House-Senate energy conferees yesterday decided to order President Carter to resume filling the nation's strategic petroleum reserve, an action that could bring a retaliatory cut in Saudi Arabian oil production. a
The conferees also directed the president to change some oil-pricing regulations so that oil users, including ordinary motorists, end up paying most of the cost of oil for the reserve next year.
Wrapping up work on the bill creating a new corporation to oversee development of a national synthetic fuels industry, the conference committee reached agreement on a separate section covering the proposed 750 million barrel reserve. At present the reserve has only 91.7 million barrels on hand.
The bill, which is expected to be passed by both houses before the end of the month, directs the president to "commence crude oil acquisition immediately" to assure that oil is placed in the reserve at an average rate of at least 100,000 barrels a day in the fiscal year beginning Oct. 1 and each year thereafter.
As recently as last week's meeting of Organization of Petroleum Exporting Countries ministers in Algiers, Saudi Arabian oil minister Sheik Ahmed-Zaki Yamani warned that further filling of the U.S. reserve could lead to cuts in his country's production, currently 9.5 million barrels a day.
The last oil put into the reserve was 80,000 barrels of Mexican crude delivered to the Bayou Choctaw, La., storage site on Aug. 26, 1979, under a 1978 contract. Because of high prices and a tight world oil market stemming from the Iranian revolution and interruption of production there, no oil was purchased in 1979.
The Saudis, as well as most Arab members of OPEC, view the U.S. reserve as an attempt to reduce the power of the oil cartel and to circumvent their use of "oil weapon" in the event of another war with Israel.
The Carter administration has been reluctant to resume buying oil for the reserve until world oil markets stabilized.
In an interview, Energy Secretary Charles Duncan said, "I want to fill the SPR," adding, "We have to consider carefully all of the impacts of filling it."
In particular, Duncan said, it should be done in such a way that it is "not disruptive of the market."
Duncan, who was aware of the pending decision by the conference committee, said he saw no difficulty to resume filling the reserve within the next six months. Given the lags involved in buying oil and getting it delivered, such a schedule meet the terms of Congress' new mandate.
To save the government money, the conferees directed President Carter to change the present system of "entitlements." Through entitlements, the cost of crude oil is approximately equalized among refiners, regardless of whether they buy and refine price-controlled domestic oil or domestic or foreign oil with a price that is not controlled.
The change, which can be in effect only through September of next year when oil prices controls are to end, would cut the effective cost to the government of the oil reserve from about $28 a barrel to about $7, a Senate Energy Committee source said.
For each 100,000 barrels a day purchased for the reserve, refiners' costs of crude oil would rise by the equivalent of about 0.4 cents a gallon. Refiners could pass that higher cost along to their customers if market conditions would allow it.
While the question of whether and when to resume filling the reserve has been up in the air, Department of Energy officials have been planning how to do it whether they get the go-ahead.
Ruth Davis, DOE assistant secretary for resource applications, said that by the end of July everthing will be in place to start buying oil again.
In order to minimize the likelihood of a cut in Saudi production or other retaliation by OPEC, Davis said DOE intends to rely primarily on domestic oil sources but also an some foreign purchases.
At the head of the list of possible sources of oil is production from the Naval Petroleum Reserve at Elk Hills, Calif. That oil, about 125,000 barrels a day, is being sold to refiners but can be taken by the government with 10 days' notice.
Another source, Davis said, is so-called royalty oil -- the one-eighth of oil produced on federal lands, primarily off-shore, that belongs to the government but normally is sold to the company producing oil on that leased land.
Still another source is oil from the Prudhoe Bay field in Alaska. Davis said a separate storage cavern in the Louisiana and Texas salt domes would have to be set aside for Alaska oil, since it cannot be mixed with the oil already on hand.
Davis said a recent test of the SPR showed oil could be moved out of storage at a rate of up to 1.4 million barrels a day.
If a decision were made to draw upon the reserve, the oil would be sold at a price equal to the average cost of imported crude. Depending upon circumstances, the oil might be made available to refiners as part of a nationwide allocation plan or simply sold to those who wish to buy it.
Some critics of the SPR doubt the reserve would actually be very useful in mitigating the impact of a major oil supply interruption. A few have noted that the present level of 91.7 million barrels is equal only to about two weeks' worth or normal imports.
However, supporters of the reserve say it is unlikely that all imports would be halted, and that the ability to offset a two-million or three-million-barrel-a-day interruption with a one-million draw on the reserve could save billions of dollars for the nation's economy.