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RETHINKING EMERGENCY ENERGY POLICY
 
 
December 1994
 
 
NOTES

Unless stated otherwise, all years referred to in this report are calendar years.

Numbers in the text and tables may not add up to totals because of rounding.

Cover photo shows a U.S. firefighter using a sheet of metal to approach a burning oil well at Al Ahmadi fields in Kuwait in March 1991. (Reuters/Bettmann)
 
 
Preface

Given major structural changes in the U.S. and world economies since the Arab oil embargo of 1973 and the experience of the Persian Gulf crisis in 1990, current policies for responding to oil supply disruptions may no longer be as effective as the Congress originally envisioned. Chief among these policies is the nation's Strategic Petroleum Reserve (SPR), an emergency stockpile of crude oil. This study, prepared by the Congressional Budget Office (CBO) in response to a request from the Senate Committee on the Budget, analyzes changes in the effectiveness of the SPR and presents options on when and how the government can best use the SPR to protect the economy from losses in the event of supply disruptions.

Richard Farmer of CBO's Natural Resources and Commerce Division prepared the study under the supervision of Roger Hitchner and Jan Paul Acton. Pete Fontaine of CBO's Budget Analysis Division contributed to the section on the budgetary history of the SPR, and Adrienne Kearney of CBO's Macroeconomic Analysis Division provided a valuable review of the overall document. The author thanks Douglas R. Bohi and Lawrence J. Goldstein for their review of an early draft of the study and their many useful comments.

Paul L. Houts edited the manuscript. Christian Spoor provided editorial and production assistance. Donna Wood typed the many drafts. Kathryn Quattrone prepared the study for publication.
 

Robert D. Reischauer
Director
December 1994
 
 

Contents
 

SUMMARY

ONE - NATIONAL POLICIES FOR ENERGY EMERGENCIES: AN OVERVIEW

TWO - CHANGING INSTITUTIONS AND POLICY NEEDS: THE SPR AND OIL MARKETS IN THE 1990s

THREE - ENERGY POLICIES AND THE EXPERIENCE OF THE PERSIAN GULF CRISIS

FOUR - PROGRAM OPTIONS FOR INCREASING THE ECONOMIC BENEFITS FROM SPR USE

TABLES
 
1.  Strategic Petroleum Reserve Appropriations, 1976-1995
2.  Levels of Strategic Petroleum Reserve Oil Fills, 1976-1994
3.  Emergency Response Program Implemented by the Governing Board of the International Energy Agency
4.  Plans of the Member Countries of the International Energy Agency for Responding to the Persian Gulf Crisis
5.  Foreign Contributions Pledged to Offset U.S. Gulf War Costs
 
FIGURES
 
1.  Oil Use per Unit of Real Gross Domestic Product, 1973-1994
2.  Comparison of World Oil Prices and Days Supply of Stocks During the Arab Oil Embargo of 1973 and 1974
3.  Comparison of World Oil Prices and Days Supply of Stocks During the Persian Gulf Crisis
4.  United States' Trade with OPEC in Goods, Services, and Income, 1976-1993
5.  Change in Local Gasoline Prices for G7 Nations, Second Quarter 1990 to Fourth Quarter 1990
6.  Change in Local Diesel Prices for G7 Nations, Second Quarter 1990 to Fourth Quarter 1990
7.  Tax Share of Prices on Gasoline Collected by the G7 Nations, Second Quarter 1990
8.  Change in Heating Oil Prices for G7 Nations, Second Quarter 1990 to Fourth Quarter 1990
9.  Change in Crude Oil Prices in Local Currencies for G7 Nations, July 1990 to October 1990
10.  Net Oil Imports of OECD Countries, 1990-1992
11.  Oil Consumption by OECD Countries, 1990-1992
12.  Drawdown of Oil Stocks by OECD Countries, 1990-1992
13.  Net Oil Imports by OECD Countries as a Share of Oil Use, 1990-1992
14.  Maturity Spread on Weekly Futures Prices for Crude Oil, July 1990
15.  Initial and Revised Estimates of the Shortfall in World Oil Supply, July 1990 to March 1991
 
BOXES
 
1.  Current Oil Markets Are in Transition
2.  Some Common Questions About Futures Markets
3.  Recent Developments in Oil Markets
4.  Economic Highlights of the Persian Gulf Crisis
5.  Foreign Contributions for Operation Desert Storm Brought Small Economic Stimulus

This document is available in its entirety in PDF.