Iranian Oil Cutoff:

Reduced Petroleum Supplies and Inadequate U.S. Government Response

EMD-79-97: Published: Sep 13, 1979. Publicly Released: Sep 13, 1979.

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A review was made of how the Iranian oil shortfall affected U.S. oil companies and what the Department of Energy (DOE) did to monitor the situation and deal with its effects. The 19 major U.S. oil companies from which GAO obtained information account for about 75 percent of U.S. refining capacity, oil imports, and gasoline sales. The information included monthly inventory levels, gasoline production and sales figures, and refinery operating levels.

The estimated net reduction in U.S. petroleum supplies due to the Iranian situation was between 600,000 and 700,000 barrels a day during the first 4 months of 1979. The multinational oil companies' crude oil allocation procedures which caused a further loss of 200,000 barrels a day, the unusually large reduction in U.S. crude oil production, and decisions of the larger companies not to purchase crude oil on the spot market all helped to further tighten the U.S. crude oil supply. Other factors such as DOE regulations caused the companies to reduce gasoline allocations beyond the amount of their Iranian imports. The shortfall was further exacerbated by government-mandated reductions in production by several other oil-producing countries, who also took advantage of the tight supply to increase their oil prices 54 percent. The DOE lack of adequate energy planning and data has led to inconsistent and conflicting administration statements and policies on the U.S. oil shortfall. While the overall shortage contributed to companies not increasing their production, no evidence was found that the 19 companies' stocks of crude oil, gasoline, and distillates exceeded normal operating levels.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Secretary of Energy should develop the following: (1) a comprehensive plan for dealing with energy shortages such as the Iranian situation which should include, as much as possible, the specific actions or options available for monitoring and responding to the shortage, so that ad hoc reactions are kept to a minimum; (2) a system for better identifying demand and consumption of petroleum products on a national and regional basis, in order to determine the extent of supply shortages; and (3) a reliable system for gathering, verifying, and publishing accurate and complete energy data in a timely manner with the system including information not only on refinery stocks and operations, but also on the stocks at the middleman level such as wholesalers, jobbers, and distributors.

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