The Energy Department is moving toward a new pricing rule that would allow oil companies to impose an extra charge of nearly 2 cents a gallon on gasoline over the next year, according to oil industry and administration sources.
While he has not given final approval, Energy Secretary James R. Schlesinger has indicated to DOE officials that he would like the gasoline pricing rule change to go into effect soon after March 1.
"My expectation is that that will probably be done fairly quickly," said one Energy Department official yesterday.
DOE has already said that gasoline prices will go up 9 cents per gallon over the next two years as a result of inflation and the oil cartel's recent price increase.
With the new pricing rule DOE is expected to announce, gasoline prices would increase another 3.4 cents -- or a total of 12.4 cents a gallon -- over the next two years. As result, gasoline prices nationwide would average 81 to 84 cents by the end of 1980. DOE planners say the biggest increase will come in the year ahead. Nearly 5 cents will be added to gasoline prices by inflation and the oil cartel and almost 1.8 cents will be added from the new pricing rule.
Last year Schlesinger and President Carter had expected to send the Congress a measure to allow gasoline price decontrol -- a goal announced in Carter's 1977 Energy Message, Secretary Schlesinger and the oil industry have repeatedly argued that gas price controls have denied the oil companies necessary incentives to convert enough refineries to produce the unleaded gasoline required by environmental rules.
American Petroleum Institute officials have warned that without decontrolling gasoline -- which makes up about 42 percent of the refined oil products sold in the United States -- there could be a shortage of unleaded gasoline in the years ahead.
Except for gasoline and aviation fuel, all oil product prices have been decontrolled. Last month, DOE sent Congress a measure to decontrol aviation fuel.
After ruling out immediate gasoline price decontrol as politically unfeasible, DOE and the oil industry are now saying that the new, tilt pricing rule is the next best thing. Under tilt pricing, oil companies would be allowed to charge gasoline buyers some of the crude oil costs and processing costs for other products, such as heating oil.
For example, a refinery which allots 42 percent of its total output to gasoline and the rest to other products such as fuel oil, would be allowed to hang 55 percent of its oil prices and 65 percent of its processing costs on gasoline prices.
Unlike gasoline decontrol, DOE has the power to put the such a ruling into effect without seeking congressional approval.
Despite Secretary Schlesinger's repeated concern over incentives for increasing unleaded refining capacity, most major oil companies reported profits in the refining indicate that earnings have gone up over the past four years. Domestic refineries have been operating at over 90 percent capacity over the last two years, while foreign refineries have been operating at less than 70 percent capacity.
In a related development yesterday, Phillips Petroleum Co. and Atlantic Richfield (Acro) announced plans to join other major oil companies in allocating supplies to their dealers.
Phillips spokesman Brooks Garner said that his company will begin reducing deliveries to dealers by 15 percent beginning March 1. While Phillips, the nation's 12th largest oil company, buys no oil from Iran, it said it is reducing deliveries to customers because, under DOE regulations, the company has been forced to supply other refiners. Phillips also said that the tight oil market conditions have increased demand for its oil products in many of the 31 states where it operates.
Other major oil companies which are now allocating supplies, primarily of gasoline, are Texaco, Inc., Standard Oil Co. of California (Chevron), Shell Oil Co., and Continental Oil Co. (Conoco).
Arco Vice Chairman William F. Kieschnick said yesterday in Philadelphia that Arco "will have to allocate some of its crude oil and petroleum products shortly" because of tightening market conditions resulting from the crisis in Iran. While stopping short of describing Arco's allocation plans, Kieschnick said, "It is more responsible to allocate now than wait for the summer driving season."
While many smaller and independent refiners have appealed to DOE for crude oil supplies from the major companies in recent weeks, the shortage resulting from the Iranian shut-down is limited to less than 10 percent of the nation's total oil imports.