How the Petroleum Refining Industry Approaches Energy Conservation--A Case Study

EMD-80-55: Published: Jun 13, 1980. Publicly Released: Jun 13, 1980.

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A review was made concerning conservation achievements in the petroleum refining industry, and the impact existing Federal energy conservation and fuel-switching programs have had in furthering conservation gains and encouraging switching to coal. The U.S. petroleum refining industry accounts for about 4 percent of total domestic energy consumption and over 10 percent of all energy consumed by the industrial sector. In 1978 alone, refineries consumed the equivalent of 1.4 million barrels per day of crude oil in producing refined petroleum products, or about 1 barrel of crude oil for every 10 barrels refined.

The review of the petroleum refining industry by GAO showed that: (1) although the Department of Energy (DOE) reported that the petroleum refining industry reduced its energy requirements to refine a barrel of crude oil by 19.5 percent between 1972 and the end of 1978, Federal programs designed to promote improved industrial energy efficiency had little impact on the improved refinery efficiency; (2) the National Energy Conservation Policy Act extended the reporting program beyond 1980, but did not give DOE legislative authority to set new efficiency improvement targets; (3) the current Federal policy of moving toward decontrol of domestic crude oil and natural gas prices should help achieve greater energy savings by making additional conservation projects cost effective; (4) the 10-percent tax credit for certain conservation investments is not expected to have much impact on refinery conservation efforts; (5) Federal programs to increase substitution of coal for oil and natural gas have had little impact on the refining industry, and in some cases may actually be hampering efforts to improve energy efficiency; and (6) Federal coal gasification activities to date have not been directed toward demonstrating the use of coal gas in a refinery since the refining industry has shown little interest in the project.

Matter for Congressional Consideration

  1. Status: Closed

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

    Matter: Congress should take the initiative to enact legislation requiring DOE to develop new industrial energy efficiency improvement targets if DOE fails to request the necessary legislative authority.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Secretary of Energy should: (1) request legislative authority to develop new voluntary industrial energy efficiency improvement targets in order to maintain industry-wide visibility of effort in the conservation area, and to provide a yardstick by which to measure industry's progress; (2) monitor industrial energy usage and progress towards achieving the new improvement targets, and develop additional programs, if needed, to assure that conservation goals are met; (3) examine the extent to which companies in all industries are neglecting to replace old energy-inefficient equipment because of the coal-switching program, and take appropriate measures if a significant problem seems to exist; and (4) take further steps to demonstrate coal gasification technologies in industrial applications, including the refining industry if appropriate.

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