International Energy Agency

The rapid increase in worldwide oil prices after Iraq's invasion of Kuwait in 1990 focused renewed attention on how the use of emergency oil stocks held by members of the International Energy Agency can mitigate the effects of an oil supply disruption. This report reviews (1) the International Energy Agency's decision on whether to draw down emergency oil stocks in response to the disruption in oil supplies following the Iraqi invasion, (2) the U.S. policy on restraining oil demand, (3) the U.S. position on domestic sharing of oil supplies in an emergency and oil companies' views on that position, and (4) the extent of Department of Energy efforts to educate the American people about U.S. participation in the International Energy Agency.

GAO found that: (1) the IEA decision to not draw down emergency oil stocks to offset the impact of the oil supply disruption following Iraq's invasion of Kuwait raised questions about whether such actions, if implemented during the early stages of the disruption, would have helped to offset the adverse economic effects caused by initial high oil prices; (2) 5 months later, when allied forces invaded Iraq, IEA members implemented a contingency plan for a coordinated stock drawdown and other measures in preparation for a potential oil supply shortfall; (3) to meet its IEA commitment to restrain oil demand in an emergency, the United States has long adhered to its policy of primarily relying on market forces to determine oil prices and using excess Strategic Petroleum Reserve oil as a partial supplement; (4) the United States does not believe that it needs a fair-sharing system to ensure that all domestic oil companies bear the same burden of sharing oil to meet IEA oil allocation obligations in an emergency; (5) the United States has advised IEA that, if an oil supply disruption triggers the IEA emergency oil-sharing system, it would encourage its oil companies to voluntarily share their oil with other IEA countries; (6) of the eight major U.S. oil-refining companies reviewed, four companies supported a need for a fair-sharing program, three did not, and one had no opinion; and (7) DOE has made limited efforts to educate the American public about the importance of U.S. participation in IEA.