Petroleum Products

In response to a congressional request, GAO examined the effects of petroleum product imports on the U.S. refining industry and U.S. energy security, focusing on: (1) recent petroleum product import patterns, reasons for the trends, and their impact on refinery closures; (2) the outlook for U.S. product imports in coming years and the prospect of further refinery closures; (3) the impact of refinery closures on the nation's ability to meet its refining requirements, including a Strategic Petroleum Reserve drawdown, during a major oil supply disruption; and (4) the effects of policy options designed to ensure the availability of adequate refining capacity.

GAO found that crude oil imports are not the only cause of the bulk of recent U.S. refinery closures, and other explanations for those closures include: (1) a 55-percent expansion of refining capacity between 1970 and 1981 and an unexpected 15-percent decline in petroleum consumption between 1979 and 1985; and (2) the 1981 elimination of a crude oil price allocation program that supported operations of many small refiners. GAO found that: (1) trade policies of other major oil-consuming countries and the utilization rates of export refineries in the Middle East will affect U.S. crude oil imports; (2) the import of gasoline, distillate fuel oil, jet fuel, and kerosene may increase to 1 million barrels per day in 1990; and (3) an additional 1 million barrels per day of U.S. refinery capacity may shut down during the next 5 years. GAO also found that: (1) at present, U.S. crude oil refineries would be able to process all domestic crude supplies during an oil emergency and still have about 3 million barrels per day of capacity to refine available crude oil imports; and (2) based on Department of Energy data and projections related to crude oil and product prices, imports, and domestic production, a $10-per-barrel tariff on product imports and $5-per-barrel tariff on crude oil imports would cost consumers about $56 billion annually.