Gasoline Allocation:

A Chaotic Program in Need of Overhaul

EMD-80-34: Published: Apr 23, 1980. Publicly Released: Apr 23, 1980.

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GAO was requested to review the problems in the Department of Energy's (DOE) administration of its gasoline allocation program and to identify program weaknesses. The gasoline allocation program is the only program which can be used to manage the distribution of supplies when shortfalls are under 20 percent. Basically, gasoline allocations are determined by reference to a historical base period. Suppliers must sell to the same purchasers who bought during the base period, although the purchasers are not obligatd to buy the volumes offered them. The amounts purchased during the base period are used to determine the quantity to which purchasers are entitled. Priority is given to certain national defense and agricultural uses. The remainder is allocated to nonpriority purchasers as a fraction of the base period volume. Each prime supplier generally must use a uniform allocation fraction nationwide in distributing the gasoline, unless DOE directs or approves the use of a different fraction for a particular region. A "set-aside" program permits States to direct the distribution of a portion of the gasoline to meet hardship and emergency requirements within the State. Each prime supplier must set aside 5 percent of the supplies for this purpose. Firms can request an exemption from the regulations or appeal a DOE decision through the DOE Office of Hearings and Appeals.

Emergency response planning was incomplete and outdated. Federal and State Governments were ill-prepared to deal with their supply management role. The program operations were plagued by inadequate management and staffing, relentless demands for services, poor or totally lacking information systems, and unclear guidance and direction. The problems were reflected in the States' "set-aside" program operations. They were not prepared to deal with the sudden workload and were handicapped by the absence of clear, definitive guidance. The DOE audit activities were belated and of mixed success. A high incidence of possible violations of allocation program regulations was encountered. Despite its shortcomings, as presently designed and implemented, GAO favored efforts to make the allocation program an effective tool.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Secretary of DOE should act immediately to revise the Mandatory Petroleum Allocation Regulations and insure successful implementation of the regulations during shortage periods. To reduce the workload the Secretary should seek a cost-effective and workable alternative to a fixed base period; require certifications by priority users and by all other levels in the distribution chain; require that all certification forms state the key priority use criteria; establish operational training programs for key officials responsible for the program and give the DOE Office of Petroleum Operations regional office responsibility for conducting them. To improve program monitoring, the Secretary should require States to notify the Economic Regulatory Administration when priority needs are met through State set-aside program; establish an information gathering and analysis system; seek a cost-effective and practical method for obtaining data on secondary and tertiary storage of gasoline and middle distillates; revise the Office of Hearings and Appeals case-tracking system to provide data on the speed with which cases are being resolved; establish a system for obtaining data on the use of the State set-aside program; and review the program requiring information from DOE operating personnel. To improve auditing and enforcement, the Secretaty should review the audit programs for the allocation program; review the allocation program; and plan how the audit priorities will be revised at the beginning of a supply shortage. To improve Federal/State relations, the Secretary should provide the direction and leadership required to achieve uniform application of the State Set-aside program throughout the country; set standard definitions of hardships and emergencies; set criteria and standards of verification for evaluating requests for relief; set a lower percentage of supplies to be set aside; set criteria and procedures for release of unused set-aside supplies; require that States have adequately staffed, trained, housed, and funded organizations to administer the program; and identify options for assuring adequate funding for the State program. The Secretary should improve program planning and direction by placing responsibility for DOE energy emergency management planning and implementation within the Secretary's Office.

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