U.S. Refining Capacity:

How Much Is Enough?

EMD-78-77: Published: Jan 15, 1979. Publicly Released: Jan 15, 1979.

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Between 83 and 92 percent of the nation's petroleum products are provided by U.S.-based refineries, and the U.S. refining industry is planning capacity additions in order to maintain this position. The Department of Energy (DOE) must define refining capacity needs after evaluating the domestic and international tradeoffs involved. The following domestic factors are reviewed by GAO: (1) concern for air quality and related air quality regulations; (2) multiple use of the coastal zone under the Coastal Zone Management Act; (3) pricing and allocation regulations; (4) gasoline lead content restrictions; (5) environmental and technological requirements for desulfurization equipment; and (6) the Crude Oil Entitlements Program.

After reviewing domestic programs and policies and international considerations, GAO believes that DOE has not evaluated the tradeoffs necessary to establish a definitive U.S. refining policy. In response to this need, DOE recently initiated a study to identify future U.S. refining capacity needs.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: As part of the study to identify future U.S. refining capacity needs, the Secretary of Energy should analyze the international and domestic implications of alternative levels of U.S. refining capacity and determine the criteria for government involvement in effecting any desired levels. This analysis should include an evaluation of the environmental, economic, national security, and technical tradeoffs necessary to meet various domestic capacity levels. The future U.S. refining capacity needs should be determined after consideration of such factors as the optimum mix of refinery sizes necessary to ensure desired levels of U.S. petroleum products and the optimum relationship with U.S. petroleum product consumption. Possible policies and actions should be analyzed and submitted to the appropriate congressional energy committees. The submission should include an analysis of the advantages and disadvantages of using incentive versus disincentive alternatives to meet desired capacity needs, and should include an analysis of the probable marketplace reactions to government regulations. The submission should also include any needed legislative proposals in the event that progress is not being made.

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