1959 U.S. Quota on Foreign Oil Imports
In 1959, President Eisenhower announced the imposition of mandatory
quotas on U.S. oil imports. This announcement followed a decade
of increasing foreign oil imports to the U.S. Prior to the imposition
of the quotas, it was thought by many that increased oil imports
would relieve pressure on U.S. reserves. Major U.S. oil companies
with international holdings profited from the U.S. importation of
foreign oil. However, independent
American oil producers were not pleased about the increasing volume
of imported oil. They were concerned that rising imports would undermine
the domestic oil industry within the United States.
Following the Korean War, oil imports continued to increase and
threatened the domestic oil and coal industry. As a result, coal-
and oil-producing states in the U.S. sought to limit such imports.
The Eisenhower Administration resisted the idea of placing tariffs
on imported oil and proposed a voluntary program of foreign oil
restrictions as well as a plan to store foreign oil in exhausted
U.S. wells. Support for this idea was weak at best and major U.S.
oil companies offered no support for it. Ultimately, the voluntary
restrictions and the plan to store foreign oil collapsed under the
recession of 1958.
The Eisenhower Administration continued to resist the imposition
of mandatory quotas on foreign imports until, at the behest of multiple
high-ranking politicians, the President was compelled to act. With
the imposition of quotas on foreign oil imports, domestic oil producers
were happy, while the majors were disappointed, though they grew
used to the idea of having their domestic production profits protected
from price swings brought about by foreign supply pressures.
The quota system was very complex. It led to higher investment
in domestic oil exploration, relative to investments in exploration
outside the U.S., and higher oil and gasoline costs to domestic
consumers. Ultimately the quota system achieved its goal of protecting
the U.S. domestic oil industry, and the domestic interests of the
major U.S. oil companies, from foreign oil and they remained in
effect for fourteen years.
Throughout the late 1960s and early 1970s, a severe global tightening
of the supply-demand balance for petroleum had occurred. This shift
in global oil demand was brought about by a rapid increase in industrial
growth throughout the world. With demand outstripping production,
U.S. surplus capacity was being drawn down rapidly. In 1971, the
U.S. ran out of surplus capacity and would became a net importer
of oil, opposed to being a net exporter of oil as it had been since
the oil industry began.
In 1973, President Nixon removed the import quotas established
in 1959 by President Eisenhower. The removal of these quotas followed
increasing oil and gasoline prices in the U.S. and political pressure
from oil-consuming states and oil users for cheaper supplies. Now,
with U.S. oil surplus exhausted, middle-eastern oil and the Organization
of Oil Exporting Countries (OPEC - formed in 1960) would play an
increasingly important and powerful role in crude oil supply and
pricing.
Source: Daniel Yergin. The Prize, 1992
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