Evaluation of Federal Actions in Response to the Iranian Oil Situation

EMD-79-88: Published: Aug 27, 1979. Publicly Released: Sep 24, 1979.

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In early March 1979, the United States entered into a commitment with the International Energy Agency (IEA) to lower petroleum consumption by up to 5 percent. This commitment would lessen the Nation's need for imports and thus help stabilize the world oil market, reduce upward pressures on oil prices, and rebuild petroleum stocks drawn during the cutoff. To achieve the IEA commitment, the Iranian Response Plan proposes to reduce the needs for imports by both decreasing U.S. petroleum consumption and increasing domestic production. The Response Plan's objectives of reducing the need for imports and raising stock levels may be, to some extent, incompatible.

The Response Plan contains eight initiatives that fall into three categories: increase domestic petroleum production, switch from petroleum to other fuels, and reduce petroleum use through conservation measures. The Iranian Response Plan has had little effect to date in increasing distillate stocks or reducing U.S. needs for oil imports. While the Department of Energy (DOE) has stated that the 1-million-barrel-per-day reduction goal has already been met, the reduction is mainly due to shortages rather than to the Plan. Overall, the Response Plan measures have the potential for significantly reducing oil imports, but some of the saving estimated are overstated. GAO found little evidence that the savings claimed from the electricity transfers and oil to gas switching measures would be realized anyway because of normal transfer and switching activities. The measures to increase production from Alaska and Elk Hills may help reduce the need for imports by the end of the year, but will not help with the more immediate gasoline and distillate shortages. The Iranian Response Plan's uncertain success to date does not speak well for the probable success of future voluntary sharing agreements among oil-consuming nations. Increasing imports may solve the Nation's immediate domestic supply problems but result in further dependency on foreign oil. If stocks are not restored, it is likely that the Response Plan measure will have to be extended through the winter and that stronger additional measures may be needed to deal with shortages of home heating oil and diesel fuel.

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