The Department of Energy is at serious odds with the Office of Management and Budget over how much money it can spend next fiscal year on oil storage to stave off another Arab embargo if it comes.
The Energy Department is seeking $260 million to put the program it calls the Strategic Petroleum Reserve in place by 1983; OMB has offered to give the department $10 million to study how best to have the program in place two or three years later.
So serious is their difference that Energy Department officials met yesterday with President Carter in the White House, where the matter was "discussed but not resolved."
Proposed by President Ford and approved by Congress, the oil storage program calls for the United States to have 1 billion barrels of oil stored at selected places along the Gulf Coast by 1985. There are now 8.5 million barrels of oil stored at three sites in Texas and Louisiana, with plans to have about 200 million barrels of oil in place at five sites by the end of next year.
The fight between Energy Department officials and OMB is over the pace of the program, not its scope or intent.
Energy Secretary James R. Schlesinger Jr. wants to speed up the program to have 1 billion barrels of oil in place by 1983, in part to buy world oil at the lowest possible prices, but more importantly, to show the oil exporting countries and especially Arab exporters that the United States is serious about completing its oil storage program as soon as possible.
Now that oil is being pumped into storage sites, OMB no longer feels the sense of urgency the Energy Department does about the oil seserves. The budget office feels the general budget squeeze much more keenly and would like to put off spending on the oil reserves for at least two years.
"It's one of the biggest issues we have," said a senior OMB official. "There are differences not just at the staff level, but all the way up to the top. The issue is how fast we do this and when we do this."
Energy Department officials argue that OMB is gambling that oil prices will not rise between 1981 and 1985, which the Energy Department thinks is unrealistic. The department points out that world oil prices are sure to rise in those four years because that's when the greatest strains will be put on world oil reserves.
The $260 million the Energy Department wants for fiscal 1979 would speed up construction of storage sites in abandoned salt domes and mines so that oil could be pumped into them two years ahead of schedule. This would mean that most, if not all, of the 1 billion barrels of oil geared for storage would be in place by 1983.
Energy Department officials argue that 1 billion barrels of oil may no longer be enough to back up a storage program under guidelines laid down during the Ford administration. The 1 billion barrels of oil was the figure put forth when oil imports were 31 per cent of U.S. consumption. Imports now make up half the oil burned in the United States each year.
"It boils down to what you think the threat is," one Energy Department official said, "an unbalanced budget or another oil embargo. Remember, the last embargo cost us as much as $45 billion in [the] gross national product. Another one would hit this country harder than the last one."