Naval Petroleum Reserves

In response to a congressional request, GAO reported on the Department of Energy's (DOE) oil sales from the Elk Hills Naval Petroleum Reserve (NPR-1) at apparently unreasonably low prices.

GAO found that: (1) from October 1, 1985 to April 1, 1986, DOE sold about 86,000 barrels of oil per day from NPR-1; (2) from the start of that period through the first week of February 1986, posted crude oil prices remained fairly stable, ranging from $24.88 to $24.95 per barrel; and (3) discount bids by the contractors purchasing NPR-1 oil during the 6-month period ranged from $0.197 to $1.16 per barrel; and (4) although DOE base prices decreased drastically during the period from February 10, 1986 to April 3, 1986, the contracted discounts remained the same and therefore, the net prices to the government for this period were not too far below the posted prices. GAO also found that: (1) for the 6-month contract period which began on April 1, 1986, DOE awarded contracts to 15 companies to purchase about 82,000 barrels per day from NPR-1; (2) these companies bid discounts from the posted prices ranging from $0.97 to $6.98 per barrel; and (3) DOE base prices remained relatively constant during this period.