The United States will have to increase crude-oil imports by more than 50 percent in the second half of the year because U.S. petroleum inventories have declined sharply over the past 12 months, a top government energy official told Congress yesterday.
With other major oil-importing nations also expected to step up their purchases, a surge in world demand once again would put the Organization of Petroleum Exporting Countries--which has halted a decline in oil prices by drastic production cutbacks--in a position to resume price increases.
The situation could become even more volatile, experts warned, if Mideast fighting spreads.
J. Erich Evered, administrator of the U.S. Energy Information Administration, told the House Energy subcommittee on fossil and synthetic fuels that American "crude-oil imports are expected to increase to about 4.3 million barrels per day" by the fourth quarter of this year--an increase of 1.5 million barrels from the average level January through May.
Evered said this would be necessary because the oil industry, faced with unusually low retail demand in the first quarter, cut back imports to less than half the 1980 level and drew down inventories in hopes of replenishing stocks later at a lower price.
A Congressional Research Service analysis prepared for the panel likened the situation to the 1978-1979 experience, when oil companies drew down their petroleum stocks because of high carrying costs and then had to rebuild their inventories in a market dominated by the Iran crisis.
"The resulting scramble to reacquire inventory then contributed to a doubling in world oil prices," the report said. "There are now two shooting wars going on in the Mideast. Should either impair the Organization of Petroleum Exporting Countries' ability or willingness to accommodate an increased call on its oil of several million barrels per day, price increases and disruptions can be expected."
Rep. Richard L. Ottinger (D-N.Y.) told the panel that the nation's major oil companies had "made a mockery of the nation's main strategy to control shortages" by reducing their own inventories "at an even faster pace" than the record rate at which the federal government has been filling the Strategic Petroleum Reserve.
He said total U.S. crude oil and petroleum product stock levels as of May 21 were 22 million barrels below the same date two years ago, despite the addition of 165 million barrels of oil to the strategic reserve.
All the witnesses took pains to avoid the suggestion that the United States faced any immediate threat of a gasoline or oil crisis.
"Stocks of gasoline and home heating oil have continued to drop and are at the lowest levels seen at this time of year for the past 8 to 10 years," Evered said.
But he added that if U.S. imports and refinery utilization levels increase in the months ahead as anticipated, the government expects "gasoline supplies to be adequate to meet demand this summer," with any shortages small and temporary.
Evered said the four to five months' lead time to rebuild needed home heating-oil stocks means "a shortage is not necessarily indicated for this winter" if refineries increase their production to 20 percent above last year's level in the next four months.
While cautioning that he was not predicting shortages "since such predictions can be self-fulfilling if they trigger panic buying," Ottinger nevertheless said the depletion of stocks had left the United States "severely ill-prepared to deal with a crisis." He called for legislation that would give the Energy Department authority to establish minimum inventory levels for the oil companies.