Carter administration officials are now privately conceding that the nation is likely to return to gasoline lines and Sunday gas station closings if Iran's oil shutdown continues through the rest of the year.
This bleak assessment, offered on the heels of Energy Secretary James R. Schlesinger's remark last week that the Iranian oil shutdown is "prospectively more serious" than the 1973-74 Arab oil embargo, stems from State Department and Central Intelligence Agency "best-case" analyses suggesting that Iran would return to its previous production levels by December. Many officials, including Schlesinger, have already ruled that out publicly.
And, as if in chorus, Sen. Henry M. Jackson (D-Wash.) yesterday predicted "we will have to shortly undertake a program of [oil] allocations." The chairman of the Senate Energy Committee added that "it will start out with a prohibition of gasoline sales on Sunday" and that gas prices could rise to $1 a gallon in the next year.
Energy and State Department officials and major oil company executives, meanwhile, say that spot market prices for oil have risen so rapidly in recent weeks -- from almost $14 a barrel to nearly $20 in some instances -- that the oil exporters may abandon their official posted prices, which would raise oil prices 14.5 percent by December, for even higher prices.
At the same time, the ranks of the major oil companies that have begun to restrict sales of oil and petroleum products have widened to include Texaco, Continental Oil Co., Exxon, Royal Dutch Shell, British Petroleum and Standard of California. Part of the reason for the cutbacks is that the companies want to build up inventories for their own use in the event of a worsening shortage.
Another uncertainty in the increasingly taut world oil market is whether nations such as Saudi Arabia, Kuwait, Libya, Venezuela and Nigeria will continue the stepped-up production they initiated to make up for 5 million barrels a day in lost Iranian exports.
Last month, following a succession of mixed signals and denials out of Riyadh and the administration, the Saudis cut back their oil production nearly 1 million barrels a day while raising prices significantly, suggesting that others, such as conservation-minded Kuwait, also might rein in exports.
Despite some symptoms, including talk of gas station lines and $1-a-gallon gasoline, there is evidence that the world may not be sliding toward the oft-predicted crippling would oil crisis.
The net effect of the Iranian shortage, once additional production from other exporters is taken into consideration, is 2 million to 3 million barrels a day, out of a free world market that produces, sells and consumes more than 50 million barrels of oil a day. And the shortfall in the United States is only about 500,000 barrels a day, compared to nearly 1.6 million barrels a day in the 1973-74 Arab oil embargo.
The lost Iranian supplies represent less than 5 percent of U.S. energy consumption.
Schlesinger has been quick to point out that U.S. stocks, amounting to nearly 70 days of supplies, are still well above the 54 days' worth the country had before the October 1973 Arab oil cutoff. And, despite expectations that Iran may not begin exporting again for months, Schlesinger stops short of giving a specific timetable for mandatory conservation measures and oil allocations, arguing that through voluntary conservation and increased use of domestic natural gas and coal the country can make up for lost Iranian oil.
While grounded in facts, Schlesinger's cautious tone is driven by a broad array of political and economic pressures.
Treasury Secretary W. Michael Blumenthal has pressed President Carter and Schlesinger to avoid alarmist statements or reactions to the oil situation for fear that already skittish foreign exchange markers would send the dollar to still lower levels.
Last week, after gold prices hit a record high of $254 an ounce, and both the stock market and the value of the dollar moved downward in response to Schlesinger's remark comparing the Iranian situation to the Arab oil embargo, Blumenthal sought to assure the financial community during Senate testimony that the situation might not be ae severe as Schlesinger had sugested.
Another factor in the administration's caution is that the Energy Department is ill-prepared to manage an oil shortage. When DOE sends its gasoline coupon rationing and mandatory conservation plans to Congress Feb. 26, it will be more than 2 1/2 years after they were required by law.
And while Schlesinger and David J. Bardin, head of DOE's Economic Regulatory Administration, both say that DOE is prepared, if necessary, to go to forced oil allocations, DOE officials say that if allocations were imposed, much of the chaos of the '73 oil embargo would be repeated.
The allocation rules, which originated with a 1973 law enacted to protect independent refiners and marketers, are based largely on 1972 industry sales relationships and profit margins. While DOE had issued proposed regulations and has a process under way for companies to update their standing under the regulations, many segments of the industry, including independent refiners and marketers, say they fear they would be wiped out if allocations were put into effect.
The major oil companies and many small refiners already have come to DOE to station themselves in the most potentially profitable and advantageous potentially profitable and advantageous position if allocations are called for.
Another dilemma facing the administration is the fear of either over-or under-reacting. During the 1973 embargo, President Nixon's energy czar, William E. Simon, ordered the oil companies to reduce gas sales and build up inventories of fuel oil. The service station lines resulted more from the government's policy than from the Arab embargo
Perhaps the greatest irony raised by the Iranian oil shutdown is embedded in the prickly political choices President Carter must now make. Schlesinger recently told reporters that energy has slipped in the administration's priorities. White House officials were saying barely two months ago that the president would distance himself from energy issues as he began his reelection campaign. As a consequence, energy received a scant 12 words in the State of the Union address last month
Today, however, the president faces the prospect of calling for both tough and symbolic conservation measures amid oil allocations and gasoline lines.
Last December Carter and Schlesinger hoped to be calling on Congress to decontrol gasoline prices. Now they are facing a Congress primed for a contentious energy debate, chafing at the prospect of $1-a-gallon gasoline and quick to criticize the administration for not doing enough to win energy assurances from newly oil-rich Mexico.
There is still another problem: unless Iranian exports come on line soon, this debate will begin to peak as the oil industry, according to some Wall Street analysts, is expected to announce its highest first-quarter profits in recent years.