As you will he aware, there is a current shortage of fuel oil in the United States as a result of greatly increased demand over last year. To meet this the United States refineries have been able to raise their production from a daily output of 800,000 barrels to 880,000 barrels, or only 10%. This shortage, which is particularly acute in the New England States, has led a group of New England Senators to seek in Washington ways and means of increasing supplies to that area. United States exports are the obvious target and demands are being made that these be reduced.

2. As this commodity is under export control to all countries except Canada, exports to other countries are, in fact, lower than last year while, at the same time, the Canadian rate of importation for the first nine months of 1947 has risen to the figure of 17,000 barrels a day, as against a rate of 4,000 barrels a day during the same period in 1946.

3. Until today the Congressional representatives do not appear to have been aware of this fact, although it was well known on the official level and those officials well disposed towards this country have been urging our representatives in Washington that we should take early steps to see that they are in a position to make adequate answers to the Congressional inquirers when the question of exports to Canada is raised.

4. Mr. Uren, the Chairman of the Canadian Coal Board, was advised of this on Friday, December 12th, and undertook to ascertain urgently the facts of our domestic situation and, in particular, the question of re-export from Canada and our stock position. It seems that Mr. Uren has gained the impression from the oil companies that there is a fairly severe current shortage in Canada and has been acting all along on this assumption. It therefore came to him as a considerable shock to learn of the magnitude of the increase in our imports and also of the magnitude of our published figures on current holdings.

5. Mr. Murray⁴³ of the Embassy in Washington feels fairly certain that imports to Canada are going to be restricted and the choice has to be made between restrictions imposed by Canada on our initiative and controls imposed by the United States. The advantage would seem to lie with the former in that we would he in a better position to vary them at a later date but there is a question of the acceptability by the Canadian public of further restrictions imposed by the Canadian Government.

6. Mr. Murray further reports that there is a growing feeling in official circles in Washington of the desirability of United States imposed controls, even though this would he against the spirit of the Hyde Park Agreement and it is therefore desirable, if we intend voluntarily to reduce our imports, that an early decision should he taken.

7. This morning the House⁴⁴ Interstate Commerce Committee, which for the past few days has been experiencing a sense of frustration in its avowed purpose of having made available greater supplies of fuel oil for domestic consumption in the United States, read into the record the figures of United States exports of fuel oil. It is reported that there was a visible brightening up and rubbing of hands when the Canadian figures were announced and the Committee appears to he eager to take action to put a stop to this, from the United Stales consumer's point of view, intolerable situation. This afternoon, Department of Commerce officials will be on the stand before this Committee elaborating as best they can the Canadian statistics. Mr. Murray reports that there is decreasing likelihood of any possibility of persuading the United States authorities to withhold action in restraining exports to Canada beyond the next ten days or less.

8. This morning Mr. Uren, Chairman of the Coal Board, and Mr. Scully⁴⁵ discussed this question with Mr. Howe and, as a result, a message is being prepared for transmission to the Department which, in outline, sketches the steps taken by Canada before and during the war to protect and conserve her oil supplies and pointing out the reasons for the enormously increased consumption. The memorandum concludes with the request that the United States be asked to withhold action in this matter until late January when the Canadian situation will be better known. In the meantime, Mr. Howe has summoned the presidents of the leading oil companies to a conference in Ottawa next Friday morning to discuss the matter with them.

9. It does not seem likely, in view of what is learned from Washington, that we will be able to persuade the United States to delay reducing our fuel oil imports until late January unless some pretty firm promises can be given and we can also show that the rate for the first nine months of the year has declined very substantially.

H.O. MORAN

⁴³R. Murray. deuxième secrétaire, ambassador aux États-Unis.
J.R. Murray, Second Secretary, Embassy in United States.

⁴⁴La Chambre des représentants des États-Unis.
House of Representatives of United States.

⁴⁵V.W. Scully, sous-ministre de la Reconstruction et des Approvisionnentents.
V.W. Scully, Deputy Minister of Reconstruction and Supply.