The United States Remains Unprepared for Oil Import Disruptions

EMD-81-117: Published: Sep 29, 1981. Publicly Released: Sep 29, 1981.

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GAO examined the Federal Government's ability to cope with oil import disruptions, reported on the adequacy of the Department of Energy's (DOE) current contingency programs and organization for dealing with oil shortages, and suggested ways to strengthen the Nation's energy emergency preparedness. In order to examine present emergency preparedness, GAO examined emergency programs for quickly increasing oil supplies, substituting other fuels for oil, restraining oil demand, and allocating short supplies both nationally and internationally. GAO also analyzed the contingency programs provided by the Emergency Petroleum Allocation Act since Congress might choose to renew or otherwise extend the authority of one or more of those programs.

With the exception of the recent buildup of the Strategic Petroleum Reserve (SPR), the United States is no better prepared to deal with significant disruptions in oil imports than it was during the 1973 oil embargo. The Nation's almost total lack of emergency preparedness requires immediate attention. GAO found that the Nation is grossly unprepared to cope with a large shortfall because: (1) no plan has been prepared for emergency surge oil production; (2) there is no adequate plan for using SPR; (3) the Government has no plans for managing private oil stock drawdown; (4) both crude oil and petroleum product allocation programs are in disarray; (5) Federal and State plans for restraining oil demand are totally inadequate; (6) emergency oil reserves both here and in other industrialized countries are not adequate; and (7) the international oil sharing mechanism is too narrowly focused and may not work effectively. Government energy supply programs should be developed before any shortages occur so that government at all levels will not have to enact measures in the confusion and political pressures generated by a disruption of supplies. Programs are needed which: will yield significant benefits when applied, are fully developed and kept ready for use, can be implemented in a timely manner, can coordinate the actions of the public and private sectors, can be enforced, and are fully tested before use.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress is apparently no longer considering the recommendation.

    Matter: Congress should authorize production at Elk Hills above current maximum efficient rates during oil supply emergencies when there is minimum risk of damage to the oil field.

  2. Status: Closed - Not Implemented

    Comments: Congress will probably not take action because the administration believes that its new free market approach obviates the need for the amendment and, therefore, would probably oppose action.

    Matter: Congress should amend the Emergency Energy Conservation Act to require that State plans be submitted for approval to DOE within nine months.

  3. Status: Closed - Not Implemented

    Comments: Congress will probably not take action because the administration believes that its new free market approach to energy emergency preparedness obviates the need for action and, therefore, would oppose action.

    Matter: Congress should provide for the Secretary of Energy to maintain, after expiration of the Emergency Petroleum Allocation Act, the authority to require companies to adjust stock levels in times of an energy emergency.

  4. Status: Closed - Not Implemented

    Comments: Congress is apparently no longer considering the recommendation.

    Matter: Congress should continue the DOE authority to require refiners to contribute oil to the Strategic Petroleum Reserve as a backup in case other acquisition strategies fail, since this authority expires with the Emergency Petroleum Allocation Act after September 30, 1981.

  5. Status: Closed - Implemented

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

    Matter: Congress should require the Secretary of the Treasury, with the assistance of the Secretary of Energy, to review tax and rebate alternatives for use in oil supply emergencies, and recommend legislation if it is appropriate.

  6. Status: Closed - Implemented

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

    Matter: Congress should replace the expiring Emergency Petroleum Allocation Act authorities with a standby system to help assure oil availability during disruptions. Whatever system is chosen should not embody overall domestic oil price control and should be fully developed, tested, and maintained in readiness or future disruptions.

  7. Status: Closed - Not Implemented

    Comments: Congress will probably not take action because the administration believes that its new free market approach obviates the need for the amendment and, therefore, would oppose it.

    Matter: Congress should amend the Emergency Energy Conservation Act to require that DOE within 60 days provide States with criteria by which their plans will be reviewed. These should include how much reduction in energy consumption State demand restraint programs should be capable of realizing within specific time periods.

  8. Status: Closed - Not Implemented

    Comments: Congress will probably not act because the administration believes that its new free market approach obviates the need for an amendment and, therefore, would oppose it.

    Matter: Congress should amend the Emergency Energy Conservation Act to provide for implementation of the Federal plan in any State (1) if, 60 days after the Governor has been notified of an emergency conservation target, the President determines the State plan is not working effectively, or (2) immediately if a State plan has not been approved.

Recommendations for Executive Action

  1. Status: Closed - Implemented

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

    Recommendation: The Secretary of Energy should prepare public information materials and programs in advance for use during disruptions to promote demand restraint.

    Agency Affected: Department of Energy

  2. Status: Closed - Not Implemented

    Comments: DOE has apparently done all it intends to do and considers the matter closed.

    Recommendation: The Secretary of Energy should complete a plan for Elk Hills surge oil production and examine the prospects for surge production on other Federal lands.

    Agency Affected: Department of Energy

  3. Status: Closed - Not Implemented

    Comments: DOE indicated that it believes that the administration's new free market approach obviates the need for a mandatory restraint program.

    Recommendation: The Secretary of Energy should expand the current Federal Standby Plan to include a set of measures with potential for achieving substantial oil savings.

    Agency Affected: Department of Energy

  4. Status: Closed - Not Implemented

    Comments: DOE indicated that it would not pursue development of the information GAO believes is necessary to accomplish the recommendation.

    Recommendation: The Secretary of Energy should design appropriate information systems to effectively monitor supply availability, transport capacity, and end-user switching capability.

    Agency Affected: Department of Energy

  5. Status: Closed - Not Implemented

    Comments: DOE indicated that it does not believe the proposed action is practicable or desirable.

    Recommendation: The Secretary of Energy should ensure that comprehensive contingency plans clearly specify options considered for Strategic Petroleum Reserve use, including rate, amount, and timing of drawdown, and method of oil distribution.

    Agency Affected: Department of Energy

  6. Status: Closed - Not Implemented

    Comments: DOE indicated that it believes that the administration's new free market approach obviates the need for mandatory demand restraint programs.

    Recommendation: The Secretary of Energy should prepare, if it proves to be cost-effective, an information system for monitoring State energy use that can be used for demand restraint programs in concert with State governments.

    Agency Affected: Department of Energy

  7. Status: Closed - Not Implemented

    Comments: DOE has apparently done all it intends to do.

    Recommendation: The Secretary of Energy should seek cooperation from governing authorities in States with significant potential for surge oil production, to allow increased production where feasible, in the event of a national oil supply emergency and to prepare standby programs for this purpose.

    Agency Affected: Department of Energy

  8. Status: Closed - Not Implemented

    Comments: DOE indicated that the proposal is directly opposed to the administration's new free market approach to dealing with energy emergencies.

    Recommendation: The Secretary of Energy should ensure that the timely completion of an inventory drawdown plan so that the Government can effectively manage drawdown of industry stocks. Design of data systems should not be held up while other DOE data needs are being assessed. Most important is receiving industry-wide input on the draft plan and Office of Management and Budget approval for required data collection systems.

    Agency Affected: Department of Energy

  9. Status: Closed - Not Implemented

    Comments: DOE indicated that it would not pursue development of the information GAO believes is necessary to accomplish the recommendation.

    Recommendation: The Secretary of Energy should evaluate the constraints to fuel switching, and identify options to deal with the constraints so as to effectively implement an emergency fuel switching program.

    Agency Affected: Department of Energy

  10. Status: Closed - Not Implemented

    Comments: DOE indicated that it would not pursue development of new data systems.

    Recommendation: The Secretary of Energy should acquire the information needed on end-user multifuel use capabilities and complete in a timely manner on-going studies of gas transportation and emergency oil and gas production.

    Agency Affected: Department of Energy

  11. Status: Closed - Implemented

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

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to maintain 90 days of true emergency reserves and evaluate desirability of amending the present requirement to 120 days.

    Agency Affected: Department of Energy

  12. Status: Closed - Implemented

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

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to maintain 90 days of true emergency reserves and evaluate desirability of amending the present requirement to 120 days.

    Agency Affected: Department of State

  13. Status: Closed - Not Implemented

    Comments: DOE and State opposed the recommendation for various technical reasons.

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to consider creation of a spot market stabilization fund.

    Agency Affected: Department of Energy

  14. Status: Closed - Not Implemented

    Comments: DOE and State opposed the recommendation for various technical reasons.

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to consider creation of a spot market stabilization fund.

    Agency Affected: Department of State

  15. Status: Closed - Not Implemented

    Comments: DOE is not considering the matter and apparently considers it closed.

    Recommendation: The Secretary of Energy should improve Strategic Petroleum Reserve (SPR) oil acquisition strategy to provide a greater proportion of secure supplies. With due regard for existing contractual arrangements and SPR storage capacity, the Secretary should obtain, at a minimum, all Federal offshore royalty oil from leases which produce 100 barrels a day or more of royalty oil, and continue to seek to obtain Alaskan royalty oil.

    Agency Affected: Department of Energy

  16. Status: Closed - Not Implemented

    Comments: DOE and State indicated that the administration believes that its new free market approach obviates the need for such a mechanism.

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to set aside a portion of emergency reserves for possible drawdown in periods of market instability or dispruptions not large enough to trigger the Emergency Sharing System.

    Agency Affected: Department of Energy

  17. Status: Closed - Not Implemented

    Comments: DOE and State indicated that the administration believes that its new free market approach obviates the need for such a mechanism.

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to set aside a portion of emergency reserves for possible drawdown in periods of market instability or dispruptions not large enough to trigger the Emergency Sharing System.

    Agency Affected: Department of State

  18. Status: Closed - Not Implemented

    Comments: DOE is apparently no longer considering the recommendation and considers the matter closed.

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to provide for thorough and frequent review of the effectiveness of member nation demand restraint programs, and emergency reserves and fair sharing programs.

    Agency Affected: Department of Energy

  19. Status: Closed - Not Implemented

    Comments: DOE is apparently no longer considering the recommendation and considers the matter closed.

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to provide for thorough and frequent review of the effectiveness of member nation demand restraint programs, and emergency reserves and fair sharing programs.

    Agency Affected: Department of State

  20. Status: Closed - Implemented

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

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to upgrade or revise the Emergency Sharing System information system to ensure resolution of discrepancies about the flow of oil into and among member countries during a disruption.

    Agency Affected: Department of Energy

  21. Status: Closed - Implemented

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

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to upgrade or revise the Emergency Sharing System information system to ensure resolution of discrepancies about the flow of oil into and among member countries during a disruption.

    Agency Affected: Department of State

  22. Status: Closed - Not Implemented

    Comments: DOE and State opposed the recommendation on the grounds that companies would no longer voluntarily participate in the emergency sharing program.

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to provide a binding mechanism for resolving price disputes among member counties under emergency sharing.

    Agency Affected: Department of Energy

  23. Status: Closed - Not Implemented

    Comments: DOE and State opposed the recommendation on the grounds that companies would no longer voluntarily participate in the emergency sharing program.

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to provide a binding mechanism for resolving price disputes among member counties under emergency sharing.

    Agency Affected: Department of State

  24. Status: Closed - Not Implemented

    Comments: DOE and State opposed this recommendation. They doubted that the agreement of other countries could be secured.

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to consider enactment by each of the members of legislation authorizing establishment of an emergency tax on oil products or a crude oil disruption tariff for use in severe disruptions.

    Agency Affected: Department of Energy

  25. Status: Closed - Not Implemented

    Comments: DOE and State opposed this recommendation. They doubted that the agreement of other countries could be secured.

    Recommendation: The Secretaries of Energy and State should seek International Energy Agency members' agreement to consider enactment by each of the members of legislation authorizing establishment of an emergency tax on oil products or a crude oil disruption tariff for use in severe disruptions.

    Agency Affected: Department of State

  26. Status: Closed - Not Implemented

    Comments: DOE indicated that it would not pursue this recommendation because of its commitment to the new free market approach.

    Recommendation: The Secretary of Energy should prepare plans to establish a private petroleum reserve to ensure that high levels of industry stocks are available for emergency purposes and to promote building of industry reserves. In this connection, the Secretary should review and analyze the various options to achieve this objective, including: (1) requiring companies to set aside, as present law permits, three percent of the previous year's imports or throughput; (2) providing financial incentives for holding oil stocks above a certain level; and (3) establishing a quasi-public corporation to build and maintain stocks so as to remove their costs from company books and to ensure some Government control and management of them. The Secretary should decide which option(s) will best assure the establishment of the private petroleum reserve and, if necessary, seek legislative authority to carry out such option(s).

    Agency Affected: Department of Energy

 

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