.
     After analyzing past petroleum regulations, the study
concludes that any other policy that limits petroleum imports is
likely to be even more complex than a tariff and would impose
even greater costs, which would eventually be borne by consumers.
     The study also estimates the effects of a tariff on gasoline
or crude oil separately.  It concludes that a gasoline tariff
alone would impose much smaller costs than a combined tariff on
crude oil and gasoline.  However, a gasoline tariff alone would
not do much to reduce U.S. imports of foreign oil, because the
United States imports only a small amount of gasoline.  While a
tariff on crude oil imports of $3 or more per barrel would
eliminate all imports of crude oil, it would cause substantial
increases in gasoline imports.  Further, it would cost the
economy about $4 billion per year.
     The study represents the views of the Bureau of Economics
and does not necessarily reflect the views of the Commission or
any individual Commissioner.
     Copies of the study, titled "A Critical Evaluation of
Petroleum Import Tariffs," are available from the FTC's Public
Reference Branch, Room 130, 6th St. and Pennsylvania Ave. N.W.,
Washington, D.C. 20580; 202-326-2222; TTY 202-326-2502.

                              # # #


MEDIA CONTACT:  Dee Ellison, Office of Public Affairs, 202-326-
     2177

STAFF CONTACT:  Keith B. Anderson, Bureau of Economics, 202-326-
     3428

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