Under pressure from Saudi Arabia and other Arab oil producers, the Carter administration has stopped buying oil for the planned 750-million-barrel strategic petroleum reserve, the main U.S. insurance policy against another oil embargo.
The administration stopped buying oil for the reserve last November when the revolution in Iran temporarily disrupted world production patterns. The separate decision not to resume purchases this summer followed Saudi warnings delivered by Sheikh Ahmed Zaki Yamani, Riyadh's petroleum minister, that if Washington began buying oil again, the Saudis and others would reduce production.
Yesterday in an interview, a White House official acknowledged that resumption of oil purchases "could cause Saudi Arabia and others who are producing at a higher rate to cut back their production."
Members of the 13-nation Organization of Petroleum Exporting Countries, including Kuwait, Libya, Iraq, Algeria and on occasion Saudi Arabia, have been openly hostile toward industrial nations' plans to build up stockpiles as cushions against future embargoes or other supply interruptions.
Saudi Arabia's warnings were delivered shortly after Riyadh announced it was lifting its production to 9.5 million barrels a day from 8.5 million.
The production increase came after U.S. motorists had endured weeks of gasoline lines and rising prices. It was meant to assure this and other countries of adequate supply and to stabilize prices.
The Saudis argue that renewed stockpile purchases would only add to upward pressure on oil prices which, since December, have risen nearly 60 percent.
Riyadh increased production after the June OPEC meeting a President Carter's personal request.
The Energy Department, which administers the oil stockpile, has not purchased oil since November of last year, just weeks before the Iranian revolt which brought turbulence to world oil markets. With only 94 million-barrel effort is now more than a year and a half behind its original schedule.
DOE Undersecretary John Deutch said yesterday the administration is evaluating plans to buy oil for the reserve in domestic markets, rather than on the foreign market.
While declining to comment on the Saudis' warning, Deutch said, "We have a commitment both to our allies and to producing countries not to be disruptive in our acquisition program, and we're searching for a way to reenter the market in a way that won't disrupt it."
At the Tokyp economic summit in June, Carter pledged that the United States "would not buy oil for governmental stockpiles when this would place undue pressure on prices."
Since the Tokyo meeting none of the other major industrial nations has made purchases for government stockpiles. But Japan already has an estimated 32 million barrels stored in idled tankers, and Germany has around 44 million barrels in storage.
Despite the increased Saudi oil output, spot prices in the Rotterdam market are still $3 to $5 a barrel above official prices.
Energy Secretary Charles Duncan is meeting this week in Paris with other industrial energy ministers to examine stockpiling and other energy issues.
One potential issue is how purchases for government stockpiles will be treated under import ceilings imposed by the Tokyo agreement as well as by Carter's import target of 8.2 million barrels a day.So far, the administration says stockpile purchases would be included under the quota.
While former energy secretary James R. Schlesinger headed DOE the stockpile program was plagued by cost overruns and a series of alleged improprieties. The department now has an estimated $3.8 billion in unspent funds for the oil purchase program.
Yesterday Jay R. Brill, departing chief of the stockpiling, said DOE is weighing plans to purchase oil from the Elk Hills Naval Petroleum reserve and to buy some of the government's nearly 180,000 barrels a day in royalty oil.
Under existing conditions the DOE can handle deliveries of up to 200,000 barrels a day to the Gulf Coast salt domes for storage.
Brill said DOE had hoped for 190 million barrels in storage by the end of this year, but has had to lower its goal again. Originally DOE said it would have 250 million barrels in storage by the end of last year.