Document em8rR53goBNgw4ZjrZRaB91Eg

Top of the news <2/* l A toward severe anti-oil industry legisla tion. And chemical producers may need relief from profit margin price controls in order to afford high-cost feedstocks'. Demand Elasticity: One of the biggest imponderables in the oil-chemical scene is demand elasticity--i.e., the sensitivity of demand to price. For the moment, Arab producers are sticking to the tax ref erence price of $11.65/bbl., which is three times higher than the tab assessed a year ago. Saudi Arabia, apparently alone, wants a lower price, presumably to delay development of alternative oil sources and to prevent economic hardship or col lapse in oil-consuming countries. Whether Saudi Arabia does or does not get its way, increased imports of Arab oil will push both gasoline and chemical prices higher because foreign oil will ac count for a larger share of U.S. demand. But whether tabs will climb enough to significantly cut demand is anyone's guess. Oil and chemical companies have esti mated demand elasticity for gasoline (a 1-3% boost in price will cut demand 1%). Few, however, have any real confidence in such numbers. The rapid surge in March driving and the Canadian experi ence suggest that present higher retail gas tabs are not proving discouraging. And, little demand cutback that can be attrib uted to higher chemical prices has been noted in Europe and the U.S. Hence, chemical producers have little hope that gasoline demand elasticity will ease feed stock shortages. Should Saudi Arabia's view ultimately prevail, the landed U.S. price of imported crude might drop as low as $7/bbl.--a price at which alternative oil sources (shale, tar sands, secondary and tertiary recovery) approach economic viability. Temporarily lower tabs may also develop from the present rush by refiners to draw down high fuel oil stocks. Lower prices, however, could produce mixed blessings. While they could ease balance-of-payment problems and restrain inflation a bit, they could also stimulate demand. And that, given the lack of refinery and chemical plant capacity, could worsen chemical shortages. Allocations: Ending of the embargo will not lead to termination of mandatory allocation programs because energy shortages will remain indefinitely. FEO is mum on future changes in allocation regulations. But it's no secret that present allocation rules have been something less than a smash hit. Despite priority status, chemical makers have not generally re ceived 100% of '74 feedstock require- ments. Reasons: diversion of crude from chemical-producing refiners to indepen dents; captive chemical use requirements of refiners; bartering; failure to mandate allocation for downstream (especially benzene) chemical products. Benzene has recently been placed un der allocation. But there's considerable doubt that present benzene allocation procedures will give benzene chemical consumers 100% of current requirements. Present regulations place the burden of proof of need on the buyer. That means buyers must shop the market, obtain evi dence of unavailability and petition FEO to assign a supplier. Moreover, some chemical firms interpret FEO regulations as applicable only to benezene actually isolated as such during refining. That in terpretation could give refiners some lee way in determining how much feedstock they wish to sell or use captively one way or another. And FEO has yet to get around to assigning suppliers. Other quirks in allocation regulations are keeping chemical firms from getting 100% of butane requirements. And al though propane supplies have improved, because of the mild winter, pipeliners are now bidding for the gas. Petrochemical companies, including members of the Petrochemical Energy Group, are seeking more meaningful FEO action to guarantee 100% feedstock availability. Their proposals include sta tistical monitoring of production (CW, Feb. 13, p. 12), faster administrative procedures and supplier assignment. Full allocation to meet current require ments, however, will not necessarily solve longer-range feedstock problems. Be cause refinery capacity will essentially be static in the U.S. for at least several years, chemical feedstock demand will take an increasingly larger share of refinery out put. That puts it on a collision course with gasoline demand. Some chemical makers would like to see FEO maintain refinery yield pro grams and hold back gasoline produc tion. Although such a move might not prove popular among oil companies (considering their present public image problems), it would at least shift the blame for gasoline shortages to the gov ernment, and make it easier to cash in on the more profitable prices available on feedstocks sold as chemicals. But the President's problems work against that scenario. The embargo's termination will provide a modest measure of feedstock relief. But for all practical purposes, chemical shortages will continue--and possibly worsen VCM exposure to be cut I The Occupational Safety and Health Administration, bowing to public pres sures, said last week that it will issue a temporary emergency standard for vinyl ! chloride monomer exposure of 50 , parts/million. In doing so, OSHA re jected the recommendation of the Na- | tional Institute for Occupational Safety r and Health to limit industrial concentra- j tions to below detectable levels (CW7 1 Washington Newsletter, Mar. 20). ! OSHA's action is sure to spark labor protests. Complains an AFL-CIO spokes man, for example: "Does OSHA think the workers are going to take this? ... There are five B.F. Goodrich plants where their own voluntary standard al ready is 50 ppm., end Dow Chemical is at a 10-ppm. level at its monomer plants." VCM, the starting material for poly vinyl chloride production, has been em broiled in controversy since early last month, when several deaths from a rare liver cancer among workers at a B.F. Goodrich PVC plant were disclosed (CW.Feb. 13, p. 14). ' In reaching a decision, OSHA consid ered at least two alternatives: the zero ex posure standard or the industry-spon sored 50-parts/million level. The zero exposure standard would have required the use of oxygen-supplied respirators in the presence of anydetectable atmo- t spheric VCM. j Packaging RulesDue:Meanwhile, > Washington sources last week were pre dicting that the Food and Drug Adminis tration would soon clamp restrictions on the use of PVC in packaging food. Al though an FDA spokesman confirmed that new rules governing PVC use in food packaging were "in the works," he would not say when they will be disclosed or what they will include. While tight restrictions on PVC . packaging would deal a severe blow to plastics manufacturers, most firms take a wait-and-see attitude. An industry ob server doubts, however, that FDA will is sue an outright ban on PVC in all pack aging. 1 VCM is also under attack from Ralph Nader's Health Research Group. Last week the organization asked Clairol Cos metics to recall voluntarily any hair spray^O containing the chemical. "We don't think^i there's any need for a recall," asserts a Clairol spokesman. He adds that the VCM levels present no danger to a hair^O spray user. Clairol says it has not usedO VCM in its hair sprays since last summer,O when feedstock shortages developed. 12 CHEMICAL WEEK March 27, 1974 BFG23729 T 1 'U