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Highlights

To better understand how changes in domestic and international petroleum products markets have affected prices, GAO was asked to evaluate trends in (1) the international trade of petroleum products, (2) refining capacity and intensity of refining capacity use internationally and in the United States, (3) international and domestic crude oil and petroleum product inventories, and (4) domestic petroleum supply infrastructure. To address these objectives, we reviewed numerous studies, evaluated data, and spoke to many industry officials and experts and agency officials.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Energy To avoid additional proliferation of differing fuel specifications that would further burden the existing supply infrastructure and create impediments to trade, the Secretary of Energy should coordinate with the Environmental Protection Agency (EPA) and other relevant federal agencies, states, International Energy Agency (IEA), the European Union, and other foreign entities to encourage development of biofuels and petroleum products standards and blending practices that maximize the fungibility of these fuels and minimize the spread of differing fuel types that would further strain the supply infrastructure, while recognizing that some fuel differences to reflect local environmental requirements, engine performance, or other factors are likely beneficial.
Closed - Implemented
In March, 2008, DOE's Energy Information Administration [EIA] notified GAO that it was currently working with--and plans to continue working with--other federal agencies, the International Energy Agency, and relevant international groups to maximize the fungibility of transportation fuels and minimize the proliferation of special fuel blends--including biofuels--to meet state and locality requirements. DOE's agreement to continue to raise this issue going forward and strive for a more fungible transportation fuel slate endorses and implements the recommendation we made in GAO-08-14.
Department of Energy To comprehensively analyze the U.S. supply infrastructure's capacity to accept, handle, and transport the increasing volumes and types of petroleum products and biofuels expected to traverse its system, the Secretaries of Energy and Transportation should undertake the comprehensive study of existing and projected increases to the infrastructure system--including terminal capacity and pipeline throughputs--to evaluate whether future demand is likely to be met by existing infrastructure and planned increases as mandated by Congress in 2006. To the extent that the data to comprehensively conduct such analyses may at present not be collected, the Secretaries should consider evaluating the merits of enhancing the reporting of utilization and throughputs, perhaps using natural gas pipeline and storage reporting requirements as a model.
Closed - Implemented
While conducting a comprehensive analysis of the downstream refined petroleum product market, GAO noted (in GAO-08-14) that the U.S. energy infrastructure for crude oil and petroleum products is constrained, and that it is important for pipeline and other energy infrastructure owners, policymakers and regulatory agencies to have a comprehensive analysis of the likely weaknesses in the nation's infrastructure so they may be informed as to the current state of the supply infrastructure and the areas in most critical need of investment. In December 2007, GAO recommended that the Secretaries of Energy and Transportation undertake a comprehensive study of existing and projected increases to the infrastructure system--including pipeline throughputs--to evaluate whether future demand is likely to be met by existing infrastructure and planned increases. A Department of Transportation official confirmed to us in November 2008 that the agency had completed a draft of the study in part in response to our recommendation, and expected to publish it in December 2008 or January 2009. Based in part upon our work, the Department of Transportation, working in cooperation with the Department of Energy, on January 14, 2009 published the completed comprehensive study entitled "America's Energy Pipeline Network: Assessing Current Strengths and Identifying Future Challenges." Among other things, the report identified where unplanned disruptions of pipeline capacity may cause shortages of petroleum products or price disruptions.
Department of Transportation In conjunction with the completion of the first comprehensive study of the supply infrastructure, the Secretary of Transportation should work with the Department of Energy, Federal Energy Regulatory Commission (FERC), EPA, and other federal agencies to evaluate the feasibility and desirability of designating a lead federal agency, with authority to convey the power of eminent domain, to coordinate across agencies and streamline the permitting and siting process for crude oil and petroleum product interstate pipeline expansions, upgrades, and new construction, using FERC's role with natural gas pipelines as a model. If this is found to be feasible and desirable, we recommend the aforementioned agencies work together to determine which agency should take the lead role and to prepare a legislative proposal for Congress to provide any additional authority needed to implement this recommendation.
Closed - Implemented
According to the Department of Transportation, over the last several years the Department has worked on this issue with other federal agencies to assess the feasibility and desirability of designating a lead federal agency, with authority to convey the power of eminent domain. Transportation has also discussed with other agencies the opportunities for increased coordination and streamlining of pipeline permitting and siting and has asked the Congress to clarify these authorities as part of its budget process. On the basis of these efforts, the Department of Transportation does not believe it is feasible to designate a lead federal agency or enhance coordination and streamlining of the permitting and siting process at this time, either in terms of the collective will of the agencies or the support from Congress.
Department of Transportation To comprehensively analyze the U.S. supply infrastructure's capacity to accept, handle, and transport the increasing volumes and types of petroleum products and biofuels expected to traverse its system, the Secretaries of Energy and Transportation should undertake the comprehensive study of existing and projected increases to the infrastructure system--including terminal capacity and pipeline throughputs--to evaluate whether future demand is likely to be met by existing infrastructure and planned increases as mandated by Congress in 2006. To the extent that the data to comprehensively conduct such analyses may at present not be collected, the Secretaries should consider evaluating the merits of enhancing the reporting of utilization and throughputs, perhaps using natural gas pipeline and storage reporting requirements as a model.
Closed - Implemented
While conducting a comprehensive analysis of the downstream refined petroleum product market, GAO noted (in GAO-08-14) that the U.S. energy infrastructure for crude oil and petroleum products is constrained, and that it is important for pipeline and other energy infrastructure owners, policymakers and regulatory agencies to have a comprehensive analysis of the likely weaknesses in the nation's infrastructure so they may be informed as to the current state of the supply infrastructure and the areas in most critical need of investment. In December 2007, GAO recommended that the Secretaries of Energy and Transportation undertake a comprehensive study of existing and projected increases to the infrastructure system--including pipeline throughputs--to evaluate whether future demand is likely to be met by existing infrastructure and planned increases. A Department of Transportation official confirmed to us in November 2008 that the agency had completed a draft of the study in part in response to our recommendation, and expected to publish it in December 2008 or January 2009. Based in part upon our work, the Department of Transportation, working in cooperation with the Department of Energy, on January 14, 2009 published the completed comprehensive study entitled "America's Energy Pipeline Network: Assessing Current Strengths and Identifying Future Challenges." Among other things, the report identified where unplanned disruptions of pipeline capacity may cause shortages of petroleum products or price disruptions.

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