Business: Oil Squeeze

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In such a situation, refineries should be able to tap emergency supplies from the Government's Strategic Petroleum Reserve, but the three-year-old program is a shambles. Construction work is far behind schedule at the massive underground salt domes along the Louisiana and Texas Gulf Coast, where approximately a one-month supply of oil, or 248 million bbl., is supposed to be stored by year's end. So far only about 80 million bbl. of crude—little more than a week's supply—has been stockpiled. What is more, Energy Department technicians are still struggling with technical problems regarding the seemingly elementary task of getting the oil out of the ground. These difficulties, as well as the ever rising cost of the imported oil involved, are sure to push the cost of the program far above the currently planned $14 billion.

Officials at DOE remain publicly confident that a supply crunch can be avoided this year, but privately they are not so sure. Says one Schlesinger aide: "We're walking a fine line. We want the public to be aware that we are facing a potentially serious situation so that people will conserve oil, but we don't want to scare them."

Just to be prepared, DOE has drawn up contingency plans that begin with compulsory allocation of supplies to industry and culminate in actual gasoline rationing for the public. If Iranian production has not been substantially restored, and if voluntary measures have not cut consumption, then mandatory allocation will be brought in on a trial basis If stocks are still not being rebuilt, rationing would be imposed. Each car owner would be sent ration checks every three months specifying the number of gallons he could buy. The checks could be turned in at banks or other financial institutions in return for coupons that would have to be handed over at gas stations. The coupons might also be sold openly for whatever someone is willing to pay for them thus allowing drivers to get extra gasoline without having to ask DOE for special dispensations.

One thing that DOE can do nothing about is the prospect of yet another increase in oil prices. Even a small scarcity in such a valuable commodity can produce large jumps in cost, and that is exactly what is now happening on the so-called spot market. There, oil companies bid for any available crude that is not already committed to customers under long-term contracts. Though the quoted long-term OPEC price currently stands at about $13 per bbl., spot-market oil last week was trading for as much as $17 per bbl. Warns Energy Economist John Lichtblau of the Petroleum Industry Research Foundation: "The OPEC countries are free to adjust their prices if they want to, and they could well increase them so that not only will spot prices go up, but official prices as well, at least temporarily." It seems that the energy crisis is turning out to be less the moral equivalent of war—as Carter has called it—than the equivalent of Chinese water torture.