6

DOCITSERT EESURE

BD 127 105 SR 020 241.

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TITLE The Gasoline Shortage: A NatiOnaI Perspedtive; ABackgrOdnd Paper, Conkittee on Interior and Insular.Affairs, U.:$..Semate. imety-Third Congress, First

...;.*Sesgion. (Committee.Print] .

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INSTITUTION. Congress of .the U.S.,. Washington, D'.C. SenateCOmmittee:on Interior and Insular Affairs.

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RUB DATE 73 1

ROTE.,

99p.; Vot.

available in hard' copy due to marginal/.- legibility of original document

AVAII,ABLE FROM Superintendent of DocumentS, U.S.' Government 'PrintingOffice, Wishington, D.C. 20402 ptotk Number5270-01923, $0.651

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.,

DESCRIPTORS Conservation (Environient); *Energy Conservation;Environment; Federal regislationv:*Fuel Consumption;.

. Fuels; *Government.Publications;,Natural Resources;Policy; *Reports

43DEA,TIFIERS *Gasoline. -.- 6ABSTRACT . ...- .

.

This publication is a background document frt the,'Nationil Fuels and Energy Policy Study authorized by Sen'atelResolutice45. The purpose Or this report is to identify the issues, -to describe the impact of present policy on'gasoline.Supply anddemand, and to, suggest potential measures to reduce the 'shortfall.This docukent is published to assist members of the.Committee onInterior and Insular Affairs, and other i4terebt4d parties, in theirunderstanding of vthe issues inherent in the formulation of a

,

long-term National Energy Policy which assures the continued welfare'of the Wion, incldding balanced growth, safeguarding and enhancingthe quality of'the environment, and national security. Topics under

:discussion include supply and demand:AmPact of shortages oh the.. Consumer, agriculture, and independent marketets; and proposed

remedial actions. The 'concluding summaty indicates that"the gasoline§hort'age is the result of several interacting factors and willpersist for some tike. 'Iwo appendices contain energy relatedlegislation ancrteferences. (Author/BA)'. ,

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************4***********A*****************************************Documents acquired by ERIC include many informal unpublished *

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93d Congress1st Session } cOloirrrEz PRnrr

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,56U S OEARTMEr Or t4EALTI4

EOUCATtOtt g sat1.94199loTtOodat iNSTiTurt or

EOUCAY004

00<umE Pe «AS SEEP./ REPRO-. DUCE° ExCTL v AS RECErvE0 04OPA

TmE PERSON OR ORGAt02TIOtA *.t.ic. rT POPNTS Or v.ive OR ORINtONSSTATED 00 040TINECESSARtt.r REPRE-SENT Or r.c.At. NIAT.otAL orSTTorf orEDuCTOt POS,TIOht OR POLCv 't

THE GASOLINE SHORTAGE:A NATIONAL ERSPECTIVE

A BACKGROUND PAPER

PREPARED BY THE

CONGRESSIONAL RESEARCH SERVICE

AT THE REQUEST OF

HENRY 1li., JACKSON, Chairman

COMMITTEE ON IINTERIOR ANDINSULAR AFFAIRS

UNITED STATES SENATE .

ruisuAsT%ro

S. Res. 45A'NATIONAL FUELS. AND ENERGY

POLICY STUDY .

Serial No. 93-14 (92-49)

IS

Printed for the use of the Committee on Intericar and Insular Affairs

97441 0U.S. GOVERN3MNT PRINTING OFFICE

WASHINGTON 197k

Por oak. by the Superintendent of Dorun1ests, U.S. Government Prititing Mee'Washington. D.G. 20402 Peke talents

Stock Nutshell. 5270-01929

2

1

)SENATE.' RESOLUTION 45' "

NATIONAL FUELS AND ENERGY POLICY STUDY

Due p.blrestlon is a backgrOund document for the NationalTuels and 'EnergyP14N study authonzed Lc z'ienate R...4tition 45, intrbduced by Senators JenningsRandolph and Henry M. Jackson on February 4, 1971:and considerki,amendowl,and agreed to by the Senate on May 3, 1971.

The resolution authonz the 'Senate Interior and Insular Affairs Committee,and ex *ALA....nierribers of the Committees on Commerce and. Public Works andtae Joint ckominittee on At....rnic Enerp, to make a full and complete investiga-tion and study of National Fuels' and Energy Policies.

This document is pubhshed to assist members of the Committee and otherinterested partner in their understanding of the issues inherent in thh,formikaionof a lung-term Natiunal.F..nergy Policy which assures the curitirinfd welfare ofthe Nation, including balance growth, safeguarding and enhancing theiikalityof the environment, and national security.

.

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COMNIITTVE ON INTERIOR AND INSULAR AFFAIRS

HENRY M..1

ALAN BIBLE, NevadaFRANK CHCRCH, IdahoLEE METCALF. Manta=I $ ENNETT JOH NSTQN. Ia.. LoutesasJAMES ABOVREZK. Saab DakotaFLOYD K. HASKELL -adoOAYL(tRD NELS w cgs

KSON, Wasblagton ClerEscaPA lit 3 F.kNNIN. Attu=CLIFFORD P.11.kNSEN. WrotaingMARK cf. HATTIELD.OregoaJAMES L. BUCKLEY. New YakJAM n )1cCLURE.IdelioDEWEY F. BARTLETT. Oklab=s

.1sss T. Vssm.st. Staff DfreebeWISISAX r: VAN Naas. Ode/ Crouse:731114130N LOT. 901, Ifflartr COMUCI

Er °Ala, Mriatts Pursuant to &saint 3 4 Senate Resohltiors. 45.

CommirrEt tns COMMERCE

WA R Irv. G. SSA cis uSON.IWas2:Ing0:42. Cheirra'esNORRIS COTTON. New 111...mpstdre

ALAN BIBLE: Nevada

COMMITTEE ON PO= WORKS

JENNPSOS RANDOLPH. WestVIrginia, CktirraersHOWARD H BAKER. Is.. Teddemee

- JOINT COMMITTEE, ON ATOMIC ENERGY

HOWARD I3. B A KR R. Ja.r Teariesae.

WIttum I. Va r Niss, Cad Cosssa .Gatcrtus Gasstas, Special Cossael cal Stud, Cc44116.4r

Rvzsam D. Osuwar, Ereralst Swam cud Pro/mina StafAstme R Tcasc(0. SU, Er:samitt

DAVIit '?theca. Prates:km=1 Sakai Earisecrfa. Cours&s:DAID STAN"). Deputy Direate for Athweini

Fans= E. STAXILATS. Saff Duni Anew., Cortrattee ow Consume

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/MEMORANDUM -OF THE CHAIRMAN

To MernberK and er of c o.rrtfTF rs of th. S.`natt Committee on Irate-. . rior ,7ad lattular Atrair, .Vational Fut tzvd Eatrgy Policy Stady(S. Re s. 44) :The swum r 1973 is t xpet tt d to see the mu:, t set ere g ;i line short-

ages I II !1titerlt vspor fuel shortages (wt tared last v)interanti. onl w arm w eatlttr a%Crted more serious difficulties.Far more w it it itreati short ag,s are now 111 proimp t. A I.ri.ady. informal

ition of st art e fuels is taking plate., VitaLtransportation And.a!, ultilial font tains arebeing a tiet ted.1;asolue stations hat e (lose."intit pendent rcfiners ha%c run short, of & rutty oil supplies. Units of APIts al go% t rialtent --count Ws, it iesor k huolr-- are unable to get bids on)fuels neeissar for essential publit ;er% lees.

, .There is little t hanee that. domesti. refineries tan catch up w ithipiraling demand. Gasoline &tot ks, for example. %retie downs 12 pert '4cent in April from last tear }rile demand is ill; at least t perrtnt. Onthe a% erage we are using. ..I. nallitai trail( Is of gasoline 'wire than 5%prbdut-e eat h week. Thetlitrr some br thi,detwit can be made up ,

th rougli unport high13 unt ertam. espetiiill in hght of recentdevelopments lii-the Mideast.

)n 0;3. the Senate itased, `A. hill to inithorize thePresidt lit of the United states to allot ate t rude oil and refitted petro-leum vr,,,Itit t. to deal with t xist ing, of imminent shortages and disloea-tionson the national distributiob s%steni hit Il jeopatdize the publichen th, safet or tielfare; to pfiovitit for ,the &leg:limn of authorityto the Secretary a the Interior: and for other purposps.- That legisla-.tion. howeler. is a stopgap ineasiii-eto keep public. 14-r% icessuppli,ed ith fat I. to iiresentille indepndent refining anti marketing;ectors, and to dist rifillte -hortagvetaluitablt, among arious_regions of

rile rountr. and %arious al:Asc.:. ef;nsuiners. To eliminate the short-ages. whric protecting (Instllers told the national steutit will require

79, tioniprehensixt legislati% program Loh. to increase and to conserte.nerg suulies. The National Fuels and F,nerg Policy Study. estab-

lished by senate Resolution 4 ift2d Cong., first'sess.) is in the processof delopiag that program.

The purpose of this report is to itimitift the ues. to deseribetheimpart,of present publ ic policy on gasoline supplt ana demand. anti tosuggest potential measures to redut-e..tlit, shortfall. This -report wasprepared, at my request by David M. Lindald, of the EnvironmentalPolicy Di% ision. ( ongressional Research Sert ice. Librarl of Congress,as part of the Yat halal .Fuels and Energy Polity Study. 1 haw directedthat it be-published at this time for the information of interested Sen-.ators and as background for the Committee's consideration of energypolio

t Hr Nev M. TACESON. Chairman.

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4Congressional Research Service

Washington, D.C. 20540

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THE GASOLINE SHORTAGE: )A NATIONAL PERSPECTIVE

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:. ,- Dayid IC Lindahl. , Analys,tEnvironmental Policy Division 4 .

June 19, 1973

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NyONTENTS

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Introduction A

Demand.,.

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Supply T

Domestic Production ...4*.9 ;

,Foreign Imports ., - 20

Refinery Capacity -- , 29.

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Impict_of Shortages ,, 40 ,

Impact om the ConsumerImpact on Agriculpre ,

4a50 °N.

/mpact op Independent Marketers 54. .'

Proposed, Remedial Actipns 67

Proposals to Increase Supply l 67

y A Pass - through - Allowance for Imported Crude Oil 1 67

' Oil,Exploration Assistance! 68

. Itroxth SlopelOil 7 68

eil Depletion Allowance . -s -- 68

Oil Storage Reserves 68

Development of Outer Continental Shelf -. - -- 69 k

: Oil"Shalt 69

. Synthetic Oil .70.

Increased Use of Coal 70

1 .,Increased Vse of Nucleir Power 71

Efficiency of- Industry Operations. 71

Deregulation of Natural Gas 72

Proposalsto RedUce DemptidI I'

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Taxes . 73

Epur-Day(Wbrk Week 73

'' National'Speed Limit' A r 74

. Mass Transit , 74

algroved Building Design 74 ,

, Airline Efficiency 7 744:* . Shergy Conseivation

so to75 a,

Summary 78

'Appendix "A" i

Appendix "B" x

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FIGURES

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13

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21

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-.Page

4:1. DeEtand 'Gain Holds Key to Gasolihe-

shortage Seveiity. s.

2 A Look at Late-model Autos

3, Newer Cars Get More Driving4.

.4. Consumption

%5. Proved.Reserves

6: Oil Supply

.7. Productive Capacity

8. U.S. Crudeliil Prhductop :

9. Exploration --74w01-

10. O.S. Petroleum Indwttry'Colts add Income ' -Ar . .

11. Federal Income Taxes of Largest Oil Companies 1971-.

.0A

12. Stock Position, Soaring Dedanhow My ,

Gasoline Will be Tight ay .

..,-

13. Inventories -e-A-, Y.

--I .

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14. Imports (Outloot)'

%. .1 .- -4

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15. Imports (by thousand\gartels and bY ;ountry'of origin)

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16. 'License-fee Schedusle for 0i1.16;rts ,-. -,

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.17. Refinery GasolindTreldsr- ... .

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Refining (Crude oil refinery ',.IP,'.

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O. A Look at U.S. Gasoline'-making Capability'

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4. 4%.

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FIGURES (cont.)

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20. -'Pirinc's 1973 Forecast for Gasoline r 41.

21. U.S. Motor Gasoline: Stocks, Demand, Supply 42

22 Averageitetail PAce of'Regular Gasoline 49 '

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INTRODUCTION

The United States is correntlytonfronted wi,th one of the

most serious resource problems it has ever faced. Gasoline,

one of our most important fuels, is in'ctitically short supply

din many arm and the shortage is nicely to worsen before it

improves,. Most Amerikans.are confused by-this sktuation be-- .

cause always before, except during wartime, there were plenti-

ful 'supplies of gasoline. Gasoline retailert, in fact: would'

go lo greet lengths to attract customers to their stations.

The day of the free gifts and gas wars appears to be over now,

however, as mat), stations struggle to remain 4en. Independent

marketers have been especially hard-hit, and a large number have

been forced to close for lack of supplkes. At lest 40% of the

Nation's'Os stations have been affected to some degree, and that

percentbge grows almost daily.

The reasons ior the shortage are complex and It is not

pOssible to single outs any one cause. Rather, it is the result

f several interrelated factors that have limited supply while

/-increasir ig demand..

This report is intendbdto provide an oVerlOewof those

factors, the extent of the shortage, aid its impact on the

IcountiY. This discussion of the problem pis far'from complete,

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but it is hoped that the following report will provide a

u.,eftil perspective for further investigationinto the %ewes

and 'possible solutions to this very' important problem.

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DEMAND

A factor of primary importance in the current gasoline

shortage is the phenomenal increase in demand for, gasoline

and other petroleum products. In 1962 Americans used

66,255,943,000 gallons. By 1972 that demand had increased

54.9% to a record 102,615,535,000 gallons. kemand in 1973

Vis certain to be even greater. The Office of Emergency Pre-

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paredness (OM has reported teat gasoline demand in the first '

quarterof 1973 was 5.5% higher than for the same period in.

1972., If thatNemand increase were maintained throughout

.. all Of 1973, the shortage woul0 be manageaAle. If however,

demand rises to 7% or more during the second and third quarters,

serious shortages will probably be inevitable (Fig. 1). As

recent experience has indicated, even a "modest",increase of

5-6% may result in local or "spot",shortages. If demand should

rise to 7% or more, extensive shortages would occur. Persis-

tencp of that rate would create serious shortages nationwide.

The large increase'in demand over the preceding years can

be attributed to several factors. One, mote new automobiles

were sold in the past years than ever before, with, sales in,

March reaching an'all-time high. Mahy people whg had delayed

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Demand gain holds key to gasbline-shortage severity

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14411Previous

olltiow low lir..._

.1173 --.....r

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Fig. 1. (The Oil and Gas Journal, April 16,.. 1973, p. 55).

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purchases for thepast several years because of thp depressed

economy apparently bought new cars during this period. 'Two,

moseof these new cars are heavier. lees efficient and equipped

with energy, - consuming accessories such as air conditioning

(Fig. 2). Tbe'weight increase is slue.primarily to safety re-

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quirements. and the low engine efficiency is due to the lower'

IF, compression ratios necessary to permit operation on low-lead

se,

gasoline. In addition, the new emissioh controldOices on.

new cars decrease'mdleage by 7% or more. OEP estimates dam

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these devices have increased annual gasoline Consumption by

mbre't1 300:000 barrels and the percentage of emission-con-

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si31trolled cars increases Ally: Air coaditiopi g. wben in. .' :

operation. can impose an additional penalty of as much as

20. AccnrAingly. gas mileage has dropped from an average '

of 14.1 in 1990-0 11.6 112.1973. Thief; weather warmer than

average for the first five menths of 1973 ha permitted tore-

extensive-auto use. Four. mdre fuel is required to meet the

.needs of in expaided economy. Five. the increasing amount -

.,.of leisqrt time cftined with greate /affluence gas been

*Oahifested largely in recreational activities reciiiiiing large

amounts of gasoline. suCh as long Endo trips. motet-beating,

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tsnowmobiliog. and interAattonsl air travel... V

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A look atlate-model autos

ii70 1971 1572 1573

lirst-Aaree 268 253 165 165

cravreturkart.* 9.5 8.6 8.5 &4

Rtk rata 2.74 2.74 2.74 2.77

Wt4tt 611 4,362 4,433 4,595 4,653

Atorteratoa tan+no me 10.7 12.0 12.8 13.0

' 2560 ?TA 7.8 9.6 9.5. IllesJp1 141 13.1 124.41.6

157341 oats os gross lap. 10243are act 'Jr p Al data Are .basedfleet tests of solos reprearatiog rangeof =0,3e."..s produced by GM...Font

and arc e.-4 averages for.a1 LAS. actor-

Fig: 2 (The Oil anikas Journal. Aprir 16,. 1973: p. 56).

Newer carsget more -driving '

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13,200

11,030

8.703

''7.0004.330

Fig. 3 (The Oil and Gas Jour141, April 16,

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Of all these demand factors: the single most important

appears to be the gasoline penalty imposed by'anti-pollution

devices. Because new cars are driienfurther than older onus

each year (Fig.3 ), the impact of these devices is greater,

than the percentage of new cars-on the road Would indicate.. .

The Chase Manhattan Bank his estimated that one half Of the

expected growth in gasoline demand will be the result of.

emission controls on late Model automobiles.

The Oil and Gas Journal (April 1973) reported the fbIlawing

results of a study of mileage loss in new cars:

One private set of leet tests indicated+the mileage lossof 1971 models over 1 al 7%, 1972 at 6%, add.the 1973.over 1972 at 8%. This re ented a cumulated mileage lossof 19%; but.vwo direct cooper tiveitetts of 1973 modelsagainst 1470 models showed eloss ranging from 11%1017% depending on the number of milesthe 1970 models hadbeen driven prior to testing. , . -

These data showed much greater mileage declides thangovernmental tests dale for the Environmental ProtectionAgency which reported losses of orily about 7%.

It may be possiple to reduce demand through various con-, 1

servation measures mentioned later in this report. Stephen

Wakefield, Assistant Secretary of the Interior, has stated,

for example, that if each motorist could save one gallodper

week there would be no shortage. The elasticity of gasoline

demand, however, is not clear: If demand proves to be inelastic,

attempts to reduce demand artificially (such arincreased gaso--.

line taxes) nay prove ineffective.

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As serious as the situation appears to be in 1973,

it could become worse in coming years, if,demand continues

to climb. A study by the Petroleum Industry Research

Foundation projdtts ,ttat the region east of the Rockies

will need to import from 2371e00 io 265,000 barrels of

gasoline -per day (b/d) in 1974 and 478,000 to 572,000 b/d

in 1975: The report estimates that only 300,00 b/d can

realistically be expected to be available at that time.

This would result in a physical shortage of 3.5% of totaft

demand in 1975..

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SUPPLY

. It is obvious that if gasoline,supplies are insufficient

such of the demand will necessarily not beet The resulting

economic dislocation, service interruption and general incon-

venience take that possibility a decidedly unpopular prospect.

Because Of this, much emphasis is on increasing supply. Even

if gasoline conservation is successful on a national scale, it

is unlikely that it will fully counteract the growth rate in

demand. Considerable attention must bg given, therefore, to

the gasoline supply sieation.-.

Domestic Production

The United States has historicallsdpeen a nation.seff-

sufficient in petroleum production: This was naturally a de-

sirable situation because of the security it provided.in times

of international conflict. To assure the continisate of a,

strong and viable petroleum industry and the g.taf flow of

petroleum products to a rapidly growing market,,the Fpderal.

Government provided the industry with numerous economic in-.

centives to explore and develdp new sources of,dil. These

incentives included. the oft depletion.allOwance,'intangible

drilling expenses, foreign tax credits, and others that

saved thi)industry billions of, dollars Yn Federal taxes over

the past several

Until the 1950's, domestic production Ma& sufficient to

sect nearly all of the demand: The limited shortfall tlint

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existed, due mainly to distribution problems rather than lack

of resources, was met with imports from Canada and Venezuela.

By the late 1950's, however., imports from these areas had risen 11;

sharply due primarily to the fact that the foreign oil cost less

per barrel than domestic oil. With the aims of strengthening

national security and of maintaining a viable domestic oil In:

dustry, the Mandatory Oil Import Programwas instituted in 1959.

Strict limits were placed on imports of foreign crude oil and

petroleum products. The rationale behind this system was that

the U:S. had sufficient oil reserves to sustain 'production-levels,

that the dopestic oil lAdustry should be:kept co'mpetitive.'s

4!

For the first five-or six years, the hogram woked.reasOn-. '

ably wet'. 'Consumers paid more for oil'prbdu5ts than they would

haw if foreign 0.1 had been available,, but at least shortages.

were relatively zve.... However, these high oil prices and the

. f"relitively low prise of natural gas, which was placed under FPC,

regulati tin l94. led many' industries to shift to natural gas,

to satisf their major y requirements (Fig. 4 Initially.1,

there was no problem in supplying the large amounts onatural '

gas, but gas reserves steadily dwindled due to the heavy demand

for a.cheap fuel that was environmentally acceptable. Conse-

quently, when service was curtailed in the late 19Vss many

users. including eleptric utilities and heavy industries,

switched back to oil'to maintain their operations. This shift A

in demand from cilal to al pMd ;0'even heavier burden on domestic. .

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production. By the late 1960's chronic shortages of fuel oil

had developed in catch of New England and parts oft the Midwest.

By.the winter of 1972-1973, .the shortage hed become critical.

To ease the situation, President Mixon announced_ostaelonal

increases in the amount of oil that was permitted to enter the

country under the Oil Support Program. While these stopgap. .

measures were useful, it was apparent that the problem would

reappear if the system were not changed. Finally, Mr. Nixon,

on April 18, 1973, suspended the quota system, an action that,

had been proposed by his Cabinet Task Force three years earlier.

The quota system was repltced with a fee-license system that per.-

pits unlimited imports to compete directly with U.S. oil... .

. - . . .

These import's zitle necessary because at present the U.S. has. ,

'

'no spare productive capacity. Production limits on domestic

wells have been removed, and they are operating at ma4imum levels.

The proven reserves of crude oil. in the United States are the

lowest they have been since 1953 (Fig. 5 ). If no new crude

oil were found 'domestically, the U.S. would have, at the *sent

/^tote o'f consumption, an oil supply of only 8.7 years. Last year,

for example, the U.S. consumed over Ek% of its proven reserves,

excluding Alaska. Domestic oil production has increased slightly

over last year (Fig. 6 ), but this was accomplished at the ex-.

pense of productive capacity, which had declined by 519,000 b40AV

by the end of 1972 (Fig. 7 ). Asthe graph in Fig. 8 shows,

it is unlikely that domestic production will increase, and it is

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OS-15

.very possible thbt it might decline: In 1972. for .example,

-.the-U.S. produced 3.459 billion barren of crude oil, tom-i pared ta.3:454'b,illiol'im 1971, an increase of only 1/7 of

i 1%: World isroductipn id 1972, -including the U.S., ros:etrom

14.554 billion barrels to 15.4/6 billion,. -an increase of about

.

7 .

: .In spite of th,e numerous tax advantages that are. provid,ed

to the petroleum industry, exploraeekx drilling has declined.steadily,since the early 1950's. ,The,industry claims thai ex-

11.

ploration efforts have dropped 50% in the last 16 years bebause.ohigh costs, government control.of,natural gas-prices, in-S..'" . . .

.g. ....-.1

f creased taxes and environmental opposition _(Fig, 9_ )..' Accor-.+

ding td-Petroleum Outlook (May- 1973), the pre-tax profit -op a' '

$3:114 barrel of Crude is only 384, an .average. annual of

only 2%.'ovei a ten-year period (Figs lb), Even though the most

s. .

accessible oil, has already b'een.found, it is Probable that sub-.

stbntial quantities of ,oils-xemain to be discovered,'although thecoStsare. certain to be higher because of ihflation sand the -added

=difficulty of deKelotment petroleum- .industry has claimed,,

that deregulation of natural gas prices would stimulate pro-

Auction of new-gas which -would, in turn, reduCestfie depend for,

oil,products,. There is no.tettainty, however. that the increase.in..supply of either resource would be prodriionat to-the, priceincreases.,

.s v*

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1.

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OS-16zt

EXPLORATION -(GeophysicarcieW actiyityacreage tinder tgake, wildcat wells drilled)

That

Gs.wattsirsotad

141.1 krisleased las. 1(Thssusi14)

NW% wills

241.1 WY % 047

itsz 1323 273017 "4 12.42$ 100!0 '1121133 $17S N A_ 13,313 10 133 7011054 7361 315361 1N103 10311 703115S 1240 NI. 14.542 ' 11332 712

II% 7A57 MAD 11207 13.111 fl 11157 7242 NA 14114 11.004 . IN 11150" 5.731 37111 ' III% 10432 IN 11151 , 53.6 312,107 13,101 11377 -102

1%0 - 5,207 424,251 11,701 . 1315 1131%1, '5024 111.171 10312 4.1072 12.11162 4231 101 170 10.717 1.115 /1l1013 4.174 317.437 10.111 3.111 111,

3%4 4101 372.401 10 747 1 %I'

/131015 4 471 .375.301 1444 $005 141

.1144 3333 350115 10113 $705 244IF 34% 14 3331,07 0.071 7,350 121

1%3' 325 106 NM . 7A11 saiitst '

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al1072 NA. 350.725 7,587 4.213 123

t

. -4 -lig. 9. (U.S. Petroleum 'Statistics 1973, Independent Petreleehi

'Associatibn of-America, 1973)..

.3500.

$4.00 .-

43.00

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;shoo

Price_s,

....E7471.01.131113.13..ADd

1..tvetais,,Ins. cost

--s---Production Cost. .

.

"Pre-Tax Profit,,,

u:s. PETROLEUM IND0S111,CCSTE AND INCOMED011ars per Barra

1 0 -1 1 I -1 1.1.1 1-1-.1965 1970 :1075. ' '

. ... . , .

. . .Fig. 10. (Petroleum ,Outlook,. 1973, John S. Herold, Inc., .

A "___ ..P. Pl. . . .. . V. _ .

...-1.1..

24.

40,

CRS-47

Increased taxes have been paid by the oil 'companies as

k result of the decrease in the oil depletion allowance from

27312% to 22% in the 1969 Tax Reform Act. The petroleum in-

dustry has claimed that this has restricted its ability to

increase production, but even at 22%, it is a. mucli,,greater

tax advantage than that possessed by any other dignes\ic in-

dustry. In 1971 the riajor oil @ompaties paid corporate. in-

come taxes averaging only 6.7rof their net income, and some'

were as low as 1:6% .(Fig. ), The Oil industry ha? claimed,.however, .that profits are below the averages of most industries'

when related to return on assets; gross revctpuv, or 'invested

capital. Nevertheless, nviSt oil company profits. are up, in

, ome cases they are record profits. In addition, there is

no requirement that the tax creditg bg uged 'in .f :91.0 ration/and development of new sources, the purpose for which the.extra corporate revenue was intended. f it.. . -.

There are only two areas .that appear to hold much pro;.

mise as potential sources of domestic oil. These are the

Al askan 'North Slope and the Atlantic Cdritinental Shelf (in-

eluding the Gulf of Mexico). 'North Slope oil is' part of a. ...

proven redliverptile reserve thfit'could be quickly bought into

production. It is being delayed, however, by a aspute over* r .. . : .

the_routing of the pipelin . companies with North. . , t 'i

'aF

;o P.

25*a

; .

l

0.

.

CRS-18

7I01JtAl. 1/71011E TAXIS OF Lumen Ott COMPANIES 1171

AD

NI kw.Wore

tax 1erc1

SW.4.4 (NI. lesey) 12. ix. nt CO3 7iTema L 311. 461. CO3 23

CAW L3211110:0 2. 3SON. LIS; 631303 7, 437407.1 (C41647444). ...... *15.012 CO3 L 6

. Stostat6 Oed.isa). 433.021.000 11.0212 171 MO 14.1Am.. ..... ............ 211

17241

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City- 201 131 CO3 1.1 IOwns 212. 423. KO 2.1GU. Wm, 117.571 7.03 . 1 401.mM. 211312 CO3 L I1111.11 (06*) 14112 020 2 0AIWA. SL 7111. ICO 41 3

. mus.us.oto 7TAM

r

Fig. 11. S yder, Gene (Rep.). "GasoIinelationing by the. 'of 1973"; ColidiesIsional Record, June 7, 1973,

. 1:3822.

26,.

4

CRS-19.

Slope interestficibt the pipeline to be constructed acros

Alaska to the port of pildez. where the oil would be slapped

by tanker to U.S. ports on the West Coast. The alternative

is a longer route that would deliver the oil to the Midwest,

which has recently had severe energy shoftages. Regardless.

of the route finally chosen, the oil will find a ready market.

Unfortunately, the Nor& Slope oil w91 probably provide only

about 10% of the 'ation's oil needs when the pipeline Is in

full operation. Additional exploration may justify anottr

pipeline whictould double that percentage.

Offshore oil is already a significant factor in the

petroleum' miiket,, 4q, 1985 it may provide 25% of the Nation's,

oil needs. Unfortunately, delays in offshore leasing have

resulted from uncertainty over leasing procedures and from

several major oil spills. fires:, and blowouts. A consequence

of these disasters was that environmental impact statements

had to be revised and resubmitted for new leases. Now that

a compromise agreement has been reached between environmental

groups, government and the oil companies. Gulf lease sales are

proceeding. Th# oil. companies do have a major problem in..

raising capital to meet the high cost of drilling in deeper

water and of building larger numbers of platforbi.

27

CRS-20

The heavy Amend for fuel oil last winter contributed to

the present shortage of gasoline. The petroleum industry !tor-t

orally builds up its inventory for a product when the seasonal

demand for it is low. The emph9is that was placed on fuel oil

last winter, however, prevented the buildUp of gasoline supplies

to meet the expected demand for the summer of 1973 (Figs. 12

and '13). Consequently, gasoline inventories as of March 31

were over 25 million barrels lower than the previous year (a

10.6% drop), while gasoline demand was 360,000 b/d higher (an

increase of 6.1%). For the same reason, an emphasis on gaso-

line production will likely result in another fuel oil crisis

this winter.

Foreign Imports

The decline of domestic production has forced the Uhited

States to rely increasingly upon foreign countries to supply

the extra oil. This dependence has accelerated repidly.in re-.

cent years and the trend shows no sign of abating. In 1956,

oil imports supplied i6% of the Nation'; oil, a figure that

Administration officials felt was tolerable. y 1972, this

figure had jumped to 29% and may rise to-35% in 1973. The

Independent Petroleum Association of America has predicted

that the U.S. will import, 3,098,000 b/d in 1973, an increase

of 882,000 b/d (40%) over 1972 (Fig. 14). By 1980, less than

seven year's from now. foreign oil imports are likely to account .

28

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CRS-22

4All Ole anions of 1:ZrroistiM 3C0

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cced;c4r-''

222

6141.0MOMbe MokledftWso--

J bi

110

tinD

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Fig. 13. (ibe Petroleum Situation, The Chase Manhattan Bank. 417,

April 30.,073),

eN (10 1.../

t.

CRS-23

1 W-/C

IMPOrS

zauot 'cm

- , ounooK ; P

42 5..c T r 0.% / f1

, 1973,

rims 1

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.

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. ste Fes hew Apt Mc, .14.rte Joy Aug Sept Oa Nov Dec

1 ..wee -w et- ROWED PRODUCTS'S SX

I 1973

SSx

2 S.X, 1- 1972

Ftl k 4x htl 101 )11 A5. Sept oc *: OK

OIL ASO ISFINIZ PRODUCTS

Fig. 14. (Suppl and Demand Datlook. Independent PetroleumAssociation of America. April 0731.

1

CRS-24

for over 70: of demand. and ma) be as high as 10 2 millson

barrels per day.

One of the obvious disathantages of importing oil is the

inherent risk to national security. There is considerable

)strategic danger in haying an economy and a defense establish -

cent that operates on supplies of foreign petroleum that could

be terminated at any moment. For this reason. preference was

giten to oil from Canada and tenezuela. the other two major

producers 14 the hestern Hemisphere. It was believed that thee

countries would generally be more cooperative during periods of

international crisis and that the sea lanes through the Caribbean

would be core defensible. Imports from these countries. as shown

in Fig. 15. grew rapidly. Imports from Canada. for example, sky-

rocketed from 8.000 b d to 1.105.000 b'd in 1072. Much

of that-Increase. of course. represented the development of newt

oil fields with the help of American technology and capital. The

oil industry of tenezuela was already well established by 1953.

so the rise in imports from there to the V.S. is not so steep.

Even though man) large t.S. oil companies had extensive

operation in foreign countries such as Saudi Arabia. Indonesia.

and Iran. very little oil was icported, to the C7S; Trom these

sources. Most of it was sent to western Euiope and Japan because

large markets existed there and because the Mandatory Oil Import

Program strictly limited oil imports to the United States from

areas other than the preferred sources of Canada andrnezuela.

32

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ft

CRS-26 C.

As supply began to fall further behind demand, imports

from those two countries were increased. Recently, however,

both of these sources have announced limits on the amount of

oil they intend to export. This was prompted in part bia

desire to assure themselves of a continuing supply of oil

for their own development and to preserve supplies for the

future when demand will have driven prices higher.

In spite of the increasing demand for oil and the growing

reluctance of foreign countries to sell it, there has tradi-

tionally been considerable opposition to foreign oil imports.

These objections a're based primarily on the danger to national

security and the impact upon th'e balance of pbyments. Aere1.

is already considerable evidence to substantiate both of these

fears. Middle Eastern oil Gountrieswhave repeatedly threatened

to limit or shut off oil supplies to the U.S. if Ameriabn

policies toward Ivael were not modeiaLed. The i4act on the

balance of paynents kill beconsiderable because of the large

foreign purchases that will be netessary.T By 1980 the U.S.

may be importing $30 billion worth of oil. Without offsetting

purchases in the c.S., this imbalance could result in major

economic problems.- Some prbducino States. notably Sauitivoi..

Arabia. have shown an interest in investing this revenue in

the 'downstream marketing of products to the U.S. This would

have the dual advattage of keeping American money in the U.S.

woo

CRS-c1

,and reducing the likelihood of a supply shutoff. The U.S.

presently imports less than 3% of its oil from the Middle'

East, but almost all of the projected increases in imporZ5

will come from there. Consequently, such participation

arrangements may be necessary.

It had been apparent for some time prior to April 18:

when the President officially suspended the Mandatory Oil

Import Program, that increased imports were inevitable and

that a more responsive system was needed. He not only

A abolished the quotas but also the import duties ranging

from 10.5t/barrel for rude oil to 52C /barrel for gasoline

A new license-fee s Stem replaced the old Program. Imports

above the January 1973 quota for crude Md most products

and the April 1,

jectito the fees

1973% quota for residual fuel oil are sub-

shogn in Fig.16. Existing quotas may be

imported free in the case of refiners, petrochemical plant

operators, terminal operators, and others. These fee-exempt

quotas will be phased out over a seven-year period starting

with a 10% reduction in 1974. At that time all imports will

be subject to license fees. While these fees will raise slightly

the cost of crude oil and products: it permits unlimited imports-

N., of oil from any souite willing to supply it. The result will

almost certainly be a net increase in the availability of oil

products, including gasoline, on the U.S. iarket. Needed

CRS-28

License-fee schedule for oil imports

Lb!May 1973 Oct 1973

cutsltrr 1974 Oct 1974 W3 1975 Oct 1975

Gt.a o'Res.,04,1 Le: 01 N0 2:et col ore* dVdtates,ard unt,r.shed als

Crg .n andoN.f pod.cts ,

105

15

52

13

20

54 5

155

33

57

18

42

t59 5

21

52

63

?.

21

63

Fig. 16. (Oil and Gas Journal, April 23, 1973, p. 20.)

4

1.

ti

CRS-29

immediately will be imports ranging from 100,000 b/d to

200,000 b /d, if available tankers can be found to transport

that large amount on short notice.

Some difficulty may be expected in obtaining gasoline

from foreign refiners. Europe raa)be able to supply U.S.

needs this summer, but because of its very shallow gasoline

pool and its own soaring, demand, the long-term supply pros-

pects are not favorable. Thee total refining capacity in

western Europe (Belgium, Germany, France, U.K., Italy, and

the Netherlands) is only 14.4 million b/d, of which only 14.0et

can be made into gasoline. Many European countries require

long term product reserves for emergencies and most refiners4

would be reluctant to draw upon these for export. The gasoline

that will become available will command a premium price.

Generally; it takes about three months from the order placement

to delivery, a time span that may prove too long to provide .

European gasoline supplements this summer.

Refinery Capacity

One of the major factors limiting gasoline supply is the

Nation's inadequate refining capacity. At present there are

no refineries under construction anywhere in the country.

Only one has been built in .the United States in the last three

years, and none have been built on the East Coast in the past.

15 years: As a result, the pressure on existing refineries. has

1

3`7

CRS-30

been made that much greater. Refining capacity has dropped

'steadily relative to demand. Last year,, for extOple, demand

rose nearly 7% while relining capacity (mostly plant expansion)

grew only 2.2%.

At a time when domestic refining capacity is critically

short, it may seem paradoxical that refineries in many areas

of the Midwest are operating at very low levels and, in fact,

some have been forced to 'close. The reason for this can be

traced to the decline in domestic production of crude oil.

Most of these refineries were independently operated and were

designed to operate on domestic "sweet" (low-sulphur) crude.

In many cases these independent refiners did not have their

own production facilities, but depended instead On supplies

of crude from the major producers. The incentive for such

trades was provided by the Mandatory Oil Import Program which

provided "import tickets" to t independents. These tickets

permitted the duty-free impor of low-cost foreign crude.

Because of the cost differenti between foreign and domestic

crude. these tickets had monetary.value to the large inter-

national oil companies with overseas operations. They would

trade domestic crude oil to the independents for the import.

tickets which. would allow the majors to'import their foreign

oil. This system was unbalanced by the decline in domestic

production. The majors no longer had a surplus to trade, and

.

0el

CRS-31

in some 0algl_had to curtail their own refinery operations.

The independents not located near the coasts had no alternative

sources except for crude from Canada, quantities of which may

be limited by the Canadian government and by pipeline capacity.

Because most of these independent refineries previously had no

need for foreign crude, no pipelines had been built to carry

the oil to inland refineries.

One action taken by the Administration to ease the supply

situation for independent refineries was described by Darrell

Trent of OEP:

The Fede-dl Government obtains royalties in the form ofeither dollars or crtide oil from offshore areas which itleases to private compantes. To help the short-run situation,the Government has been ,aking 'the royalty payment in theform of petroleumtrand malcIng this oil., available to hard-pressed independent refineries., Since January of this year,contracts for approximately 70,000 barrels per day have beensigned, and we expect another 80 to 100 thousand barrels perday to be made availableifrom that source. -1/

The new system will maint'ain to some degree the special

treatment of independent refiners and marketers by providing

"tickets" that will allow imports without payment of the fees

these tickets will initially not be worth its much as the tickets

under the olio quota program but, to the extent that domestic

crude oil is available, they will have some trading value.

V Darrell M. Trent, Acting Director, Office of EmergencyPreparedness, statement before the Senate Committee onBanking, Housing and UrbaniAffairs Subcommittee on SmallBusiness, May 10, 1973. I

'33

d.at,

CRS-32

These tickets are supposed to be phased out after seven years,

but they may be retained if the situation warrants. The amount

of(the fee can also be raised toipprove the trading value of

the tickets. To spur refinery construction, refiners will ob-

tain duty-free quotas equal to 75% of new capacity for five

yiars.

SoMe U.S. refineries could operate at higher percentages

. .

of operable capacities. The worldwide shortage of sweet crude,

however, precludes this. In the first quarter of 1971, Texas

Gulf.Coast refineries, which produce over one-third of the Nation's

gasoline, were operating at only 85.5%0 capacity. Competition

from European refihers for this type ef oil has made it very

expensive and in many cases virtually unobtainable. The Euro-

peans are using the oil to Wake low sAphur residual fuel to

avoid the cost of installing expensivehydrodesulphurization

equipment.% They are reluctant to rebuild their refineries to.

operate on "sour" crude because they expect quantities of "sweet"

crude from the North Sea to be available within a few years.

In the United States there are presently about 250 refiperies

operating at about 91% of their total capacity, processing 13.4

million barrels of crude each day. Most refineries can operate

at full capacities only for short periods, consequently a cepa-

, city percentage in the low 90's is essentially full capacity.

There are 30 refineries with a total capacity of 400,000 b/d

0

4'

CRS-33

that are Inoperable and in need of extensive renovation.

There are fewer refineries today than there were in previous

years In 1Q36 there were 632 refineries; in 1959 this figure

had roped to 315, as ball and uneconomic plants were closed.

To e economic today i refinery must have d capacity of at

least 100.000 b,'d. although 160.000 is the preferred minimum.

A refinery of that size requires 600 acres of land (approxi-

mately one square mile) and costs upwards of S200 million. To

construct all of the refineries needed over the next twelve

years. an investment of $11 billion will be required. actor-

ding to the American Petroleum Institute.

The National Petroleum Council (NPC) has estimated that

by 1975 the shortfall of domestic refining capacity will be

about 4.8 million b/d (25% of the total capacity required).

If demand is to be met ia 1985, an additional nine million

bid of refinery capacity will be needed, the equivalent of sixty

150.000 bld refineries. If product imports are eliminated, this

requirement would be 12 million b/d. NPC based these estimates

on gromh rates of 5.7% from 1971 to 1975, 2.7% from 1976 to

1980. and 3% from 1981 to 1985.

To Justify the extremely high capital investment required

to construct refineries, the oil'industry must be assured of a

steady throughput. In the past, however, the oil import

quotas goere set at such a low level relative to rising demand

4- 41

CRS-34

and exceptions to the quotas were frequently so unpredictable

that efficient refinery operation could not be guaranteed. This

situation effectively discouraged new refiners

guaranteed.

Now

that the quota system has been scrapped in favor of the fee system,

a number of oil companies have announced plans to build new re-

. fineries. Unfortunately, it takes 2 .i to 4 years to build a

major refinery, so immediate relief from this source is not likely.

y Siting is a major obstacle to new refinery construction that

remains a problem. Delaware, for example, has banned refinery con-

" :1

struction and other heavy industrial installations along its coasts.

Sites in other areas have also been contested on environmental

grounds. It is important that new refineries be built near the

_sea so that very large crude carriers (VLCC's) will have access

to them. Coastal locations, particularl% in the East. are de-

sirable because of their location near major markets.

Many existing refineries will also have to be renovated.

Originally designed to be operated on sweet crude which is cur-

rently in short supply worldwide, most refineries will have to

be adapted to sour (high-sulfur) crude which is relatively

plentiful. If this transformation of existing refineries cannot

be accomplished! effective refinery capacity may be even less

than it is now.

Because of the sllortage of refining capacity in the United

States, an oil products are refined abroad for Importation to

42

CRS-35

this country. The Interior Department's Office of Oil and

Gas has estimated that 1,720.000 bld of refining capacity

has been "exported" to foreign locations. This represents

a loss of employment in the U.S. of approximately 108.000

jobs, as well as an increase in our dependence on foreign

sources. Because of the increased value addO to the pro-

duct by the processing, the balance ofpayments is aggravated

even further. Most of the new refineries have been built in

the Bahamas. Caribbean. Middle East, eastern Canada. and

northern Italy These refineries were attracted by proxi-

mity to large producing fields guaranteeing constant through-

put, low taxes or tax exemptions. low labor costs. deepwater

ports, and less stringent environmental regulations. Some

producing areas have begun to require that a certain amount

of their exports be processed Ivan, to provide employ

for their citizens.

The export of refinery capacity has veep accelerated by

.ting problems. Even though modern refineries are not nearly

as objectionable as were earlier refineries, very few communities

have shown a willingness to perrit construction. The added costs

of pollution controls. siting delays, court injunctions. cOastal

zone regulations and other problems have led many companies to

build their refineries outside the borders of the United States.

4.3

CRS-36

Another factor inhibiting refinery construction has been

the changing specifications for gasoline. Because decisions

are made for five to ten-year periods, refiners are reluctant

to build refineries designed to produce high-octane unleaded

gasoline only to have the emphasis changee to low-octane

(below 90) at a later date.

Refining capacity will be of critical importance in meeting

the gasoline shortage this summer. Because of the limited capa-

city, refineries will have to operate at levels averaging core

than 91:g and yielding at least 48:i gasoline (Figs. 17, 18, and

19). The Oil and Gas Journal (April 16. 19731 made the following

analysis of the situation.

Journal data place refinery crude Capacity at 13,383,000b d (API estimate of capacity is 13.620.000 1),'d. some

237.000 b d or 1.71 higher and thus will show greaterproduction at lowervapacity levels).

The stud) shows that with a 64 Jump in demand ifrefiners on a national scale operate at 90-923; of cap

city and get a gasoline ,y1eld of 46-46.51, they mustimport 125.000 b d of gasoline and draw down stocks to27.4 days' s;upply at the end of September, a perilously

low point.

Refiners can avoid a stock drawdown with yields of 47-48% and imports of 125.000 bid or yields of 48-48.51 with

little imports. If demand should average a 7-1. gain, yields

would tia%E to reach 47.5-48.51 with imports and 48.5-49'i

with no imports.

If crude supplies should limit refinery operations to89i; of capacity, the drain on inventories would be almost

intolerable, and the need for imports could exceed avail-

able supplies.

44

A

a

CRS-37

Refiner) gisdiSe yields

a

;t "

Si

7---,,--,;.-.--nu1 16...;;:i

if AMIN'' Al! 1 11

I i..10,m

1 i

11

1

, ,..." I

11111I44114111114451

1474 4. W Wow" peer red *lee.Fe 0 veree41 44e446 we r leweire

r erne 0 WI reit we sal edindWOOL

au}

Fig. 17. (The Oil and Gas Journal, April 16, 1973. p. 58).

REFININGscat o t cuipagarr rots

I

19731973

e,N...........0' ...

Iv.."

; ;

sx

,L.,,..

1 972.ene./

,il,'...Num

I I43I Feb Moe Ape troy 4.0* Afty a4s; Sept Od NOV Ctoc.

Fig. nB. (Supply and Demand Outlook, Independent PetroleumAssociation of America, April 1973).

45

t .4 4

CRS-38

A i,),)k al LS 1u.rmkrn c-Jpabillt)

ka:.:as 4;aelskelmr, =at t'fIt*CarTz'sgas:: tt tIteZtit cts

A ,AT S2% CT cr,..1:: coi:Y.,T

t::::: ..: : e : .c, r-: .It :::.: I - - L'a .1' Ne'y . er.... O' .: . 5: 3): ..: e.

IS% SF: DY... 932 ):.: E...soioxs: X..: 1 :47 cc

I AT 91% DT CRUDE CAPACITY' .`i )): I, 'IS ):!: t : e, 6- b b's, e",-.e.-. e. c' :137, CO: I t:

It I SI7 7.,:i. E:65?): 6 J.. 3 )33It 5 6,3 )).: 835 :): 6 555 ))3t - 5 rte. )X 5#3.t )): 6 See ))3LS 5 917 PAX 6:3 )30 6 6.1.3 ):03

t? -- 6 :4: X*: 53 ))3 6 A3))36 164 DX 9-32 DX 7.126 CO3

C AT RI% CT CRUDE coszni: 3.: ) ) : 1 : : t s . ' c- :Se a,: A 9 x.: 5 . z ,nr b tea' oe'.-1-y 'we 17 46 I OX 5 d

5.607 303 876 )33 6 88.2,000t.E.,- i 73: X.: eAsc 6 6:7 003

SS'S, V.):, 514 )X 6 77, Dco

933.003 6 SI< ow8,1,-. 6 136 SX 953,DX 7 C63300

6:`% 6231 Xe 972 OX 7213 Q3

Fpg. 10. (The 021 and Gas Journal. April 16. 1073. p. SW.

43

1'

a

1

CRS-39

One major company analyst estimates that operationsat 89% of capacity with a 5% growth in gasoline demand_would pull stocks nearly 19 million bbl belowolast yearat the end of September. With a 7% demand growth. thedrawdown would be more than 56 million bbl.

Some analysts doubt the refining industry can sustainoperations exceeding 91% of capacity for prolonged periodseven if enough crude is available. The strain on agingequipment, they believe, would inevitably cause break-downs which would bring the operating average down.

This set of circumstances explains why many observersconclude that gasoline demand this summer must be con-tained within the 5-6% range. The refining industryjust can't keep up with constant increases in demandwithout renewing and expanding plants.

Refineries generally have a "swing capacity" of about four

percent that can be used to increase production of gasoline.

Gasoline stocks are usually built up in the early spring by

one or two million barrels per week because of the anticipated

seasonal surge in demand in late spring, summer, and early 1611.

Because of the late demand for fUel oil, however: stocks weret

not increased this spring. Inventories were 215 to 220 million

barrels in January and had slipped to 201.5 million by Way 4th,

As the peak season of heavy demand is entered, that level is

expected to decrease steadily.

i7

CRS-40

IMPACT OF SHORTAGES

1There is no question that

during the, summer of 1973. In

there will be a gasoline shortage

many areas, the shortages are al-

ready acute and show signs of becoming worse. A study by the

Petroleum Industry Research Foundation..Inc. (Pirinc) has esti-

mated the shortage to be on the order of 125.000 b/d east of the

Rockies (PAD 1-4). This estimate is based on a projected increase

of '5.6% in demand for gasoline, which is slightly less than the

5.7% gain in 1972. Stocks of gasoline, however, are verb low be-

cause of the emphasis on fuel oil production earlier in the year.

At the end of the first quarter of 1973. stocks had been built up

to only 191 million barrels (Fig. 20), in contrast to preceding. .

years when inventories were greater than 210 million barrels. If

consumption increases 8% to 7.3 million b,'d. gasoline inventories

will be only 95 million barrels on September 30 (Fig. 21).

For the first three months of the year, the United States had

only 32.4 days of reserve supply. A 34.6-day supply is generally

r4garded as the lowest level on which operations can be maintained

without interruption. Late last summer there was a 31.4-day supply

and localized shortages occurred. E%en if gasoline output is maxi-

mized (refineries oPerating at 92% Of capacity 1011 yielding 48%

gasoline), the Pirinc study predicts that there may be a drop to

29.9 and 29.4 days' supplies'in the second and third quarters re-

spectively of.1973. This can be translated into a shortagi of

125.000 bid below minimum levels.

43

Li

CRS-41

PirinC's 1973 forecast for gasoline

Dat.1.4)1

l tQ 211:XSlet let fur

lirtor rimiest ac: MISMaley MRS talitt ne..**ret0 10.375 10.474 10.613 10,613 10,520

Gasopoe mks I%) 4/ 0 !SO 435 47 5Item y catput

hoe mode ant reinded o.;From w

7t

4,SS5719

5.027749 772

5.011325

4$477E4

!dewy art,w4Total 5.154 3371 5,119 SAX 1.731hwa ts repa el 75 221 211 70 144Net to PAD-5 75 70 59 58 655001 5.354 5.927 6.071 5.678 5,810Drund 5.350 5 6.060 5.819 5.783Stock ctsrge /at/11:4480.__ +04 +2. +10 +54 +9.8Studs &d ef,/urtZtoos tbis) 191 193 9 194 9 199.3

Drys up** 1973 32.4 32.0 335 35.6

End quartet stocks dmdcd by nest quarts/ dal:mad

Fig. 20. (The Oil and Gas Journal, April 9, 1973, p. 38).

5,1

sa

10

CRS-42

1 . . .. -zt: -- : '

-- - - - - - . . a: ::

I - ------- - - -

. . .ektys Supply------1_

-4

1 --'

.......

Stocks1/3bls x 10 M11.1

4

: - ..-...... . . . . .....

... G.S. MOTOR GASOLINtStocks. - Dcoancl Supply

4

1471 1972 .19731

farFig. 21. (Petroleum Outlook. May 1973, John S. Herold c..

p. 5).

50

ti

CRS-43

Even though..the East and Midwest appear to have the most

serious gasoline shortages, the West Coast (PAD 5) also has

supply problems. Last year demand in District 5 grew 7.5%

(well above the national average) and a 6% rise is predicted

for this year. This extra demand amounts to an additional

55,000 bhd. , The 43 western refineries have operated at a

level low enough to permit production increase to 2,000,000

b/d, compared to 1,839,006 b/d last year. Additional increases,

however. will necessarily come from imports which may not be

usable by smaller independent refiners.

Impact on the Consumer

Many motorists have already found to their consternation

that adequate supplies of gasoline are not available. Many,gas

stations have closed, others are open for shorter periods than

before. Increasingly.' drivers are being told that their tanks

can not be filled, that they are limited instead to ten gallons,

MOst consumers are confused by the situation but accept it re-

.

luctantly. There was a case recently in Oakland. California,

however, in which a motorist was so enraged by the refusal of

the attendant to fill his car with more than ten gallons of

gasoline that he returned minutes later with a shotgun and

fatally shot the unfortunate attendant. While this admittedly

was an extreme example, it does indicate the sensitivity of most

Americans to restrictions on their traditional mobility.

51

4 CRS-411.

As of %June 1st, several major oil companies (Texaco,

American, Gulf. gun, Shell, Exxon, Phillips, Mobil. Union,

Atlantic Richfield, and Cities Service) were rationing-gaso-

line to their dealers. In some cases, this allocation is as

low as,80% of last year's sales. A number of companies have

begun rationing gasoline, usually in ten-gallon allotments,

to individual Customers. Initially, this practice was limited

to company-owned stations on major tollways. As the shortage

grew in extent and in intensity, these limitations were.ex-

tended to franchised dealers as well.

For the most part, the average individual has so far en-

countered little more than occasional inconvenience. As the

shortage becomes more severe, however, the consumer Laces the

prospect of formal rationing. The United Stptes has had some

experience with fuel rationing during World Wars I and II.

similar system, requiring printed coupons for gasoline purchases,

may be necessary if present trends continue.

The Administration has stated repeatedly that rationing

is not likely to be necessary during the summer of 1973. The

same assurances are not extended, however, to succeeding summers.

One reason for Administration reluctance to initiate a rationing

system is the cost. Darrell Trent, Director of OEP, has esti-

mated that such a system would cost nearly $200 million per

year to set up and would require a staff of 12,000 people.

52

CRS-95

Nevertheless, a contingency plan has been drawn up which

would be implemented within a few days of authorization. A

recent amendment to the EcondMic Stabilization-Act of 1970

gives the President rationing authority. Prior to that

Imendment a Presidential Declaration of national emergency

was required. In such a systeb a priority of uses would be

determined to ensure ga ine supplies to those having the

greatest need. Conside ing the severity of the gasoline

shortage and the time required for corrective measures,

rationing must be considered a possibility for the next three

years.

An alternative to rationing is the proposed increase in

the Federal gasoline tax. This tax would have a greater im-

pact on the consumer because in addition to the difficulty in

finding supplies of gas.:1)ne, he Would have to pay more for

it. William Simon, Chairman of the Oil Policy Committee, has

said that an increase of as muchas 104 per gallon is being

considered. That would make the total Federal gasoline tax

144 per gallon:'

The motive for such a tax is twofold. First, it would

raise revenue without an increase in the income tax, a stated

Administration goal. A 104 increase in the price of a gallon

of gasoline would probably produce an additional $9 billion.

Car

CRS-46

Second, a higher tax would discourage gasoline consumption

and encourage conservation. There are, however, major problems

associated with such a proposal. A tax of this type is regressive

in that it imposes the greatest economic penalties on those least

0'able to pay and often upon those with the greatest need. such as

farmers. MoreoveY, there is no certainty that the higher price

would limit demand to any significant extent. Consumers may

be willing to pay the higher prices to retain their life styles,

regardless of cost. If that is.the case, the net effect would

be only to increase the cost to the consumer w1ithout achieving

the desired balance between supply and demand. The wealthy

would not be greatly affected by the cost increase and would

still use gasolene foF frivolous purposes. At the same tine,

low income groups would be faced with major problems such as.

unemployment because of difficulty in reaching their jobs.

Regardless of the specific actions taken by government

and industry to ease the shortage, the price of gasoline is

certain to rise. Anticipating a rise in the price of gasoline

and other oil products, the Cost of Living Council (CLC) im-

posed price controls on the 23 major oil companies with sales

over $250 million per year (76% of the-industry). A major

loophole in this arrangement is that the prices can be weighted

.so the prices on some products like gasoline can be raised more

than 1.5%. In other words, there iS no limit on the price of

54

,

CRS-47

any particular product as long asp the average price increase

for all of the company's products does not exceed 1.5%. If

X

higher cost increases can be proven, the,CLC can authorize

larger increases. Most oil companies have already increased

their prices by more than the guideline figure: Wholesale

prices of gasoline have iiseQ' more in the first quarter of 1973

than in the previous twenty years. The CLC has generally per-

mitted increases of 3.7% to 4.7% at the discretion of the orl

companies. In some cases, oil companies not affected by these

regulations have raised their pump prices by more than'10%.

Even major brand stations which are leased rather than com-

pany-operated (as most are) are not subject to these controls.

These limited controls are.temporarily inoperable because

of the 60-day price freeze announced by the President on June 13.

One provision that continues to apply to the 23 major oil com-

'ponies is the "reseller rule" whit allows increased costs of

oil imports to be passed on as lo as rh oil Is not transformed.

Thus, the consumer can be charged a higher price for imported gaso-

line but not dooesticas The increased costs of foreign crude oil,

however, must be borne by the processor. Major oil companies are

reluctaht to.idport foreign oil if they incur a loss in the trans-

action. To encourage increases in supply, it may be necessary to

Iinclude is Phase IV controls a pass-through rovision.

In some respects, gasoline is an under rfced fuel. It

has risen only about /lit per gallon wholesale from 1962 Co

CRS-48

1972 (fioc11.554 to 12.870. an increase of only 11.4.

During that same period the average prices of all items in

the COnsumer.Price Index rose 38.3gs. Esen though the pri'c'e of

. .

asolip.e has steadily risen, the rise has not been continuous g.2V).:

.77se prrage 1972 pump price. for exaP1e. was 3e.134 per gallon.

as opposed to,3o.43C in.1971. The 1973 prices. however. have'

already risen substantially and the trend is not likely to be

reversed

Higher prices for the consumer will adsersely affect many

consumers. %ot only will they be inconvenienced. but their

livelihood nay be threatened if gasoline prices rise to the

754 to S1 00 per gallon that some have predicted. Because of

extensise decentralization of industry during the last decade.

man) factories are located in the suburbs. some distance from

the city centers. These areas are seldom served by mass transit

and car pools may not always be practical. If a worker commutes

175 miles to work each week in an automobile that averages 12

miles per gallon. 1411gallons will be consumed. A 50 increase

in the price of gas would add S3.05 per week to his commuting

costs.'or 11.2t per hour.

Perhaps esen more important to the consumer is the indirect

impact of the shortage on prices in generalOHigher fuel costs

for farmers will result in higher food prices. Transportation

charges for manufactured items will rise and will be reflected .

t

4

Q b

CRS-49

sot

AVERAGI Itrr.n, PRICE Or=OMAR CASOLSKE - EXCLATDING TAX

(Cents per Gal Ice)

1966 1967 1966 1969 1970 1971 1972 1973

Fig. 22. (Petroleum Outlook. May 1973. John S. Herold. Inc.p. 361.

i

or

CRS-50

in higher prices. High prices and short supplies may lead

large numbers of families to cancel vacation plans that in-

cluded long trips. 'Many are concerned about being stranded

great distances from hose. Because of this, areas dependent

on tourism may suffer a major loss of business and extensive

unemployment could result in those areas. The State of South

Dakota, for example, would lose $33.6 million in income if

tourist traffic dropped 20k.

pact on Agriculture

There is a verb real danger that a prolonged fuel shortage

could lead to another shortage, one of food. The increased

productivity of American agriculture. in spite of a declining

farm population; is due tc the mechanization that hai- been per-

mitted by the availability of inexpensive fuels. Abundant

energy has also made possible the synthetic fertilizers which

add greatly to yields. Gasoline shortiqes may also reduce

farm production by limiting cultivation. Even more importantly.

in some cases entire crops may be threatened by inadequate fuel

for planting and harvesting.

Farmers used about 6.2 billion gallons of fuel in 1972,

4 billion gallons of gasoline and 2.2 billion gallons of diesel

fuel. Agriculture is not. however, a major user of petroleum

fuel compared to other users. In 1969, for example, 2,6

million farmers spent $1.9 billion on 6 billion gallons of

53

rJ

CRS-51

fuel. That quantity of fuel, while a significant amount,

accounted for less than 3% of the total petroleum demand for

that }ear. The percentage of total fuel demand that can be

attributed to farming has remained nearly constant at 3-4'1"

since the 1930's.

Ihe agricultural demand for fuel has been estimated by

the Department of Agriculture to rise from-6.2 billion gallons

in 1972 to 9 billion gallons by 1980. This represents a 45%

increase. During that same period, however. non-farm uses

are expected to expand even more. This will cause the pro-

-portkon used in farming to decline, although the actual

constiesption will continue to rise.

;,..1The demand for agricultural fuel in 1973 has been affected

---'by several factors. First, demand for farm production has in-

creased and farmers have responded b} planting more acres of

such crops as corn, wheat, and soybeans. Second. the Depart-

ment of Agriculture has authorized plantings on land that had

preciously been set aside, resulting in a 125; increase in

acreage. Need. wet weather in the fall of 1972 prevented

farmers from doing much of their field work which had to be

postponed until the spring and summer o Lion Fourth. heavy

rains and floods hate saturated the soil lc* moisture. re-

sulting in extra work to dry the soil and to remove ruts.

Fifth. farmers are increasing their use of high-powered equipment.

59we'

CRS-52

Perhaps th-emtost important aspect of the agricultural

fuel shortage is the ,compression of demand. Usually the

planting season is spread over the spring and early summer.

The unusually Net weather, however. has delayed much of this

activity so that work that normally would be spread over

several months is being done in one. This creates an abnormal

peak in fuel demand that would be difficult to meet at any

time During a national shortage, it has proven in many cases

to be impossible. Fuel distributors have often beet unable to

obtain quantities comparable to last year's. let alone the

greater amount required this year.

Timing is especially critical in obtainfig gasoline and

diesel fuel for farmers. Any delay in crop ittlanting beyond

an optimal date has a depressing effect on yfelds.

Each day's delay in planting corn in the olv Belt, for

example. drops the yield by one bushel per acre per day from

May Lst through May 15th. and two bushels pe' acre pet day from

May 15th to June 1st. Production costs. howeveY, remain the

same and art likely to be reflected in higher market prices.

The voluntary allocation plan announced by Ur. Simon on

May 22 was designed, in part, to alleviate the problem of farm

fuel shortages. Farmers were given top priority in this syStem.

Under its provisions, the major oil companies are asked to supply

to all of their historical customers the same amount provided

CRS-53

in the last quarter of 071 and the first three quarters of

1Q72. This was intended to aid the independent marketers.

who supply many farmers with their fuel. This yoluntary

system may be made mandatory if the present- system does not

cork. Present indications are that voluntary guidelines have

not been effective and that mandatory allocations may be war-

ranted. Strict legislation to that effect has been introduced

and acted upon in Congress to ensure that farmers Katie tre

fuel tfle) need.

I

61

CRS-54

Impact on Independent Marketers

Although the gasoline shortage has affected many groups,

the most severe impact has been on the independent marketers.

This segment of the industry consists of "private brand"

marketers and independent distributors of "branded" gasoline,

Together, they account for BD% of the total market. Because

most integrated oil companies give market preference to their

own dealers, the independents usually feel the impact earlier

and with greater intensity than the rest of the market.

The impact on private brand marketers has been especially

severe. This is ue primarily to the dependence of these mar-.

keters on gasoline produced by. the major refiners in excess of

the needs of their integrated or branded distribution channels.

The availability, of this gasoline on the "spot".6arket made it

possible for the independents'to sell at lower prices under

their own names. This was beneficial to the industry becauae

it kept gasoline sales competitive, and it allowed the refiner

to operate at a more efficient rate. During a periodrePshortage,

Sbwever, the refiner givesptIority to his own or controlled out-

lets. When no surplus exists, the independents have no source

of sutily and, consequently, nothing to sell. Many independents

are currently in that predicament. The ramifications of this

6 2

CRS-55

shortage on the independents has been well-described by the

I\SS

Petroleum Industry Res rch Foundation in its report "The

Near-Term Outlook for Gas ine and its Impact on Independent

Marketers.Z

...Men the gasoline shortage begins to affect theavailability of branded gasoline, the refiner can beexpected to reduce first his branded supplies to non-integrated outlets. Thus, a number of independentbranded gasoline distributors have already been in-formed that their contractual volume this year wiltbe either the same or less than last year. Sincespot gasoline cargoes are currently not economicallyavailable, some of these distributors will have tocurtail their operations.

To what extent the independent market segment willbe affected by the shortage over the next three yearsdepends of course on tne scenario chosen. It is clear,however, that if the independents must increasingly relyon imports and if the cost of imports remains higherthan domestic gasoline prices, the independents mustraise their prices relative to those of the integrateddistributors. This will cause them to lose marketshares to integrated companies. While the extent ofthis loss is subject to speculation, one possible kscenario is to assign all the growth in the marketto the integrated refineri.(the "majors") while main-taining the volume of the independent segment at itslevel of 1972. Needless to say, this is not a recom-mended scenario but it provides the opportunity toanalyze the supply situation of the independents undera no-growth assumption until 1975. Assuming a 30%market share for the independents, the comparablefigures for 1972 and 1975'will look as follows:

Total Motor Gasoline Demand(000 b/d)

I-IV

1972 1975 Growth Rate

Independents 1,632 1,632 0.0% 4Inte§rated Refiners 3,807 4,724 7.5%

5,439 6,356 5.3%

63

.20

CRS-'56

Under the most optimistic supply case, we forecastthat refiners in 1975 would produce 5,971,000 barrelsdaily (excluding an estimated 34,000 b/d of aviationgasoline) of which 64,000 b/d would be shipped to PADV [the West Coast). After meeting the entire demandof the integrated companies this would leave 1, 183,000bid for the independents or.449,000 b/d less than they '

will require even under our no-growth assumption for thisgroup. Thus, in order to maintain their existing levelof operations they would have to import about 450,000 b/din 1975. *Additional imports of 29,000 b/d will be requiredto maintain stock levels at the 1972 ratio of 34.8 days ofsupply, making for total imports of 478,000 b/d.

These import requirements could well fall 150,000-200,000 b/d short of available foreign supplies. If

the entire shortfall has to be borne by the independentsegment, it could reduce their actual volume in 1975 byat least 10% below last year's. This would reduce theirmarket share over the next three years from 30 to 23%.

The independent marketers do not obtain all of their pro-

-1,ducts from the major oil refiners. There are many independent

refineries that exist solely to supply independent marketers.

The capacity of these refinexiet,'is small compared to that of

the majors but it is significant, particularly in the Uldwest.

If these refineries were operating at full capacity and sup-

plying the indepe;dents with gasoline, there would be essentially

no shortage. The problem, as was mentioned earlier, is that the

major oil producers in the U.S. claim that they barely have

enough domestic crude oil to operate their awn refineries. The

majors are reluctant to release domestic oil if it cannot be

replaced with foreign "sweet" crude, which is in short supply

r

4

i.

CRS-57

worldwide because of rising demands in foreign countries and

because of production controls imposed by Middle Eastern pro-

ducing states. Many independent refineYs are too fai inland

to import foreign "sweet" crude on their own, evill if it were

available.

Before the fuel.oif and gasoline shortages Drought about

the'demise of the Mandatory oil Support Program, the indepen-

dent refiners held art advantageous position. Because of a

"sliding scale" method of alloCating import licenses, the in-

.

dependents received more than a proportionate share of import

tickets which allowed the import of certain quantities of crude

duty-free. Because foreign oil cheaper than domestic

-and had no tariffs imposed, these tickets had monetary value.

The independents exchanged them to the majors, who had facilities

for processing foreign oil, in return for domestic oil. When

the oil shortages forced prices upward, however, these tickets

lost their value. Foreign oil, in fact, has become more ex-

pensive than domestic'oll. Under tese conditions, there was

no incentive on the part of the majors to trade away domestic

oil when they would lose money on each transaction. The majors

at the same time are reluctant to part with their crude oil

supplies when they are under intense pressure to increase their

production. In many areas, local air quality standards bave

compelled refineries to use low- sulphur crude oil, making it

65

1

j

CRS-58

that much more difficult for the independent refiners to obtain-

the type of oil they need. The ne4"fee-license system may be

partial remedy to this situation in that itinaintairis a,

.ticket system that gives the independents something to trade'

for domestic althougk they have complained that the ticket

value is too low. It is'doubtful that the new import plan will

. be totally successful in freeing domestic oil for use in inde-

pendent refineries.

'Because this shortage is likely to persist, Congress

passed an amendment to the Economic Stabilization Act of 1970

which provided the mechanism for an oil products allocation

system. Administered by the Interior Department's Office of

OH and Gas, the program is voluntary but may be Made mandatory

if circuMstances require. On May 10,'1973, the program was

described as follows by Deputy Treasury Secretary Simon before4

the Senate Committee on Banking, Housing and Urban Affairs:-1/

THE program for allocation of crudeoil and refinery products will be vol-untary but backed up by

(1) Guidelines established by theGovernment.

(2) A mechanism for providing con-tinuing scrutiny-of i:ompliance withthese guidelines.

(3) The threat of imposition of morestringent regulations requiring reallo-cating crude oil and products shouldthis program fall.

General policy direction will bevested in the Oil Policy Committee,day-to-day administration of the pro-gram. in !be Office of Oil and Gas(OOG). An oil-allocation section shallbe established in OOG to adnilnisterthe program.

Under the program, each producer,.refiner, marketer, jobber and diStrib-utor will agree to make available ineach state to each of Its customers(including those purchasers in the spotmarket) the .same percentage of Its

it The Oil & Gas Journal, May 21, 1973, pp. 72-73.

6v

w

CRS-59

total supply of crude oil and productsthat it prosided during each quarterof a base period (defined as the fourthquarter of 1971 and the first threequarters of 1972)

Supply preemption. Under the pro-gram. 006 may assign to each pro-ducer, refiner. marketer, jobber, andd,stributor allocations for priority cus-tomers still unable to obtain neededsupplies of crude oil and products, notto exceed 10', of any supplier's totalsales of crude oil and products duringthe bage period

This assignment by 006 will bebased . upon demonstrated need Thebasic purpose of the assignment is toassure adequate supplies of crude oil

an products to priority users who.for so reason, are not well servedunder the proportional allocation pro-gram

It will be- particularly important forfulfilling the needs of new customorsthat base entered the marketplacesince 1971.72

Consumer priorftles. In distributingthe oil for 00G allocation, priority

- will be given to supplying the followingactivities or to independent market.era, jobbers, and refiners who supplythe following actiwnes

I Farming, dairy, and fishing ac-tivities and services directly relatedto the cultivation, production. andpreservation of food

2 Ford processing and distributionservices

3 Health, medical, dental, nursing.and supporting services except commercial health and recreational ac-tivities

4 Police, fire fighting and emergency-aid sery ices

5 Public passenger transportationincluding buses, rail, intercity andmass transit systems, but excludingtour and excursion senices

6 Rail. highway, sea and airfreight transportation services, andtransportation and warehousing ser-vices not elsewhere specified

7 Other state and local-governmentactivities

8 The fuel needs of residents instates or parts of st a t e s not welt,sersed by major cal companies and unable to obtain sufficient crude oil or-products

Wholesale and retail marketers ofgasohne shall not be deemed prioritycustomers unless they supply a substantial proportion of their product tothese priority users

When convenient, various companiesmay exchange supply obligations In-curred under this program in order tosimplify distribution problems

Complaint procedures. The Office ofOil and Gas will receive complaintsfrom anyone who feels he is not re-ceiving a proper allocation of supplies

it it deems it necessary, 000 mayrequire a public hearing and submis-sion of oats, by suppliers, on their1971 and 1972 exchanges and/or salesof crude oil, unfinished ods, and prod-ucts. These data will I n ciud e thenames and addresses of customers,the amounts of cryjde oil and productssold to them, the legal relationshipbetween major oil companies and cus-tomers, and whatever other informa-tion 000 believes necessary to con- )duct the hearing

00G will then verify the accuracyof complaints against a supplier and,if justified, impose mandatory alloca-tion on the supplier

Prices. The price at which petro-leum products shaft be sold to inde-pendent markelers, wholesale distrib-utors, and othetsunaffillated customersshall not exceed normal refinery rackprices charged by major companiesto new contract customers

7

4

tit

The price which wholesale distribu-tors may charge independent market-ers shall not exceed normal wholesaleprices, or normal refinery rack pricesplus a normal wholesale markup

Where independent refiners haveprevious)) received domestic crudeoil in exchange for import tickets, theIndependent refiners will be requiredto surrender license-fee-exempt quo.tas in return for receiving the priv-ilege of purchasing crude oil underthe program Where the independentrefiners previously purchased crudeoil without surrendering import tick.ets. no license fee exempt quotas willh.r.e to be surrendered

Thp price at which crude oil shallbe sold to independent refiners shallnot exceed posted crude-oil prices plusan applicable pipeline-transportationcharge except. however 'where crudeoil is sold as required based uponprevious exchanges of import ticketsfor domestic oil, the major companiesmay charge a price equivalent to theaverage landed cost of any oil Im-ported to replace the oil sold underthe provisions of this program

Hearings. immediately following theinitiation of this program, the Oil Poi;icy Committee shall begin hearings to

CRS-60

13

determine any changes that may berequired to make the program equi-

table to all classes of suppliers andpurchasers, and whether the programshould be made mandatory

The Chairman of the Oil Policy Com.matte will designate an ad hoc boardto conduct such hearings reportand repoits findings to the Oil Policy Commit-tee.

The board shall be composed of rep-resentatkes of the Interior, Treasury,and Commerce departments. GSA/OEP. and any other representativesas the chairman of the Oil PolicyCommittee may feel appropriate Thechairman of the Oil Policy Committeeshall designate the chairman of thisboard

The Oil Policy Committee will alsoinvestigate and recommend additionalmeasures that should be underrakento- encourage allocations by majorsuppliers For example, It will inves-tigate changes in Cost of Living Coun-cil rules and environmental standardsand regulations that seem necessaryto assure efficient utilization andequitable distribution of crude oil andproducts

Because the allocations are'based on historical purchases,

mans existing contracts will be broken. Branded jobbers, who. -

are also independent busin en, are concerned that products

will be shifted from them, despite existing contracts, to

priv'ate-brand spot. buyers. ,The voluntary program is considered

by the Office of Oil and Gas to have the effect of a "force

maieurei which would permit compliance with government-ordered

6

d .

CRS-o1

silt-ea:43ns LC ,C o,,ed e14- 4 ieftt.sk 19 eni4

of contract suits. Me problem of oreakihd e'edsiing cam-

tracts as apparently recogdized but conlidered necessary

Vin order to "share the shortage" The Office of Oil and

Gas has4 1

is.c.-&uraged.States from adopting their on gepara.le-.

, allocation plans so that distribution can be coordinated

nationally.4

In spite of the voluntary allocations. .the independent

marketers are still baying major supply problems. As of

May 30th, the Office of Emergency P,peparedness estiftted

that 1,020 retailgasoline dealers had been forced to crose

and that1,914 %ere on the verge of doing so. A total of

40,000 indeppndent nations are faced with the prospect of

limited operations: To counteract this trend, the Senate.1

recently passed S. 1570, an emergency measure to require action

, by both' the Executive 'Branch and private industry Ito assure theA

egaltable distribution of fvtels in short supply. S. 1570 would

I

make it illegal for the large integrated companies to supply

.theii hismrical companies less than the amount provided

during the bash period. Such a mandbtory allocation plan

appeuvto be increasingly necessary becan;e of the follq%Ing

1.1sadvailages of the voluntary plan. (1) economic gains can

be r.ade bs hithdolding supplies as the shortage becomespore

6 9 )

I

CRS-o2

serious, :2, cooperlation is penalized. (3t equitable geo-

grapic distribution is- unlikely. (41 compliance 7tgebf in

Conflict with programs eAablisted by State or local csoYern-

re-!. Implementation is dependent on private decisions

ani does not generate axihur pmblic confidence. (o) existing

contracts cannot %oluntarily be superseded. and (7) oarlet-

sharing activities are encouraged which ray be in violation

of antitrust laws.

Th'e.supply problem of the independents has generated

speculation t1at the gasolin4 shortage might he artificial

rather than teal. There is no doubt that, in either event,

the rajor petroleum companies are reaping four major advan-

tages First, competition from the independent marketers is

eliminated through supply starvation or reduced through lower

price differentials; second. the majors have been able to exer-

cise greater control over their franchised dealers by limiting

Supplies or impssing other restrictions: third, the majors

ha%e benefitted from the unprecedented price increases in the

price of gasoline due to the imbalance between supply and de-

rand as indicated by record first quarter earnings. fourth,

the oil industry has an issue with which to counter environ-

mentalists in disputes of air quality regulations and refinery

siting.

CRS-0

To a very areat extent, the shortage is real. Domestic

production has le%elled off and foreign "sweet" crude is diffi-

cult to find on the international market. The. extent and in-

tensity of the shortage howe.er, ray hale beed aggraUted

industry practices. The Oil and Gas Journal noted on April.

It. 1'173, that

c<, s':sn

-ons -3,4

' Trtz.

«."..-r. .1" 4d: z-r 1p-,riz

:* ,s r_

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A nurber of rajor oil corpanies are currently inyolyed in

a Proces of rarket consolidation. While re is no elidence to date

that the aband)nrent of regional markets is a result of collusion

on the part of the rajors inyolved, it does work to their mutual

achanZage by red-cing competition. Sun Oil has abandoned Tennes-

see and eight Midwestern States. Gulf has spent $250 million on

a l" -State pullout, Amoco has left its market on the Nest Coast.

ti

1

CRS-64

BP and Phillips in the \ortheast, and Arco in the Southeast.

E4on is closing 150 of its 400 retail stations in Illinois.

Michigan, Wisconsin, and Indiana. Gulf is selling 3500

stations in 21 States frac Illinois to Californ4i. Other

companies na%e select%%el) reduced their marketing activities

other regions. Tne reason offered b) these companies is

that ttese operations are marginal. unprofitable. and too far

fro- t''e refineries. They consider the consolidation a means

of correcting their overextension.

Another marketing tactic which has disturbed the indepen-

dent marketers is the attempt b) the majorstlo establish their

own chains of discount stations. The fact that the majors are

()cuing Into the discount business at a time when the indepen-

dents are being forced out has led man) to question the legi-.

tirac) of the shortage. Exxon is currently marketing discount

gasoline under the brand name "Alert" in four States. Gulf

is also selling under. two labels. "Economy" and "BulkO-. Shell

sells under the name "Ride-, Mobil under thename-Cello"

Phillips under the names"Blue Goose- and "Red Dot".

To same extent, market penetration this was ma) be a justi-

fiable business %enture. The market perctntage held b) Most

major oil companies has dropped in recent years, while that

of the independents has risen. In 1972 the majors sold 74.41

r

CRS-65

of tre \ation's gasoline and the independents 25.b. That

was a gun of 2.011: co.er 1972 and represented a steady en-

croacnment on tke major petroleum companies' share of the-h.eh--

market. I^ that context, the rove toward discount

marketing may be a mo%e by the majors to preserve their

market rather than an attempt to drive the independents out

of business.

The Minded dealers are not, in general, sympathetic

to the current plight'of the independents.. The turnover rate

of the branded dealers is about 33%; per year, seven times more

franchised dealers go out of business each Ear than do inde-

pencle-nts Rera6se the independents ha%e bought surplus gaso-

line at.loWer tankuagon prices frog the same suppliers that

sent branded dealers, they are often considered parasitic.

The branded dealers feel that the independents have been

stealing-t,eir custon,ers by price alone since theil- costs

were lower. \ow that a seller's market pre%ails. the branded

dealers resent sharing their products with independents. They

espociall% objert to the independents' demand that the same

price' athantage fie maintained.

The retail marketing practices of both groups are already

r,anging in re,sponse to theshostage. Gas wars are generally

a trinc of the past. Gi%oaway promotions. trading stamps. and

i3

CRS-66

. .

even naps may St discontinued. Credit card purchases. which

add 1.5t to 2.0t pli gallon. were originally encouraged as

an inducement_to buy gasoline and may-be dropped by can) re-

tailers. The trend in gasoline retailing appears to be

tos.ard minimizing costs by emphasizing large volume outlets

and promoting self-service facilities.

r 4

CRS-b7

PROPOSED RE4EDIAL A7TIO%S

In any shortage situation there are two courses of action.

ihcrea.e supply or reduce demanit. In the cast, of 9ascline,

neither of these alternatives appear to be easily accomplished.

o - eNtert that efforts in either category are effective,

4oYvvPr. the severity of the shortage can be reduced, All of the

are discussed as proposals and are not necessarily ad-

vocated by the author or CRS.

Proposals to Increase Suppl'.

A number of actions have been taken recently which would

hopefully have the effect of'increasing supply, either through

increased domestic productidtor foreign imports. These ac ions

have been discussed in the Section on Supply. For the short term,

it appears that foreign imports represent the only major means of

increasing supply. Even imports may encounter 'delays due to

tanker availability and the lack of deep-water ports in the C:S.

SP.eral other specific suggestions hate been made for increasing

supply. The time frames for all of these actions,vary but host

mast t,e considered mid-term to long-term actions.

A Pasithro4e Allowance for Imported Crude Oil

tndcr the current Cif restrictions and the price freeze, in-

creased costs of oil products can be passed on to the consumer

high,r prices for crude oil cannot. Because of this, there

is a reluctance on the part of the oil companies to import oil

1

r q -tJ

CRS-o8

at a loss. Since crude oil is vitally needed to maintain

maximum refinery output such an action may stimulate through-

put.

Oil Exploration Assistance

Because of the high costs associated with the search for

crude oil, exploration efforts hate diminished. 'If lease and

bonus payments were aval4tle for use in exploration and develop-

cent, industry could expand its efforts to find additional re-

serves.I

\orth. Slope Oil

Alaska possesses one of the major untapp )11 reserves in

the world. Addition of this oil to existing stipplies would

significantly alleviate current shortages. If a pipeline route

were agreed to and construction begun soon after, Alaskan oil

-ould be entering the market within five years.

Oil Depletion Allowance

This major tax achantage was designed to offset the costs

Incutred by oil com pan s in exploration and development of new

sources of oil to compensate fer those that had been exhausted.

10 all of tae one saved through the allowance, however, is

used for thAt purpose. A requirement that e percentage of the

tax satidgs be used for oil exploration has been suggested as 6

one means of increasing such activity.

Oil Storage Reserves

The gasoline shortage in many areas has been especiall

severe becausC of distribution problems. If adequate storage

r(

CRS-og

facilities were ?trategic!fally placed around the country. the

effect of such shortages could be substantially reduced. In

many cases the stored supply might besufficient to provide

fuel for a region through, periods of high demand. Furthermore.

dasnline would be immediately available for emergency allocation

to farntrs and aver nigh priority users. Legislative proposals

haor :t; msdt hrl «-onmend a 440-day reserve storage capacity.

0*.elonrent uf .r ,._mtal Shelf

A 1.,r. ,f,,+(' rE4er. f oit, ,Ithougt, no one ic^ows

refi-eries

.1S inr '.11 off out c. 171';,)01'

IP

1,I 11. '( 'hi: 1s. than 527. has been

de%elope, J-1 -1 -4' bee- r --er,'.rated Tt

t'te Gulf loan iet.oe, rfstr 'lie

off 1. f*lntir roan' ,r./irqrarv, -,*- Indicated

that pOttrIt. 4. tr-, CIT,,IteL Or- io)S1% EStl-

mated. Development o" It, ,,r(o wolf. rcl4Art er,Aron

mental controls but ,t;zo tcrnevtani') I WroleJresource position of the ' redurg dcpAtnc o- forti9r

imports.

Oil Shale

I.S. tas a largl guantit% of untapped domestic oil in

the oil shalP deposits of`colorado. Utah and liyo-ting. These oil

reserves ma) be as large as WO billion barrels: Development of

these resources would have obvious national security and balance-

of-parents advantages. In addition. the oil is located near

7 7

I

CRS-70

areas in the Midwest %here refineries are operating at levels

well below their capacities. Conversely, a great deal of en-

vironmental disruption would take place from the mining neces-

sary to process the shale. although experlmen(s are being

conducted to determine the feasibility of extracting the oil

from the shale in place. At pr4sentshale oil costs more per

cibarrel than foreign oil but that differential is diminishing.

Economies in scale would be realized by large scale operations

that could be *kxpected to reduce the costs still further.

The extensive tar sands io Canada are a similar resource that

could be de%eloped.

S%nthetac Oil

Oil can be made from coal. which the U.S. has in great

abundance. Pilot plants have shown the feasihilitl of con-

version, but the costs are currentl.. higer than imports. As

the price of foreign oil risc4 )nd the cor. rsion cost decreases,

production of synthetic oil ma% bercyn^ significant in the next

several decades. Consider,,-le research, however, remains to

be done.

Increased Ise of Coal

In many as ttt ,pply and demand situations for all fuels

are interrelated. If f donal for one fuel exceedi the supply,

the excess demand is trao.4,rr.t-, 4 another fuel which, in turn,

reduces the suppl of that fue a A,11. For example, the rapid

rr' 3

CRS-71

increase in oil demand was due in large part to natural gas

users switching to ail %hen gas service began to be curtailed

4 in the late lcobOss. The United States has large quantities of

coal, in fact, some of the richest deposits in the world.

Greater use can be made of coal directly and through gasifi-

cation and synthesis. Relaxation or deferral of secondary

air quality standards and wider use of stack gas cleaningt

symems would ameliorate the Coal utilization situation in the

electric utility in'clu&try. Since many industries and electric

utilities burn oil when coal could be used as an alternative, an

increase in the use of coal could considerably reduce the demand,

fo1r oil,

Increased Use of Nuclear Power

Because a great deal of the oil used in the U:S. is consumed

in the production of electricity, an increase in the percentage

of electricity produced with nuclear power would reduce the de--

mand for oil. Construction of puclear cowerplants has been

slowed several factors, including delays in licensing. If-

..the process could be streamlinN and accelerated there could be

a reduction in the demand for oil.,

Efficienv of Industry Operations

A significant amount of oil is left iri the ground after

extraction has been completed. In some cases at leastf, secondary

and tertiary recovery of that oil may be possible through as

CRS-72

injection and other procedures. A great deal of energy is

also unnecessarily lost in refining operations. By using

better mechanical energy conversio, methods, better process

energy conversion, and improved process heat recovery, most

refineries could reduce energy consumption by as much as 20%.

Deregulation of Natural 'Gas

If artificial price constraints were removed from natural

gas, more. exploration and development money would be mailable

from revenues and urhaps equally importantly, there would be

a more equalized competitive price structure between the various

fuels and lower order uses of gas would be discouraged. Recent

FPC decisions have greatly increased the price of natural gas

soli in interstate commerce. If the increased price does re-

sult in increased availability of natural gas, pressures on oil

Csupply might be reduced.

.

Ili

A

Proposals to Reduce Demand

Taxes

r'SRS-73

Most of the gasoline consu d( in the United States is

used in automobiles. The average American automobile is heavy,

highly, powered, and sometimes inefficient. To encourage the

industry to build and the public to buy smaller, more efficient

cars, several tax proposals have been made. There could be,

for example, a tax that would be directly proportional to the

weight and horsepower of each new car. Ideally, this would

provide an economic incentive to purchas economy cars. In

c0that same connection, it might also be ap priate to require

the expected gasoline consumption to be printed on the price

sticker so that a prospective purchaser could inqude that,

factor whe'comparing cars. An increase in the Federal gasoline

tax has been suggested as an additional means of reducing demand,

although there is some question that demand would be significantly

reduced by higher prices. Most people would 'probably grudgingly

pay the higher prices without substantially altering their con-

sumption. Because the tax would be regressive, it would impose

a severe economic penalty on groups with legitimate needs-for

ine but with me of paying for it.

a Work Week

A large amount of gasoline is consumed by automobiles and

buses in transportipg people from their homes to their jobs.

I

61

CRS-74

The energy'loss is especially great when rush-hour traffic

jams occur. A four:day work week could reduce the amount of

energy needed fox commuting by 201 by eliminating one commuting'

day.

Nationa5Peed Limit

Automobiles consume 11% less fuel when driven 50 miles per

hour instead of 60 and 25% fess when driven 50 instead of 70.

A reduction in speed limits, therefore, could reduce fuel de-

mand. Problems could be expected, however, with enforcement and

with the cost of.cha es in existing signs.

Mass Transit

If most commuters had access to mass transit and used a

substantial reduction could be made in fuel consumption. t Many

,people do not feel that mass transit is sufficiently convenient

or inexpensive to represent a real alternative to driving to work.

To be successful, a mass transit system would have to have low

fares, possibly even no fares if heavily subsidized, and an

adequate network to serve each urbanicommunity. The savings in

highway construction and in sir pollution would be great. as would

{he time and money saved by the commuter.

Improved Building Design

Large quantities of oil are wasted every year in heating,

cooling, and producing electricity for poorly designed office

buildings. Large glass areas are attractive but allow considerable

82

(RS-75

heat transfer Buildings ra%e been designed with energy con-.

senatiOnin mind. and tie sa%ings in fuel costs can he

consicterable If most nei buildings were constricted to con-

ser%e energy, tre demand for oil could be much lrs. than if.

current "prac,4-e-ar..continue.

Airline Efficiency

airrralt is one of the'least efficient means of. 4.

transportation in terms of fuel expended per pas)enger

although it does offet,conjlnience and speed in rArn. Many

aiklknes by planes6.with a %ery small nutiberiof passengers.

Quite often anether plane bf a different 'airline willalso be

flying the same rou th a small load. If such flights were

coordinated so that planci could fly with greater loads and so

"al unnecessary flights could be dropped. a substantial

of fuel could he sated.

Enero% Consenatlon

.7 The greater potential foi reducing demand lies with the

mos people are accustomed to havirig 1 ine a% ai 1-

ahl whene%Er and where%er they want it. Unle s the individtal

hegins to prcticc energ% conservation. 110A6L%T. gasoline'sh-

ages ma% hen om. even mere acute than they are now. In that e7e.

' rlasoline might not he a%ailable for even the most important'

4

p.irpilses. The following suggestions fromthe American Motoristo .

,

-Ouce_ 073, can be used by the indi%idual to consene oasoline g

G3

4

r I

Pt

F''!"'T }Of oi.rntrat-4cmh,rs. sh t trip, .hldrer, t p1, -king, up s,;ut

alb take care ' sr:ppm; errand..44 1 s . on-esider-mg, b-s u 1Ct sl .0-nghth... a snot crier za...1:1(

keep Th. cars eng,.ro..n ;lane Special attentian shxild ix 1;7,s er, t., fur' anda r plac. 4'13 p,'"It, 'and 1.1 car. cnntro'

Den t 511 s ar cut' rank tk Fu,1 canr, V.h..1 parked an rs,:inr Fuel A19, ,ar, expand an-d oser3esa

irhe-r e-,,-1 If th. car puked ,m g,r,Ltri,d so wrest -act the.401 n-Klan, t, -hp tht tiik

Stake pr,p -' tnnated 11,:s .- tr. wt ar Addlira air v."..,n trasern,, with a 'till ',cd bat gle, not ,1,1,d the

',Ted tr,1)rgs, at -r..d,rat, speeds creath

iff.-cted b% speedSs rid -}4ck r1Y-..t" stalfk Als.ass acrelt-rat, izzadualh as trrach sou had

n s and 'h. ac.ve.--...t,rsthenese ;N/A:Ye st p and go drwIni. iLso

t...' -npt srgn.als mlnirnize braking and

- \Allen -r4,--ing, a tree...as takt tu:1 adsantage ,f azrttlerat-m path.!kit can zradualls reach h3chv.as ,perds ratht than having to fi bor.!bard- th....acvelrrator reach cr.acIng., Teri

As1d 3,-,geh-ratnr, hard 'ahem ;;.-nni.. up 3 WI ireteaA "vaird up ldequatt.speed .h-ad -.4 tsrn

- Ater <tarrtng t old enzln. don t 'kn.; ..arm up prods taste-addtn. A milt re-aching, C-"11% pd

t all 1k the -14.-ir.e- t m.,re than i m parked..t .n 4,, 4 !h.- ,pr-0,-,14, ner hs hez.nnsrsg, soar trawl &as

.-ar',r Its the ra,rrsinc and ping es- road during, th, hottest t1,-,arcTts t trawl Izhter u<- ht pr:ts addrhcmal stnurt

tFe .rig er s p.r ill n 1!

of 'e irrortalsce -of gasoline to agrir.lturt,

aromas .'e 's.3.a%ailatle

)4 car -- ur;cd farrtrs to follow' ,,.-se

ion jTar1,7tS

--S-duc ill acie practices I -r}on Now if not.ntes-

gars oup1' rac'tries tocicther wol!cr r..3.SSIbl, to crake one

ri: r !tt, work of sc,ral--sus" as disk-plant-,.

64

CRS-77

apply terbic de all in one operation, (3r don't cultiyate un-

necessarily

--Ma,cr tractors to the job to be done. %her possible

Cse srall 'ractors for the lighter jobs: 2 use diesel ractors

where possible Lecause gasoiine s ply is 'Ighter than diesel

O

fuel. Nib

--Operve egJiprert a' toe proper engine and field speeds.

.-se.p ractor and equipment properly tuned for raximur.

fa-1 efficienc..

--Shut the engine off if the rathire is likely to be stopped

for sore tire. Ic11.ing 1401 often use more fuel than restarting the rotor.

--If possible. rove large egiripment by truck instead 3f

drNing it seyeral Miles over the highway.

--Pos'pone operations such as ditch clearing and land

ley-ling when poss;ble, even for just a few weeks. until the

f,e1 situation irproyes from the present 'peak-use period.

--Mork the field the long %ay of the field wen possible.

'o nut down the number of turns that result in inefficient

us' of

1,

'TM- gasoline shortage is tne result of several factors

actin( in conjunction. Limit,ed refinery capacity. flagging

domestic production, and a uorldwide shortage of loin- sulphur

crud( resulted in restricted supplies, At the same time

demand was rising at rates mu,h nigher tn-an before. Tnis

imbalance. if it co-tiues could create serious economic

problems.- Thy gasoline snortage has already had a major

Orimpact on consumers. farrers d%d independent marketers:.

Unfortunately. there are no quick or simple solutions. The

only short -tern relief is likely to cone from impor1s of

foreign oil and oil products and through conservation efforts.

A recurrence of gasolibe shortages car, he cxrected for at

1ast the next three years until ne% refineries are built.

such tire as supply once againifs sufficient to meet

demand. artificial means nay be needed to ensure that supPles

of gasoline arf, allocated to those who need ther for high

priority uses.

f 8 8

a

4

a

I

CRS-i

APPENDIX "A"

ENERGY RELATED LEGIS4ATION. GASOLINE SHORTAGE

Bills and Resolutions - 93d Congress

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U .

I. 66,0.

er

r..ll. 15/.1

Vote art gem..

4 n.11 .o osn1 tee tot

,ol

of

115

t.

O t0wldo

a141.100o1

tttttt

dodoction fit the on 4f

wger.,

aotomobilo

in

careor1.

MIL

TITLE

JILT.

)IMESTf0 II 111.folEVI 1511E1

-01-11

lefortod to hose. Cossittee o Va. sod MOAM

M. M. 713.5

MM.

/14/71. tootle/ 11) L. writ.. f.cf.

A bill to stablieb

to fat..

geedliee

Aoki

diesel

feel

Seoul

clivilloa

neer* 1 'tier to erd..4e for

fficiert feel Cot face to le ttttt

of

hdttage.

(SELL

TITLE 0111.1.

DIGIISTf0 IV 104.110081. 1550E1

.0.14-")

Iloterred to Mote. (*settle. on *ash. sod

C ttttt or

.O. 0111-

or. Moakley. 5/1111.

1 ttttttttt and fofel9M COM1OIC1.

4bill

to

avtocIfe

a, troroe

of

tCI

4.4

Jolelo ttttt of al tttttt

ropello Est... for pottfootive

"tact's

is

c ttttt co.

(tILL

TI

^"40L?.

DIOESTBD

IV

5041StO011T

S-01.11

lfetrtn to Roe.. Coseittee om

YorOdo Cosser-e

I.

1511.

Mc. 1A.19

VW). Ily fled ttt

A bill to wood tb internal Me

Code

of MO to

TOirl

for

91 ol tttt 1111. tosobilo Itb respect to

its

fool 'co tttt poluo

Ts'. td

to

prooll

for

ilsOlogot

of

%IA

fuel

COKSUMPti011i

rate

of

esety

goo

tt000bile.

(SILL ttttt 01LT. 0(015110 II SOP310UEST 151021.

S-01-'1

leforral to 110,10 C000tt91 OK Va. s4

, .

S.

'St 2.

11f. Racdoea14, 5/1/'1.

I ttttttttt en/ Por' Cosset...

S.

O.

TOO).

Mt. bp.. at el

.

tttttt tate awl ,tel3s

Co.

tree

.

left

erlfs,cliser/

*So

of

Ilolotion

In

lb

11.t t lb it tun of 11, 11 1.4

1.51

5of ale

leolant

eri

tbt

the

*obi.,

health.

,t

lfer it thovly

1. q.(it.l.

o,f olo

1. f.t 99. deleratt,r of

19ff, ,fL.,

fII

II.

1ct./

ofIke

(oleflOf.

SO

)tot 0.9f 'scoot.*

(SILL TITLE ..1.1

0,.fatO It SOR5Tolt11

5 "1-'1

lfetti to Romeo -o ttttt ee 15 tttttt

inS

C ttttt cy

O .

S.

161111.

Mr. ttttt

5/1^/'1.

Isteretet

Toreigo-Comsetco.

4 bill to ptlirlie 274 the co ttttt ed sole of geeolim

to

1.101111 ttttt Let*.

.010[11[11

It 5055140111 1111.1

5-11-')

tttttt

to Noose Co ttttt ee 3M iet.r state 4

foreign Coseott

O .

O.

'TOE.

MI

,C3,11.. et l-. 5/101-11

TaIretet and Forl.. Coemetce.

bill to movil fir the cootie... napply of

petiole,.

*colon*.

to

todpemdemt

oil market.

(SILL TITLE *ELT

DIOTOTOD It S011ied0OVT MOT)

5-10-'1 Vfetri to Moose ',sm... in In tttttt to and

Forel -osserce

O .

O.

'$70.

et.

501a04. 5/14/1). tttttt

and C ttttt Cy.

4 bill to eofbotile the Olealdeet of the

Omitod 5

to ello-ato soot,. .4 feels ees be deterglmes0.4 dee t

that

ertrecod t

shortages

or

4lagocatlos

is

the

dietribotioa of eetgy GM1 foe. ofiel Of Ole ("teen.

401

that

the

path

(boot t 1

ttttt

ofv.

11.

is ttttt by

leopetdisel.

(SILL

TITLE

OVLT

DIOXSTED

TV

5011,40011.

Isio

n5-14

lefcri to Nov.. -

t e so tttttt g sei

C ttttt of

A bill to Prol4e for the contisoei soviet, Of PtfOl

. reflect

to

isdpoelest

.(MILL TITLE OOLT

0/0ESTtO II 10111t00EVT mon

t.o.-11

ttttttt d to K041 COSeittee OM

I tttttt ete 4

70.1111 C0.1f.e

M.

R. U.. Are. Grasso. 5/11^1. StAbial end

tttt cy.

N .

O.

T101.

Mr.

booth. et l.. 5/1',./.

A bill to utborise tb. Ptevileibt of the

Ont.)

ttretst 4.4 9(111 Co...,..

c90 *locate neroy end (rein .Men he 4efefolf100 451 loc.

4 bill to prowli for Ike comtlol tel

of gesolime

to

In tttttt *et

gsolls retaliate.

(JILL ttttt OIL?

015f$110

II 51111EJOEBT ISSUE)

5- l'-'1

ttttttt I to Moose Comet.. de Infetotte .rd

Total. Coget,.

0 -)

s.

S. ogel

100$' all)

a bill to 'fowl, lot to co eeeeeee 001. Of a.oll. to

I.

U. 1106

at.

yto.; 5/11/1).

1.4.1.044eat

welt.. emtala.

(SILL TITLE OIL!

0144iTto

la tttttt 4 aid rotas. Coamerc..

If 3011110011T ()PP()

iA Sill oo 'Pr WI t>1 the coet.nuel eat. of q..,,LI..

to

S l'''')

Seferre4 to Mole. CO011atto VO

IAt. ami

la.pefeat gaoll aolaalam ad retailer. 0.4 ttttt ..4

foirilt ,70.16,

14 a 0 ttttt bbt. so4 lot.

tel almacie. ttm. (SILL

.S.

6052.

sc. Dolt 1/22/'1.

laotatat. sae 'or.lIs Cobbfc..

A bill to provide for tb.

cotl.

4sal. of alesoll

to

1.1 ttttt total'

t.

(SILL ttttt OLI; 01414fSD In

1061200211. 141011)

iffir on!. 5141St)) IS 1065E002ST 115011

5 -11.')

ttttt rei to tttt Coellte om fatlstat .64

grilk C0.4111(CO

S .O. 511.

Ill.

ttttt

1/7/71. rebliC Volk..

1 bill to teattal. the Motto. lea coaaptlo. ea. by

5-22-'1

tlettel tO Soo.. Cooatt.e co. ttttttttt 444

r)allal for tb. lo ttttt 1 of the tima .p..l Ilat vital.

/.rg Cosset:.

..ca Stat..

(SILL ttttt OILT; OP:1MM IM 40641,001 r 11501)

S .

I. SOSO.

at. lapis. t al.; S/21/71.

6-1,-,)

Valetta to Sea.. :oaatte. ea Public Vocals

1t

4 Potato. Calacc.

I.

S. 1511.

a. total; 4/11/'1.

A bill to ao.14 for the coal...4 ..1. of gaol.. 0;

I ttttttttt 0.4 ?orag. Comarr.

1.4...04ma

oaaolla total....

(SILL ttttt OPLT. al,t)Ti,

IS 4011110011 I4101)

a all to peal. lot lb. coal...4 apply of

para..

ptolu(t.

to

tat ttttt ea

oil ar tttttt .

(SILL TWA OIL!;

$ 27')

::::1;7.4c::.::::. Cosoeittoe

0140$120 II 3041212VIIIT ttttt I

6.11 -1)

notated to 1001 :00.1110. /* ltermt.te mad

S .

S. 6060.

Al. fiacgoeall. et al.t 4/21//1.

roclbe COscs

Istaatat 4.4 'ocelot! Co...cc.

Cr

Ce.

)N .

O. 6517.

a. 101.11; 11/12/,1.

I bill to pt0v14. let (C. coal.oi ttttt of

parole..

la

4 Otaq. Com.rce.

prOdect.

to

1.4Pealmitt

oil ttttt terra.

(SILL Till! GILT.

01 ttttt 0 IS 3001200111. issarl

a bill to alborls. th. ''..Nest of (C.

0.11.4

to allocate ceette oil ad poll..4 patrol... ptalmeta to 4..l

S-2

1-'7

itro4

1 to

los.. Cobalt!** .. I

4alb eclat., a ttttt eat aortal.. al 41.10calos. I. tb.

rota.. Co..orc.

salon.' di

which

jop.t41..

the

peblic

heath. allay. or

;to provide for the delegation of

S . I. 4104.

Sr.

to

5/21/').

.a boric)

to

. Sec tttttt of tbo 'aort'. .14 lot °at.

"orals" toeeerc.

perpoes.

("ILL ?Inc 0$144 010E4T11) IV 5064C00211T 13401)

A bill to "cosine ter the coati...4 ...'If of

otfolese

loroncts

to

isgesoedest

ell e ttttt bib.

CULL TULL OW:

O 1413,10 is 301134044T M0!)

5-21.'1 Solra la Moose Committe. o. 1.'. tttttt ..4

Potag. Coaoc

S .

O. $111.

Sr.. Gramma 5/21/1).

tttttttttt 064 rotation Coamcc.

I bill to 'rosin. for the coatled eats of gasoline

to

linfveadeat

gaeoll retallere.

(SILL 7I1LS

07.

01,14f60

IS 40111200t

1510

1)s

5-21-'1

tttttt .4 to Sou.. Comatte. om

I ttttttttt

10[1.1,11 COMMIEC

4-12.1)

tttttt ad to So... Co.mitte co. tttttt tate 0.4

radio. Collarc.

1-)

Air

AI

ILLs AND A1SOLOTiON1 -,1141 (011,11( SS

MOUSE JOIST ESOLUTION'S

M.

J.

ei

Onielson, 7/4/.11

f 00000 tete to4 otlg k000ern.

lthorir44

the

Se:rtry

of

T 00000 ortottos,

to

leasolttlo olth the eeedoOts Cetwatl O the

41.1.0,7

00000 ee

00000 lishel

seder

thin

toist

r000ltkoo,

to

collect

co 00000000 lye

54

1 000000 gatlos

of

the

rlotlOselt10

of

.0101 vehicle slA to lb. Nb1A: 1.

Provide. (hot sec* stet,

os4

Eavotiotios

*hell

tocil

csidrotlo oft (I) tb roltieeohle b. 00000 etgr vehicle

tr aot

(I)

ollet Soo Of the elf aa4 other coo 0000000 of

101

Ioa of lb. Sotiot

supply 'of

ettoloe,

*tots.

as/

other r 000000 le rooetce. ICJ lll

ote all frosecv f tor vblcl occ 000000 4 tbe ccr(,

(stories, eel fatlities 00000 dloot tbsvote.

(0)

the shartg

of aotor voUlel iorklag l.-SC le

aflo

684

oottopolltoe

(t)

the 4 for 14itioa1 biplotty cost foci tor:

(f)

the cooestloa

of eft.

coaleees).(LI the soots of solot

woe.; (MI the

estosobtle

itaaefaCtorlao

lad 00000 .

ootor

vehicl

ocoots, *84 the tattoo IN

tee

toe Mel

lob ...We ...foto*. &Pt good.

foe

the

osi 000000 ce.

o 00000 lee.

sill

osefactor of

motor

vobicleo;

tad

(1)

the

feasibility

of

motor

vehicle

soy*,

other

(boa

istorsoi

co 00000 leo eaglaeo.

(2)

t he

roloctlo of oator vebicle else wol4

be

is

the

**We

0.4 (1) tb vosolbl

I tgctag lee

Ile of

motor

vhi(leit,

sick

as

terough

IN

loot.

of

C000rem

tc

too

or

to

rgolot

ttt.ratot

Gad foreig

covcco or is say other goy, s4

the

reletive

:ast 4

booefite of ocb each

, oosetary or otlrol.

leseirA te Socrtoty to *bolt tOteri tepatte

(tom

tis

to

(lee

to

the

4 to the Presides% sad

flee* Re01ti 001 lister tit" twelve *oath. ftt tbe 4te of

porovol of tale foist

rolelo,

costieleg

t4etotl1

tIf the (1541st.. ceacloplo. wed to:oft...Eltion*

of th Sec 000000 ,

sad to ftpol10 sock le

ot

olot

sotto* es the lCretar, caelder ono* 00000 to perry out hie

ocoesesletioas.

Revell*.

tile

ftlleet

to

opoolot

Doh

Advisory Cooitt on

the

loaCt

of

Motor lebicl Site

comeloti

of e

h sc

,tff 5

10 1

.ill

CIs

tronI 0

each

Eros

the

Depot.

of comrce.

Jostico, Roost, oat Orbs. troeloP000t,

loterior.

es&

0.111.

feticallo,

and

Vetter.,

the

(Nett( 1144

Cosolosioa,

the fkolto 000000 1 Protectiot Aolebcf, the Office

of 0000000 co r 00000 *doess, one sorb other

rotors'

gemcies

as ore tleelosoted by tee Previtoot.

P rofiles the, loch ',visor, Committee shalt

dvise

III

SeCtetilt,

Of

the tfettlflO Cut

end the cost.(( of th4

othorivt by thJo feint resolution.

P rovit tent the authority of the S,fett/ 44101

-teto

tole

rpOltion

shalt

terinsts

flht,

dove

lifter Oh.

soholooloo Of Ile fleet report.

Asobollteo

to

be

epro otfistel,

slyoot

210,1

teat

Ilettt,ito,

soot, sot to

112.^00.0,0. .0

sly

be

ea,

tt

ct

the

lot o I et Is

of

t h t

Jot

rsolstio4

2-06 -1

Deforrol t, Itose (0 0000000 O. letereti 04

/Well 7oeseti

O .

J... Ira. 140.

Ir.

0 000000 oo. t 1.. 272',71.

000000 tete. eel foreign Coeeetce.

Seep Dlgt of R. J. Its.

10'.

e2-27-1)

lferrot to Moose (oeeitt to Itertte

1011

) C

ON

.tcN

.J.

Bee

.Slf.

area

Dosieloon. et l.; /t /n1

lottttte sot Soleil% C0elot10.

See Dilst of R.

J.

Bee.

101.

n -lo-,1

eef 00000 to Noose Cosittee a Itrstt 4.4

yorio. coeer,

N .J. O.. sro.

v.

.s/s/-s. ey,. n4

Direct'. t 00000 toot to, after petal, be 00000

,provide

Ref

the

atebliheynt

of

prlaritla

of

one

wed

for

i/

llocettos

of poll of

petrol..

prolct

locioding

crele oil is 074e7 to soot tee oseentiol adoe4o of

various

sectioso

of

the.

(lotto

oat

to

pt

W it°. ttttt lye effJt

ttttt tins

Ira. hortg of ch

pro4ect.

fttee in the I...Ulf.

Office

of

the

Fools Allocation ord, cooonot of five sesbet,

to toottl the loplottino of

directly*.

by

tee

ttttt 400t, as wsteorisd Ay thio Joist tesoletios.

crt

the 0.14

foto tttttt

poet

to

carry

oat

the.

fenctilas of tel jolt

01-'1

tttttt et tt Moots teekli on 'aye e54

r-s

4

*ILL' sus imiuirloss

tsrs co:mess

2111 COSCO eeeee azsomition

M. vie. i..

rim.

Rt. ****** . 5/2/71.

let eeeeee

aellTotelmn Casette..

eeeeeeeee the eeee et C eeeeee V tint there they'd at

en

lupN

lett

reelect Ito or ail petted opted Ileitis Is tsceia-of

!lett

llhoer or

t it t

ea e

eeee

hose.

SpeeltlI

eeeeee tes which hisit h

eeeeeee "ea ST /Natal.

Stets.

4'44

a1 tO

rnea

tein

ardor

tolleIt t Icier lel

Ceti Mctgo.

5.25

tortured to I.... Comeltte. as eeeeeeee 4.4

Weiss [Gamete

s. Co.. Sc.. 231.

et. teach.: 5/101/3. Steed Socvicoo.

Come eeeeee

seseeletlem

eitsroselnq

tie

some.

of

the

Co eeeeee

that

tat Vetional Cenci sad 11..ecir cosset..to of

too

Scowl

Motets t the

Oalt.4

Stet..

cat

beck

toe

anecoes4s, feel *speed eeeeee thick Cr. sot eeeeeee I for etc

kstiocsl

stescity

of 4.reato total:meg.

(MILL SITU OSLT:

Sit eeee) Is eeeeeO

tter

Wen

t-7.77

Setecce3 to eeeee Co eeeee oo on Scott Service.

S. Coo. See. ISO.

et, Scombill fl.l: 4/3/');

eeeeeeeeee sad Totolt C eeeee co.

,etcottme rooOlstioa

la, the wee et

Coesree

coiat414,

tie

cetervtio of 144elIse.

'SILL TITLE OOLT,

10113e$0 IV segvolessr Mon

114forro4 to Moe. Co eeeee to

Torsi.* C eeeee co

I. Co. fee. 241.

Ir. eeeee III (740. t al.: 4/7,7).

let

et 'ocelot Coal.cc..

fseserost

reso

ltlos

*apt eeeeee the *e*.

Or Co.W..

ce4t4lo0

the

cOmatcm4tion et eaeoil.

DILL TITLS 0/OLT:

DIGlITID IV SOOMOIRT 1143n

6.0`-1

eeeeeee to

loup

e C

o ee

eee

oe e

a ra

jfectite CO eeee co

M. Cos. em. 200

Rt.

tiro eeeee :Ie.:. et l.. /12173.

tat rorolli Co444m4.

Cow eeeee t

etsoletloa ttromolna

of

S44

the

lot of mem011ne.

:SILL TlTLt ostr:

014i0rf3

sussiottor

.1

Perccti to loose

realtte. On Interstate emi

fordIq, Cos4ore.

S-,

z

CRS-x

APPECDIX "B"

REFERE\CES

a

1'

I

RS- x1

1. Allocation favors independent refiners and marketers. Theoil and gas journal. May 21. 1973 72-73.

2. CLf Majors ray raise prices 3.7-4.7qx. The oil and as AI.:ournal. April 0. 1073 3.m.

3. codifies to oil-Pricingrules. The oil and gas journal,may 21. 1073e 70.

4. ,'onflIct 17 L.S. oil policy. 'sew York tires, May 27. 1973.

5. Dpumani, George A. C.S. refineries and the energy crisiscongressional Re-seare Service. may 7. 1073.

? o Dryer. Jason E. =Statement of independent ftfiners' associationor America before the Senate Committee on Yanking. Housing. Andtrban Affairs with reference to the effects of the new oil im-port program. May 10. 1973. /

7.. FTC probes independents products squeeze. The oil and 'gasjournal. May 28. 1073 108.

8. Gas consumptio n it new high in '12: MI recommends conser-vation reasures. American Petroleum Institute nests release.June 2. 1073.

0. Gas stations A s+a) of life is changing. 'sew York times.'may 27.1,073,

10. Gasoline pric'es rose less than half as much as consumer pricesin general since '02. American Petroleur. Institute news re-lease. February 0. 1073.

11. Gasoline runs short throughout the U.S. Wash4ngton post,,April 16% 1073.

12. Gasoline shortage shuts doors of hundreds more stations.Christian science monitor. June 2. 1073.

13. GasOline taxes--hot way to cool U.S. economy.science monitor. June 1. 1073.

a

14. GaAtt, Earle E. Agriculture and the energy crisis. V.S.Department of Agriculture, speech before the ational con-ference on agriculture and the energy crisis. University of'sebraska. April 10-11, 1073.

Christian

57

.\

CAS- x.yt

Impact of gasoline marketing practices on tte consumer.Hearing before the Consumer Subcommittee of the Senate(omerce rommittte. Marc' 17. 1073.

:a;kson. -4.-nry Y. , Emergency petroleum allocationact of 1071--arendment. congressional record. May 2".. 1073Sokoo0.

ma.ors'slice of i S. gasolin, pie s'rank in 1072 Tte oil '441

Ind gas jourral, May 14. 1073 20-31.

18 More oil refineries. BarroF's. May 28. 1073 3.

10 7', "tar-term outlook for gasoline and its impact on in-dep-ndEnt 'marketers. Petroleum Industry Research Foundation.Inc:. Marcr 1073

20 %Ivo* aide fa.ors nationwide speed limit on interstate roadsto consent gasoline. hall \street journal. May 0. 1073.

21 00( issues re.ised oil allorat,,n guidelines ThE oil andgas .ournal. May 28. 1073 30-31

Proleum outlook. John S. Herold. Inc.. May'1073.

23. Tte petrolur situatiop/./ TtE Chase Manhattan Bank. April30, 1073.

21. Pirinc. Chase see acute gasoline pine'. The oil- and gasjournal. April 0. 1073. 38-30.

...

I Pirinc urges 1.O. strategic oil storage The oil and gasjournal. June 4. 1073 28.

20. Probe of energyplot charge sought. T'e oil and gas journal.Jure 11. 1071 t8.

27 Resporise tc Secretary Schultz' proposals for tax change- -

an introduction. S. stEvens. Congressional record. May1071 S7200

28- Re.ision of`oil profit reporting urged by Cities Servicectairman. American Pe;roleur Institute news release_ June12. 1073.

20 0,43c,Erity of t.S gasoline pinct' tied to demand gaiy. The31 i and gas journal. April lo. 1973 35-30

53

L

f

30. Sh-11..7.-xaco J.pin firms limiting salts of gasoline.hasgto- post. 11ay 31. 1073

31 si-on, - F. Tmcny before t'e Sena'e commi'tee,o- Parking. Housing, and, 'vrban Affair, Yay 10, 10-

12, Sn..der. G-ne GasoLane rationing t]. 'the.end107-, Gorgressional rerord, 3.ne 7 1073 '63822

,,uppb and demand outlook Independn' Pe-A-ale-um Assoriationof Amerira, April 1073

4 ..ne!. of fe1 and energ, pro'.'lems for sprit' andesummerof 10- c)ffirelof Emergency Preparedness. APril 1071

Cdo37, 7a1 o,oe.ld penalize Gas hog pur.".asers. (1-1-ago tribune.

N. 107

3o. 10-rent gasoline tax ,ikE studied. The oil daily. Vay 30,.073,

37. Darrell v:'7 Office of Emergency Preparedness.

statement before the Subcommittee on Small Business ofthe SPnate tommittee on Banking. Housing and Irban Affairs.

107i,

L.S. 'rol,ur statistirs 1073. Independent PetroleumAssori.vion of America. FEtr-Jar 1073.

10, %astg.--uha refiners are doing. The oil daily.-May 16. 1473.

1

a