Status of U.S. Participation in the International Energy Agency's Emergency Sharing System

Pursuant to a congressional request, GAO reviewed the International Energy Agency's (IEA) Emergency Sharing System and the effectiveness of U.S. participation in that system. Under the system, IEA member countries agree to: (1) establish demand restraint measures for reducing their oil demand at least 7 percent during a serious supply disruption; (2) maintain emergency oil reserves equal to 90 days of net imports; and (3) in a supply disruption equal to or exceeding 7 percent, share oil supplies under an IEA allocation system.

GAO found that progress has been made in addressing the workability problems that it reported on several years ago; however, GAO found that some problems and uncertainties continue to exist. To meet their demand restraint commitment to IEA, member countries use a number of approaches and rely on market forces to increase prices and reduce demand. The United States relies primarily on these market forces and supplements its plan with use of the Strategic Petroleum Reserve. Although the aggregate of IEA oil stocks well exceeds the 90-day limit, the actual amount of emergency oil reserves readily available in an emergency is not clear because the IEA definition of the reserves includes industry oil stocks which are widely varied. In addition, questions still remain concerning pricing, fair-sharing, and data reliability of the allocation system. Important authorities for U.S. participation in IEA contained in the Energy Policy and Conservation Act are due to expire in June 1985. This act authorizes the President to require oil companies to provide oil to other countries to meet U.S. allocation obligations and make available limited antitrust and breach of contract defenses to companies that participate. Without these, U.S. oil companies have said they would not voluntarily participate in the emergency sharing system which other countries may view as a lack of commitment. This voluntary participation is considered vital to the successful operation of the IEA system.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Allan I. Mendelowitz Team: General Accounting Office: National Security and International Affairs Division Phone: (202) 275-4812