Transportation Charges for Imported Crude Oil:

An Assessment of Company Practices and Government Regulation

EMD-76-105: Published: Oct 27, 1977. Publicly Released: Oct 27, 1977.

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Transportation cost is a significant element in the cost of imported crude oil. Together with other costs, it is used to support price increases for regulated petroleum products.

Review of the tanker transportation charges reported by seven large oil companies showed that: (1) the Federal Energy Administration's (FEA) transportation regulations were inadequate in preventing companies receiving payments greater than their actual costs; (2) the overall reliability of the FEA transportation data was questionable due to inconsistencies and incompatibilities in the reporting systems and inadequate audits; and (3) companies reported about $26 million in transportation charges which seemed questionable or were considered as overcharges.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of the Department of Energy should take the following actions with regard to regulatory compliance, administration, and systems support: (1) verify that the oil companies have reported cost adjustments for uncovered overcharges; (2) assure proper implementation of new transportation regulations; (3) assure that all companies applying for exceptions to standard transportation accounting methods demonstrate that the company method results in costs no greater than those resulting from the use of the published Average Freight Rate Assessment as commonly applied; (4) insure that reviews of imported crude oil transportation charges are of sufficient scope to assure continued compliance with applicable regulations; (5) evaluate the Average Freight Rate Assessment periodically to assure the continued integrity of the system; (6) eliminate, to the greatest extent practical, problems which arise from Department of Energy report period time frames which are incompatible with the timespan in which the reported events take place; and (7) require respondent companies to use uniform reporting procedures which identify clear and discrete transportation data.

    Agency Affected:

 

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