Impact on Small Refiners of the Decision To Decontrol Crude Oil Prices

GAO was requested to provide certain information relating to the impact on small refiners of the President's January 1981 decision to decontrol the prices pf domestic crude oil and the allocation of refined products. Specifically, information was requested on a selection of small refiners which included ownership and/or affiliation, product slate, regional economic role or markets served in relation to the nearest integrated refinery, capacity utilization, and financial and employment data. For the purposes of this review, a small refiner processes 50,000 barrels of oil per day or less.

Concerning ownership of the seven refiners visited, three are privately held companies, one is owned and operated by a cooperative, and three are affiliated with or owned by publicly traded corporations. In all seven cases, the refinery is not the sole business activity of its owners. Four have diverse interests in natural resources; the cooperative has interests in related farm products and activities; one owns and operates a fleet of trucks; and one owns a chain of service stations. All the refiners believe that they are producing a product slate which meets a segment of the market demand. They produce diesel fuel, home heating oil, asphalt, jet fuel, gasoline, and petrochemical feedstocks. However, the refiners are not the only source of supply for their respective geographic areas. Supplies can also be obtained from product terminals, pipelines, and/or other refiners. Six of the seven refiners are operating at 75 percent capacity or better compared with the preliminary 1981 average utilization rate of all U.S. refiners of 70 percent. Together, the refiners employ about 1,085 persons. All expect to stay in business and do not anticipate laying off or decreasing their number of employees. According to company officials, crude oil supplies are readily available at this time. None of the refiners favors reestablishing Government subsidies, such as the small refiner bias, that provide favorable treatment specifically for small refiners. Six supported some other type of Government action to assist the small refiner such as tax incentives.