Petroleum Storage and Transportation - The National Petroleum Council [PDF]

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This volume is dedicated to the memory of Donald M. Prenowitz who passed away during the course of this study. Don was associated with Shell Oil Company for almost 32 years. A member of previous task groups, - as well as a member of the task group that prepared this volume, Don willingly contributed his experience, practical insight, and good humor. He will be missed.

Petroleum Inventories and Storage

PetroleuiD Storage & Transportation National Petroleum Council

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April 1989

William E. Swales, Chairman, Committee on Petroleum Storage & Transportation

NATIONAL PETROLEUM COUNCIL

Edwin L . Cox, Chairman L odwrick M. C ook, Vice Chairman Marshall W. Nichols, Executive Director

U.S. DEPARTMENT OF ENERGY

J ames D . Watkins,

Secretary

The National Petroleum C ouncil is a federal advisory committee to the Secretary of Energy. The sole purpose of the National Petroleum Council is to advise, inform, and make recommendations to the Secretary of Energy on any matter requested by the Secretary relating to petroleum or the petroleum industry.

All Rights Reserved Library of Congress C atalog Card Number: 8 9 - 6 0 7 61 © National Petroleum Council 1989 Printed in the United States of A merica

VOLUME IV PETROLEUM INVENTORI E S AND STORAGE TABLE OF CONTENTS

INTRODUCTION

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E XECUT IVE S UMMARY .

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Pr imary D i s tr ibu t i on S y s tem . . S e condary D i s t r i bution S y s tem Ter ti ary S torage S e gment . Petro l eum Future s . . . . . . . . . . . . Sys tem Dynami c s . . . . . . . . . . . . . . .

CHAPTER ONE :

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OVERVIEW OF THE PETROLEUM D I S T R I B U T I ON SYS TEMS AND THE FUNC T I ON OF INVENTO RY AND S TORAGE CAPAC ITY •

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The P e t r o l eum D i s tr ibut i on Sys tems The Func t i o n o f I nventory and S to r a ge C ap a c i ty . . . . . •

CHAPTER TWO :

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ANALYS I S O F CHANGES IN THE P E TROLEUM D I STRIBUT I ON S YSTEMS , 1 9 8 3 - 1 9 8 8 •

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Hi s to r i c a l Trend s in P e t r o l eum I ndus try Ope r a t ion s -- P e tro l eum P roduct Demand , 1 9 8 3- 1 9 8 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Primary D i s tr ibut ion Sys tem Ana l y s i s Secondary D i s tr ibut i on S y s tem An a l y s i s T e r t i ar y S torage S e gment Ana l y s i s .

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5 13 15 15 17

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35 42 59 63

APP END I C E S Append ix A : Appen d i x B : Append ix C :

S tudy Re que s t Le tter and D e s c r ip t i o n o f the Nat ional P e t ro l eum C ounc i l S tudy Group Ro s te r s P r imary D i s tribu t i on S y s tem S u rvey Me thod o l ogy NPC 1 9 8 8 Surve y o f u . s . P e tro l e um I nve n to r i e s and S to r age C apac i t i e s ( Pr imary D i s tr ibut i on S y s tem ) P r ima ry D i s tr ibution S y s t em Survey D a ta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Impact o f Petro l e um Futur e s Market s o n I nventory Leve l s .

Append ix D : Append i x E : Append i x F :

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A- 1 B-1 C- 1 D- 1 E- 1 F- 1

Appendix G : Appe ndi x H :

The S trategic P e tro l eum Re s e rve C a r ibbean S torage /Tran s s h i pme n t F ac i l i t i e s . . . . . . . . . . . . . . . . . . . . . . . . . . H i s to r i c a l P e r s p e c t ive on Re f i n i n g C ap ac i ty U t i l i z at i on Graph ic a l Pre s e n t a t ion o f D emand and P r imary I nventory Leve l s , 19 8 3 - 1 9 8 8 Me thodo l og i e s for Determ i n i ng P e t ro leum I nven to r i e s and S to r age Capac i ty i n the S e c ond ary P e tro leum D i s tr ibution S y s tem Me thodo logie s for De t e rm i n ing P e t ro l eum I nvento r i e s and S to r age Capac i ty in the T e r t i ary S to rage S egment . . . . . G lo s s ary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

App e n d i x I : Appendix J :

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Appe nd i x K :

Append i x L :

Appe nd ix M : INDE X

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G- 1 H- 1 I-1 J- 1

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L-1 M- 1

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I NTRODUCT I ON

The Energy ' s s torage , February that :

N a t i ona l Pe tro l eum C ounc i l ( NP C ) , a t the S e c r e tary o f reque s t , h a s c omp l e te d i t s s tudy o f pe t ro l eum i nventory , and tran s po r t a t i o n c apac i t i e s . I n h i s l e tt e r o f 2 0 , 1 9 8 7 , the S e c retary o f Energy s p e c i f i c a l ly r e qu e s ted

the Counc i l under take a compr e hen s i ve new s tudy on pe trol eum i nventory , s torage , and tran s po r t a t i on c ap ac i t i e s upda t i ng the C ounc i l ' s e a r l i e r s tud i e s a s n e ce s s ar y . Emph a s i s shou ld b e given to the reexami n a t ion o f min imum operat ing i nventory l eve l s , the loc a t ion o f s to r age fac i l i t i e s and av ai l ab i l i ty o f i nve n to r i e s in re l a t i o n to l o c a l demand , and the c apab i l i t i e s o f d i s t r ibut ion n e two rk s to move p roduc t s from re f i n i ng c e n te r s t o the i r po i nt o f con sump t ion par t i cu l a r l y dur i ng pe r io d s o f s t r e s s . •

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The fu l l text o f the S e c r e tary ' s reque s t le tter , a d e s cr i p t i o n o f the Na t i o n a l P e t r o l eum Counc i l , and a ro s te r o f th e C ounc i l memb e r s h i p are provided i n Appe nd i x A . The NPC e s t abl i s h e d the Committee on P e t ro leum S to rage & Trans portation to deve l op a comprehens ive r e s pons e to the S e c r e ­ tary ' s reque s t . Th i s Comm i t t e e w a s c h a i re d by Mr . Wi l l i am E . Swa l e s , Vice Cha i rman - Energy , U S X Corpora t i o n . The S e c r e ta ry de s ignated Dr . H . A . Merkl e i n , Admin i s trator , Ene rgy I n format i on Admi ni s tr a t i on ( E IA ) , to repre s e n t h im and to provi d e c o o r d i n a ­ t ion between t h e Depar tme n t o f Ene rgy ( DOE ) and t h e C ounc i l b y serving a s t h e Gove r nme n t Coch a i rman o f t h e C ommi ttee . To a s s i s t i n r e s pond i ng to the S e cre tary ' s reque s t , the Commi t te e e s tabl i shed a Coord i n a t ing Subcommittee a n d f o u r t a s k groups : Sys tem Dynami c s , Natur a l Gas Transportat ion , L iqu i d s T r a n s po r ta ­ tion , a n d I nve ntor i e s a n d S tor age . The Counc i l ' s over a l l repor t , Pe tro l eum St orage & T r an s ­ portat ion , i s contained i n five vo l ume s : • • • • •

Vo lume Vo lume Vo lume Vo lume Vo lume

I - Exe cut ive Summary I I - S y s tem Dynami c s I I I - N a tu r a l Gas Tran s po r t a t i o n IV - P e tro l e um I nventor i e s and S to rage V - P e t ro leum L i quids Tr an s po r t a t i o n .

In add i t i on , deta i l ed p ro f i l e s o f the comp an i e s th a t p a r t i c ipa ted in the natura l ga s tran s portat ion and petro l e um p i p e l i n e s urveys are ava i l ab l e f rom the NPC . The Invento r i e s and S to rage T a s k Group wa s c h a i r e d by B ruce D . Fro l i ch , Vice P r e s ident , Supp ly & D i s t r i b u t i o n , C h e vron U . S . A. Inc . Jame s M . D i e h l , Ch i e f , Fu e l s Ana l y s i s B ranch , P e t ro l e um Supp l y D ivi s i on , E n e rgy I n forma t i on Admi n i s tr a t i o n , s e rved a s Governme nt Cocha i rman o f th e T a s k Group . ( Ro s te rs o f the s tudy

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group s re spo n s ib l e for the deve l opme nt o f th i s vo lume are con­ tained i n Append ix B . ) Th i s volume update s and e xp and s the NPC ' s I n the 1 9 8 4 report , P e tro l eum I nve nto r i e s and S to r age C apac i ty . new repo r t , a l l th r e e phy s i c a l sys tems ( pr imar y , s e c ond ary , t e r ­ t i ary ) i nvo lved w i th petroleum s tor age c apac i ty a n d invento r i e s are ana l y z ed . I n add i t ion , th e e f fe c t s o f the p e t ro l eum futu r e s mark e t s and the S t r ategic P e tro leum Re s erve ( SP R ) on pe tro l eum inve ntor i e s are de s c r ibed and evaluated . H i gh l i gh t s o f th e repo r t appear i n the Execut ive S ummar y , de t a i l s i n Ch apt e r Two . The NPC h a s under taken and pub l i shed 1 0 inventory s tud i e s s i nc e 1 9 4 8 to a s s i s t the fed e r a l gover nme n t i n eme rgency p r e ­ paredne s s p l ann ing . The s e s tud i e s we re princ i pa l l y d e s igne d t o d e t e rmine b o t h t h e vo lume o f pe tro leum th at c ou l d b e ava i l a b l e from t h e pr imar y d i s tr ibution s y s tem i n the event o f an emer ­ gency , and the t o t a l s torage c apac ity o f the pr ima ry s y s tem . Add i t ional l y , the l a s t three s tud i e s ( 1 9 7 4 , 1 9 7 9 , 1 9 8 4 ) e s t imated the min imum oper at ing i nventory of crude o i l and p r i nc i p a l petro­ leum produc t s . Th i s m i n imum operat i ng inve ntory e s t imat e repre s e n t s an i nvento ry l eve l be low wh ich p rodu c t s hor tage s and ope r a t i n g prob l ems wou ld begin to appe ar . The pr imary d i s tr ibut ion s y s tem rema i n s the p r inc ip a l foc u s o f th i s vo lume . However , much gr e a t e r emph a s i s t h a n be fore h a s b e e n p l aced on the s ec ondary d i s tr ibut ion s y s tem and te r t i ary s tor age s egment , due to the i r c lo s e i n terre l a t i on s h ip with the pr ima ry s y s tem and the s i gn i f ic ant s torage vo lume s c o n t a i n e d in the s e s e gmen ts . DATA DEVELOPMENT AND METHODOLOGY Pr imary D i s tr ibut ion Sys tem The NPC s e n t s urvey que s t ionna i re s to the compa n i e s tha t report pr imary i nve ntory da t a to th e E IA . To e n s u r e t h e c on f i ­ dent i a l i ty o f the d a t a , a n i ndependent account ing f i rm , D e lo i t te Ha s k i n s & S e l l s , r e c e ived and tabu l ated the survey r e su l t s . ( S ee Append i x C for s urvey methodo logy , Append ix D for the p r imary survey qu e s t i o nn a i r e , and Appendix E for tabu l a t e d s urvey r e ­ I n add i t ion to in format i on on s to r age c apac i t y and in­ sults . ) ve ntory , comp an i e s i n th e pr imary s y s tem we r e surveyed about the use of pe tro l eum future s marke t s and the i r e f f e c t on i nventory leve l s . They a l s o were s ent a que s t ionn a i r e d e s igned to ob t a i n an i ndu s try as s e s sme n t o f t h e impact o f t h e S P R on i nvento r i e s he ld in th e pr ivate s ec tor . F i na l l y , comme nt s on t h e D O E p l an for u se o f the S P R dur i ng s t r e s s s i tu a t i o n s we r e s o l i c i ted . ( S e e Append i x F f o r s urvey re turn s on pe tro l eum fu tu r e s a n d Appe nd i x G for re spon s e s to the S P R s urvey . ) D a t a we r e co l l e c t e d by P e t ro l eum Admi n i s tr at i on f o r D e f e n s e D i s tr ic t s ( PADD s ) , and b y s ub-PADD s i n PADD I . Th i s bre akdown wa s nece s s ary to re f l ec t reg iona l d i f fe r e nc e s in s e a s o n a l and s y s tem- r e l a ted ( i . e . , pr imary , s e condary) pe t ro l e um demand s . Furthe r , the a n a l y s i s o f s y s tem dynami c s u nde r s t re s s cond i t io n s

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requ i red a regiona l approach to demand , i nventory , and s t orage , s i nce petro leum s upply and tran s porta t i on s y s tems are geogra­ ph i c a lly integrated . For th i s purpo s e , PAD D s I - I V are shown combined , wh i l e PADD V , wh i ch genera l l y ope r a t e s i ndependent ly from PAD D s I - I V , is s hown s eparate l y . ( F i gure 1 shows the f ive PADD d i s tr i c t s . )

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Figure 1. Petroleum Administration f or Defense Districts (PADDs).

The pr ima ry s y s tem s urvey did not inc l ude a l l p e tro l eum produc t s , only c rude o i l and the p r i nc i p a l p e t r o l eum p roduc t s . Al s o , the s urvey d i d not c over c rude o i l and produc t s l oc a te d i n u.s. po s s e s s i o n s a n d terr i tor i e s or in C ar ibbe a n tran s sh i pme nt ( For a d i s c u s s ion o f Car ibbean fac i l i t i e s , s e e fa c i l i t i e s . Append i x H . ) As a b a s i s for c ompar i s on and trend i n t e rpr e t a t i on , h i s ­ tor i c a l data are g iven for r e f i n i ng-capac i ty u t i l i z a t ion (Append ix I ) and for petro leum demand and i nve n t o r i e s i n the primary d i s tr ibu tion s y s tem ( Appe nd ix J ) •

Se condary D i s tr ibut ion S y s t em S urvey que s t ionna i r e s wer e a l s o u s ed to gather d a t a i n the secondary d i s tr ibut ion s y s tem for inventor i e s and s to r age capa­ c i t i e s in bulk petro l eum s to r age p l an t s . Re c ip ie n t s of th i s que s t ionn a i r e we re a s ked a s we l l abou t p e t r o l eum futur e s . The secondary survey re l i e d on a s ta t i s t i c a l s amp l i n g of s ec ondary

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bu l k p l ant ope r a to r s , and s urvey r e s u l t s we re expanded to to t a l s for the ent i r e b u l k p lant popu la t i on . The r e s u l t s o f the s u rvey wer e r e c e ived , tabu l at e d , and expande d by D e l o i t t e H a sk in s & Sells . Dat a on the r e t a i l s e c tor o f the s e c ondary s y s t e m were de ­ ve loped from pub l i s hed i n forma t i on and from d i s c u s s i o n s w i th i ndu s try repre s e n t a t i ve s . Where po s s ib l e , PADD s I - I V d a t a and .PADD V d a t a are pre s ented s eparate ly . ( Fo r th e m e th o do l og i e s , s ee Appe nd i x K . ) Te r t i ary S tor age S e gm e n t T e r t i ary s e gme n t s torage c apac i t i e s a n d i nvento r i e s we re e s t imated from pub l i shed data , s urvey s , and the c o n s e n s u s ex­ perience of indu s try repre s en t a t ive s . A review of the methodo lo­ gie s used for e ach c o n s umer s ec tor ( Appe nd i x L) wi l l prov i d e i n s ight into the a c c u r a c y o f t h e e s t ima te s .

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E XECUT IVE SUMMARY

The princ ipal o b j e c t ive o f th is I nvent o r i e s and S to rage report is to ana l y z e a l l three phy s i c a l s y s t ems ( pr imary , sec ond ary , t e r t i a r y ) r e l ated to pe tro l eum i nventor ie s and s torage c apac ity . Thi s s tudy wa s de s igned to determine both the vo lume s o f petro leum th at c ou ld b e ava i l ab l e i n the eve nt o f a n eme r gency and the tota l s torage c apac ity in the thre e phys i c a l s y s tems . Minimum ope rat ing i nven tor i e s for crude o i l and pr inc i p a l p e tro ­ leum p rodu c t s have been e s t ima ted . Wh i l e the pr imary d i s tr ibut ion sys tem i s the m a i n focus , gr eater empha s i s th an in the pas t h a s been p l ac e d on the s ec ond­ ary d i s tribu t ion s y s tem and terti ary s to r ag e s egme nt . Th i s r e f l e c t s the ir c lo s e interre l a t ionsh ip wi th the p r ima r y s y s t em and perm i t s e s t ima t i on o f the s i gn i f icant s to r age vo lume s repre s ented by the s e non-pr ima ry sys tems . PRIMARY D I STRIBUT I ON SYS TEM The ob j e c t i ve s o f th e pr imary d i s t r ibu t i on s ys tem ana ly s i s we re to e s t imate the min imum ope r a t i ng i nve ntory for c rude o i l and the p r i n c ipal petro l eum produc t s ; to an a l y z e the volume s o f inve ntory that the s y s tem h e l d on S eptembe r 3 0 , 1 9 8 7 and March 3 1 , 1 9 8 8 ; and to d e te rm ine the amoun t of s torage c apac i t y i n the sys tem . Min imum Ope r a t i n g I nven to ry The data r e s u l t i ng from the NPC ' s " 19 8 8 S urvey o f P e t ro l eum Inventor i e s and S t orage C apac i t i e s in the Un i te d S t a te s " r eve a l varyi ng trends i n min imum operat ing inventory leve l s . F o r c rude o i l , motor ga s o l ine , and k e ro s ine -type j e t fue l ( ke r o - j e t fue l ) , the min imums have i n c r e a s e d s i nce the l a s t e s t ima te , wh i l e the min imums have decre a s e d for d i s t i l l ate fue l o i l and r e s i du a l fue l oil . In contra s t , the 1 9 8 3 survey showed that m i n imum ope r a t i ng inventory leve l s fe l l for a l l produc t c l a s s e s c ompared to 1 9 7 9 . Min imum oper a t i n g inventory i s de fined a s the l eve l be l ow wh ich operat ing prob l ems and shor tage s wou l d b e g i n to appe ar in a given d i s tr ibution s y s tem . Howeve r , i n s tr e s s s i tua t ion s , i nven­ tor i e s can drop be l ow th i s l e ve l for short p e r i o d s wi thout s i g­ n i f i cant s upp ly d i s rup t i o n s , but with inc r e a s ed ope r a t i ng c o s t s . Un l i ke the 1 9 8 3 s i tu a t i on , where lowe r deman d wa s the driving forc e for an acro s s - the -bo ard decre a s e i n min imum ope r a t i ng inve ntor i e s , the 19 8 8 e s t ima te s mu s t be i nterpre ted i n l i gh t o f oppo s ing trend s . S e ver a l f a c t s s ugge s t the ne ed for h igher min imum o pe r a t i ng invento r i e s . The Un i t ed S tate s i s once aga i n b e c om i n g mor e

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dependent on for e ign c rude o i l . A s dome s t i c produc t i on c o n ­ tinu e s t o de c l i ne , t h e U n i ted S tate s mu s t re l y on d e l ivery o f fore ign c rude o i l i n l arge sh ip s from l ong d i s t a n c e s . Furthe r , Th e s e c o nd i t i o n s both the dem and for p e tro l eum i s i n c r e a s i ng . d i c t a te h i gher m i n imum i nventor i e s . On the o th e r h an d , the o i l indu s try h a s c o nt i nued to r e s tructure dur ing the 1 9 8 3 - 1 9 8 8 p e r i o d , r emov ing s igni f i c an t amount s o f re f i n ing , p ip e l in e , and tank age c apac i ty from th e s y s tem . NPC e s t ima t e s o f the 1 9 8 8 m i n imum ope r at ing inve n to r i e s for c rude o i l and the p r i nc i p a l petro l eum produc t s are shown i n T ab l e 1 .

TABLE 1 NPC MINIMUM OPERAT ING INVENTORY E S T IMATE S F O R THE PRIMARY D I STRI BUT I ON S Y S TEM * ( Mi l l ions o f B a r re l s ) 1988 PAD D s I - IV PADD v § C rude O i l Mo tor G a s o l i ne Ke ro-Jet F ue l D i s ti l l a t e Fu e l O i l Re s i dua l Fue l O i l Tot a l

�

Total

Change i n Tota l u .s . , 1 9 8 3- 1 9 8 8

230 178 25 77 25

70 27 5 8 5

300 205 30 85 30

+1 5 +5 +5 -20 -10

535

115

6 50

-5

*

The NP C e s t imate s o f m i n imum ope r a t ing inventory were In deve l oped through an interac t i ve dec i s ion-mak ing proce s s . order t o arr ive a t a c o n s e n s u s , individua l j udgme n t s we r e cons idered w i t h t h e a i d o f ope r a t i ng e xpe r ie n c e a n d r e l evant s t a t i s t i c a l data . §

Exc lude s S P R . A l a skan c rud e o i l i n t r a n s i t b y wa t e r was inc luded i n PADD V to be cons i s tent wi th the E IA report i ng s y s tem . �

Tota l s inc l ude c rude o i l and s urveyed p e t r o l eum produc t s only . They d o no t inc lude kero s i ne , wh i ch was e s t ima ted to b e 5 mi l l ion barre l s i n 1 9 8 4 .

No e s t imate o f tota l m1n 1mum ope r a t i ng i nventory for the ent i re pr imary d i s tr ibut ion s y s tem has been made . Rath e r , it i s impor tant t o note that the NPC m i n imum oper a t ing inven tory to t a l o f 6 5 0 m i l l ion b arre l s r epre s e n t s t h e sum o f o n l y tho s e p roduc t s surveyed . A l though k e ro s ine , a spha l t s , lubr i c a t i ng o i l s , and "othe r o i l s " p l ay a key ro l e in the u . s . pe t r o l eum p i c ture , data

- 6 -

for the s e produc t s we re not co l l e c te d ; and n aph tha - ba s e d j e t fue l wa s exc l uded from the 1 9 8 8 s urve y at the reque s t o f DOE , wh i c h s t ated th at t h e 1 9 8 3 data we re s t i l l s u f f i c i e n t for the i r n e e d s . Tot a l I nventory and I nve ntory Above M i n imum March 3 1 , 1 9 8 8 i nve nto r i e s o f the ma j or produc t s h e l d in the primary d i s tr ibut ion s y s tem have been reduced s i nce 1 9 8 3 , as c a n be s een in Tab l e 2 . The ma j or r e a s on for the decre a s e was a s ub s t an t i a l drop i n di s t i l l a te fue l o i l inventory . T a x l aw ch ange s th a t a l te re d p r o ­ cedure s f o r c o l l ec t i ng t h e Feder a l D i e s e l Fue l Tax , e f fec t i ve Apr i l 1 , 1 9 8 8 , par t i c u l a r l y depre s s e d pr imary d i s t i l l a te inven­ Th i s tax had the one-t ime e f f e c t o f movi n g s tock s from tor ie s . th e pr imary d i s tr ibu t ion s y s tem to the s e condary s y s tem and ter­ t i ary s e gment . Howeve r , i t is impo rtant to note that d i s t i l l a t e invento r i e s are rou t i n e l y lowe r now t h a n i n the 1 9 7 0 s a n d e a r l y 1 9 8 0 s , d u e t o reduced d i s t i l l ate demand and s e a s o n a l i t y . The

TABLE 2 INVENTORY OF CRUDE O I L AND THE PRINC I PAL P ETROLEUM PRODUCT S IN THE PRIMARY D I STRIBUT I ON S Y S TEM (Mi l l ions of Barre l s ) Ma rch 3 1 , 1 9 8 8 PADD s I - IV PADD V To t a l *

Crude O i l Mo tor Ga s o l i n e Kero-Jet Fue l D i s t i l l at e Fue l O i l Re s i dua l Fue l O i l To t a l

§

C hange from March 3 1 , 1 9 8 3

263 203 33 80 35

80 29 6 9 9

343 231 40 89 44

-1 +8 +5 -29 -2

614

133

747

-19

*

Exc lud e s S P R and 1 0 . 6 mi l l i on barre l s o f l e a s e s to c k s ad j u s tme nt . A l a s k an c rude o i l in tran s i t by wat e r was inc luded in PADD V to be c o n s i s t ent with the E IA r epor t i n g s y s tem . §Tota l s inc lude c rud e o i l and s urveyed p e t r o l eum produc t s only . To ta l s may not equ a l the s um o f c ompo nen t s due t o i nde­ pendent round i n g . S ou rc e : Ene rgy I n forma t i on Adm in i s tr a t i o n , P e tro l eum Supp l y Month l y , March 1 9 8 8 , and P e t r o l eum S upp l y Annu a l , Vo l . 1 9 83 .

- 7 -

2,

princ ipal fac tor s l e ad ing to reduc ed d i s t i l l a te i nve n tor i e s are: ( 1 ) incre a s ed use of d i e s e l mo tor fue l , mode r a t i ng s e a s on al inve ntory swi n g s , ( 2 ) r e duced demand for s e a s ona l h ome h e a t i n g fue l , d u e t o the s ub s t i tu t i o n o f natu r a l ga s , a n d ( 3 ) i nc r e a s e d s e a s o n a l u s e o f imported d i s t i l l a te c argo e s , d u e to b e t t e r ­ · Oth e r f a c to r s tha t h ave l e d deve l oped p r i c e h edg i ng techn i que s . t o d e c r e a s ed inve ntory leve l s are the re l a t i ve c o s t o f s to r i n g i nventory , vo l at i l i t y o f produc t p r i c e s , a n d c o n t i nu e d c omp e t i ­ t ive pre s s ure s to reduce c o s t s . Mo tor ga s o l ine a n d k e ro - j e t fue l l eve l s inc r e a s e d o n ly m i n ima l ly , con s id e r i n g the g a i n s i n d emand th a t have occurred s i nc e 1 9 8 3 (s e e Append i x J) . D ay s ' s upp l y o f i nventory c a lc u l a t i o n s mus t take acc ount o f min imum ope r at ing i nventor i e s , s ince the m i n imums do not ch ange proport i on a l l y with demand . Moreove r , min imum ope r at i ng i nven­ tor i e s are not rout i n e l y ava i l ab l e fo r use w i thout c au s i ng s hortage s , bu t c a n be u s ed for short pe r io d s o f t ime at h ighe r ope rat ing c o s t s . The re fore , day s ' s upply o f inve ntory c a lcu l a ­ t ions b a s ed on to t a l i nventory do no t pre s e n t a val i d i nd i c a t i on o f the adequacy o f inventory leve l s . A b e t t e r way t o j udge the adequacy i s to c o n s ider acce s s ib i l i ty , i . e . , the vo l ume o f inven­ tory above the m i n imum that is requ i r e d to run the s y s tem : to t a l inventory - m i n imum operat i ng i nve ntory current d a i l y demand

=

days ' s upply o f inventory above m i n imum

With th i s method , March 3 1 , 1 9 8 8 data for mo tor g a s o l i n e wou l d r e s u l t i n 3 . 6 days ' s upp l y , rather than t h e 3 1 . 6 d a y s ' s up p l y der i ved from t h e to t a l inventory c a l cu l a t i on : 2 3 1 MMB - 2 0 5 MMB = 2 6 MMB 7 . 3 MMB /D

=

3 . 6 days ' supp l y o f inventory ab ove min imuml

ver s u s 2 3 1 MMB = 3 1 . 6 days ' s upp ly 7 . 3 MMB / D of to t a l inventory B a s ed on both the s e methods , a compa r i s o n wa s made o f the day s ' supp ly of inventory for March 3 1 , 1 9 8 3 , and the d a y s ' s up­ p ly of i nventory for March 3 1 , 1 9 8 8 (s e e T ab l e 3 ) . The day s ' supp l y o f pr imary inventory above min imum , c l e ar l y a l ow e r numb e r than days ' s upp l y o f tota l i nventory , i s a mor e r e a l i s t i c me a s u r e o f ava i l ab l e s upp ly . T h e inve ntor i e s above m i n imum a r e , i n gene ­ r a l , l ower i n the 1 9 8 8 c a l cu l at ion than i n 19 8 3 . F o r k e r o - j et fue l , g rowth i n demand and an incre a s e in the e s t imated m i n imum c omb i ne for a s ign i f i c an t reduc t ion in the days ' s upp l y above min imum ope r a t i ng i nven to ry . For d i s t i l l a te fue l o i l , the s h a rp

1

MMB

=

mi l l i o n barre l s ; MMB / D

=

- 8 -

mi l l i o n b ar r e l s per day .

TABLE 3 DAYS ' SUPPLY OF INVENTORY IN THE PRIMARY D I STRI BUTI ON S Y S TEM March 3 1 , 1 9 8 3 Inventory Total Above * I nve ntory Min imum i Crude O i l Mo tor G a s o l ine Kero-Je t Fue l D i s t i l l a te F u e l O i l Re s idua l Fue l O i l

33 33 44 40 29

6 3 12 4 4

March 3 1 , Total I nve ntory

1988 I nventory Above § M i n imum

27 32 33 25 31

4 4 8 1 10

*

The NPC ' s 1 9 8 3 e s t imate us ing 1 9 8 3 m i n imum ope r a t i ng i nventor i e s . §

The NPC ' s 1 9 8 8 e s t imate us ing 1 9 8 8 m i n imum ope r a t i ng i nventor i e s . i

Exc lude s S P R , wh i ch on March 3 1 , 1 9 8 8 , he l d 5 4 5 mi l l ion barre l s , or 1 1 4 days ' s upp l y of crude o i l impo r t s . Source : N a t i on a l P e t ro l eum Counc i l " 1 9 8 8 S urve y o f u . s . P e t ro leum I nve n to r i e s and S torage Capac i t i e s (P r imary D i s t r i ­ bu t i on S y s tem ) ; " and Ene rgy I n forma t i on Adm i n i s t r a t ion , Pe tro l eum Supp ly Month l y , March 1 9 8 8 , and P e t ro l eum Supp l y Annua l , Vo l . 2 , 1 9 8 3 .

i t mu s t b e noted th at the drop in inventory vo lume i s impo rtant : ve ry low d i s t i l l a te day s ' s upply is due b o th to s e a s on a l patte rn Re s i du a l fu e l and the one - t ime e f f e c t o f the d ie s e l tax change . oi l exh ib i t s a sharp l y d i f fe rent pattern from t h e norm - - days ' supp ly above min imum i s h igher i n 1 9 8 8 tha n i t wa s i n 1 9 8 3 . The ch ange re s u l t s pr imar i ly from the l arge r e l a t ive drop i n the e s tima ted min imum ope r a t i ng i nventory . A s e emingly low number o f days ' supp l y a bove m i n imum shou l d n o t cau s e c o n c e r n i n t ime s o f norma l ope r a t i on s . A l s o , i t mu s t be s t re s s ed th a t n o s e a s on a l component i s bu i l t i n to the m i n imum operating inventory numbe r s . Produc t s that exh i b i t s e a s o n a l demand pattern s , such a s d i s t i l l ate fue l o i l , requ i r e h i gher oper ating i nventory l e ve l s go ing into peak demand pe r i ods . The ove ra l l f l e x i b i l i ty of the s upply , re f i n i n g , and d i s tr ibu t i on sys tem provide s amp l e ab i l ity to me e t a l l but the mo s t extreme demand peak s ove r t ime . The po tent i a l dr awdown o f inve ntory i n

- 9 -

the s e c o ndary d i s tr ibut ion s y s tem and ter t i ary s to r a g e s egmen t provide s add i t i o n a l f l e x ib i l i ty i n t ime s o f t i gh t s upp ly . S i nce 1 9 8 3 , th e perc entage o f crude o i l s upp l i e d to re f i ne r s from dome s t i c s ourc e s h a s fa l l en from approx im a t e l y 7 5 pe r c e n t to to about 6 4 p e r c e n t . S o whi l e the pr imary d i s tr i bu t i on s y s tem i s s omewh a t mor e vu l n e r ab l e than i n 1 9 8 3 b e c au s e o f imported c rude o i l , s eve r a l fac to r s m i t i g a te any potent i a l d i s rup t i o n i n produc t s upp ly : •

•

A s i gn i f ic ant p ropo r t i on o f imported c rude o i l h a s a long i n - trans i t t ime (3 0 - 5 0 day s ) , a l l ow i n g s u f f i c i e n t t ime to l oc a t e a l t e rnat ive , n e arby c rude o i l and produ c t s a s import r e p l a c ement s . The c omb i n e d s y s tem s h o l d ing u . s . p e tro l eum produc t inventor i e s (p r imary , s e c ondary , ter t i ar y ) a r e ava i l ab le to moderate s h or t- term " demand s urge s " and s upp l y tran s i e n t s .

•

I n the pa s t f ive y e a r s , s ub s t an t i a l c ap i ta l i nve s tm e n t s have been mad e in down s tre am re f i n ing c ap a c i ty , such a s vacuum d i s t i l l a t ion , the rma l and c a t a l y t i c c rack i n g , cok i n g , and c a t a l y t i c hydroc rack i n g and hyd r o tr e a t ing . Thu s , the s y s tem ' s f l e x ib i l ity i n hand l in g var i o u s grade s o f c rud e o i l and produc ing a g r e a t e r p e r c e n tage of l i ght p roduc t s h a s improved .

•

F i na l l y , i n the eve n t o f a severe d i s rupt i o n , the S P R s to c k s a r e i n t e nded , and ava i l ab l e , f o r d r awdown and use .

S torage C apac i t y The pr imary s y s tem s urvey examined t h e to t a l s to r a ge c apa­ c i ty i n ope r a t i on for c rude o i l and the p r i nc ipa l produc t s . At 1 , 4 1 9 mi l l i o n barre l s , s torage c apac i ty h a s decre a s ed s l ight l y s i nce 1 9 8 3 f o r t h e to t a l o f a l l pr oduc t s s urveyed . Among the rea s on s : •

Re f i nery , p ipe l ine , and term in a l shutdown s

•

P ipe l in e s h i f t s to a l ternat ive s e rv i c e gas )

•

Remova l o f tankage not retro f i tted to me e t envi ron­ menta l r e gu l a t io n s

•

Remova l o f tankage tha t h a s phy s i c a l ly d e t e r i o r a te d .

(i . e . , n a tura l

T ankage i d l e but avai l ab l e w i th i n 9 0 days , t ankage i n ope r a t i o n , and tankage under con s truc t i on together c on s t i tu te tot a l t ankage ava i l ab l e to the s y s t em . The s he l l c apac i t y o f the s e catego r ie s appe a r s i n T ab le s 4 and 5 . S ome o f the i d l e tankage c an b e r e s tored t o s e rvice , but much o f i t i s s c atte red

- 10 -

TABLE 4 SHELL CAPAC ITY OF TANKAGE IN OPERAT I ON AND TANKAGE UNDER CONS TRUCT I ON IN THE PRIMARY D I STRIBUT I ON S Y S TEM (Mi l l io n s of B a r re l s )

*

Crude O i l Mo tor G a s o l ine Kero-Jet Fue l D i s t i l l a te Fue l O i l Re s idua l Fue l O i l Total

�

March 3 1 ,

1988 Tankage Under C o n s truet ion

Tankage in 0E e r a t i on

1983 Tankage Under Cons truet ion

Tankage in 0E e r a t i o n

499 456 68

10 3 §

508 451 82

§ 1 §

295

1

2 61

§

143

4

117

0

1 , 462

18

1 , 419

2

March 3 1 ,

*

Exclude s S P R and a port ion o f l e a s e s to c k s t ankage . Repor ted i nve ntor i e s o f l e a s e s to ck s are 1 1 m i l l ion barre l s i n both 1 9 8 3 and 1 9 8 8 . §Le s s than 0 . 5 mi l l ion barre l s �

Tota l s inc l ude tankage for crude o i l and s urve yed petro­ leum produc t s o n l y . Tot a l s may not equ a l the s um of c ompon e n t s du e t o independent round i ng . S our c e : Na t i o n a l Pe tro l eum Counc i l " 1 9 8 8 S urvey o f u . s . Petro l eum I nve ntor i e s and S torage Capac i t i e s (P r imary D i s t r i ­ but ion S y s tem ) . "

in sma l l volume s acro s s the nat i on . Re l y i ng o n a s ub s t an t i a l port ion o f th i s tankage for eme rge ncy preparedne s s p l a nn i n g i s no t re a l i s t ic . Tab l e 6 shows the percentage ut i l i z a t i o n o f tank c apac i ty ove r the 4 0 -year s pan o f the NPC s e r i e s o f inve n t o ry repo r t s . Ove r th i s per iod , i nven tory in tankage h a s ave r aged abou t 4 6 pe rcent o f s torage c apac i t y and has ranged from a h i gh o f 5 3 percent i n 1 9 6 9 to 4 0 percent in 1 9 8 3 . A l though tank s do f luc tuate b e twe en m i n imum and max imum ope r a t i n g l eve l s dur i ng the ope r a t i n g cyc l e , the ave r age h a s var i e d l i t t l e over t ime .

- 11 -

TABLE 5 POTENT IALLY AVA I LABLE TANKAGE IN THE PRIMARY D I STRI BUT I ON SYSTEM AS OF MARCH 3 1 , 1 9 8 8 , THAT I S I DLE BUT CAN BE REACT IVATED W I T H I N 9 0 DAYS (Mi l l io n s of B arre l s ) 18 17 4 19 7

Crude O i l Mo to r G a s o l ine Ke ro-Jet Fue l D i s t i l l ate Fue l O i l Re s �du a l Fue l O i l To t a l

*

66

*

To t a l inc l ud e s t ankage for c rude o i l and s u rveyed p e t r o To ta l may not equ a l the s um o f c omponents leum produ c t s on ly . du e to i ndepe nd e n t round ing . N a t i o n a l P e t ro l eum Counc i l " 1 9 8 8 S u rvey o f u.s. S ou r c e : P e t ro l eum I nvent or i e s and S to rage C apac i t i e s ( Pr imary D i s tr i ­ bu t ion S y s tem ) . "

TABLE 6 P E RCENTAGE UT I L I ZAT ION OF TANK CAPAC I TY IN THE P R I MARY D I STRIBUT I ON SYS TEM , 1 9 4 8 - 1 9 8 8 I nventory a s a P e rc e ntage o f Tank C ap a c i ty

NPC Survey D a t e March 3 1 , 1 9 4 8 June 3 0 , 1 9 5 0 March 3 1 , 1 9 5 2 March 3 1 , 1 9 5 4 March 3 1 , 1 9 5 7 Se ptemb e r 3 0 , 1 9 6 2 S ep temb e r 3 0 , 1 9 6 9 S eptembe r 3 0 , 1 9 7 3 S eptember 3 0 , 19 78 March 3 1 , 1 9 8 3 March 3 1 , 1 9 8 8

S ource :

42 45 45 48 45 50 53 48 48 40 41

N a t i o n a l P e tro l eum Counc i l S urvey s ,

- 12 -

1 9 4 8 to 1 9 8 8 .

W i th product demand once a g a in on the r i s e a nd w i th ref i neries runn ing at h i gh u t i l i z at ion r a tes , it is an t i c i p a ted th a t there wi l l be ver y l i t t le ch ange i n s torage c ap ac i ty d u r i n g the nex t few yea r s . In an a t tempt t o quant ify the imp a c t of t h a t S P R o n i nd u s try inventory leve l s , s u rvey res ponden t s were a s ked i f the e x i s ten ce of the SPR has c o n t r ibuted to a dec rea s e i n s to ck level s . W i th ­ o u t excep t i o n , respo nden t s s a i d that t h e S P R d i d n o t affe c t the i r comp any ' s i nven to r y leve l s . The pr imary d i s tr i bu t i on s y s tem h a s c h a n ged c o n s i derab l y s i nce 1 9 8 3 . Ref i ner ies have c o n t i nued to c l o s e , r ef i nery c apa­ c i ty u t i l i z a t i on i s h i gher , U . S . depen dence on forei gn c r ude o i l has grown , and produc t demand i s up wh i le s to r age c ap a c i ty i s down s l i gh t l y . A l l these fac t o r s po i n t t o a s y s tem who s e c apa­ c i ty i s more fu l l y u t i l i z ed . The s y s tem h a s demo n s t r a ted i t s improved f l ex i b i l i t y i n the face of ref i nery c on s o l i d a t i o n s and increased produ c t demand by performing i n the 1 9 8 3- 1 9 8 8 per iod w i thout any s i g n i f i c a n t s upply d i srup t i on s .

SECONDARY DISTRIBUTION S Y S TEM The NPC ' s second s urvey , de s i gned to deve l o p more a c c u r a te es t imates of s to r a ge c ap a c i ty and inventory leve l s in the secondary d i s tr ib u t i o n s y s tem , defi ned t o t a l s to r a ge c a pa c i t ies as of March 3 1 , 1 9 8 8 , and ma j o r produ c t i nvent o r y leve l s as of Sep tember 3 0 , 1 9 8 7 and March 3 1 , 1 9 8 8 . The secondary s y s tem , th a t p o r t i o n of the d i s tr i bu t i o n netwo rk oper a t i n g between the p r imary d i s t r ib u t i o n s y s tem and end -users of petro leum produc t s , c o n s i s t s of two ma j or c omponen t s : •

B u l k P lants -- sto r a ge facilities th a t h a ve t o t a l s to r a ge c ap a c i t y o f les s than 5 0 , 0 0 0 b a r re l s a n d th a t do n o t rece ive produ c t del i ver i e s v i a b a r ge , s h ip , o r p i pe l i ne

•

Ret a i l Motor Fue l Ou t le t s - - fac i l i t ie s tha t d i s pen se mo t o r fuel to end - u s er s , i nc lud i n g service s t a t i on s , truck s t op s , and c o nven ience s to r e s .

Bu lk Pl ant s In 1 9 8 8 , approx ima tely 1 5 , 0 0 0 c ompa n ie s owned and / or operated bu lk p l an t s in the Un i ted S t ates , down from around 1 8 , 0 0 0 in 1 9 8 3 . A s ample of 1 , 9 9 5 c omp a n i e s w a s s e lec ted for s tudy in an effo r t to e s t ima te to t a l U . S . bu lk p l a n t i nven tory and s torage c apac i ty . These d a t a are p re s en ted i n T ab le 7 . Ret a i l O u t l e t s G overnment a n d p r ivate s ources were ana l y z ed i n deve l o p i ng es timates of the t o t a l number of ret a i l m o t o r fuel o u t l e t s in the

- 13 -

TABLE 7 E S T IMATED STORAGE CAPAC I TY AND I NVENTORY AT BULK PLANTS IN THE S ECONDARY D I S TR I B UT I ON S Y S TEM AS OF MARCH 3 1 , 1 9 8 3 AND 1 9 8 8 (Mi l l ions o f B a r re l s ) Ca:e ac i t y 1988 1983 Mo tor G a s o l ine Diesel / D i s t i l l ate Fue l O i l Re s idual Fue l O i l Total

*

I nve n t o ry 1988 1983

22

17

9

8

37 6

29 4

8 2

11 2

65

50

19

22

*

To ta l s inc lude s urveyed petro l eum produc t s o n l y and may not e qua l the s um o f components due to i ndependent round i ng . Na t i o n a l Petrol eum Counc i l " 1 9 8 8 S urvey o f U . S . Source : P e t ro l e um I nvento r i e s and S torage C apac i t ie s (S e c ondary D i s tr i ­ but ion S y s tem ) . "

TABLE 8 ESTIMATED STORAGE CAPAC I TY AND I NVENTORY

AT RETAIL MOTOR FUEL OUTLET S AS OF MARCH 3 1 , 1 9 8 3 AND 1 9 8 8 (Mi l l i o n s o f B arre l s ) Ca :e ac i t y 1988 1983

Motor Ga s o l ine Diese l / D i s t i l l at e Fue l O i l Total

*

*

I nve ntor y 1988 1983

79

75

26

40

5

8

2

4

84

83

28

44

To ta l s inc lude s urveyed pe tro l eum produ c t s o n l y .

S ourc e :

NPC e s t imate .

- 14 -

Uni ted States , thei r s tor age c apac i t ies , and thei r i nventory leve l s . As of March 3 1 , 1 9 8 8 , an e s t imated 1 7 0 , 0 0 0 re t a i l mo to r fue l out l e t s we r e ope r a t i n g i n the Un i t ed S t a te s . T o t a l s to r age capac i ty at tho s e ret a i l mo tor fue l out l e t s wa s e s t imated a t 8 3 mi l l ion barre l s , wi th inventor i e s o f 4 4 mi l l i on barre l s (s e e Tab le 8 ) . For e s t ima te d over a l l s torage c apac i t y and inventory i n the se condary d i s tr i bu t i o n s y s tem , see Tab le 9 . TERT IARY STORAGE SEGMENT For s tudy purpo s e s , the t e r t i ary s torage s e gme n t , the u l t i ­ mate consume r s , h a s been d i vided into s even s e c t or s : Agr icu l ­ tura l , Commerc i a l , E l ectr i c U t i l i t i e s , I n du s tr i a l , Mi l i t ary / Government , Re s iden t i a l , and Tran s por t a t i on . E s t imated s to rage c apac i ty and inve ntory i n the s e s e c to r s , a s of March 3 1 , 1 9 8 8 , are shown in T ab l e 1 0 . PETROLEUM FUTURE S Re s u l ts o f the NPC s urvey o f the pr ima ry d i s t r i bution s y s tem and bu lk pl ant ope r a tors i nd i c a ted that 8 7 percent of r e s ponde nt s fe l t that the futures ma rke t s had not a f fe c t e d the i r inventory

TABLE 9 E S T I MATED S TORAGE CAPAC ITY AND INVENTORY IN THE S ECONDARY D I S TRI BUT I ON S Y S TEM AS OF MARCH 3 1 , 1 9 8 3 AND 1 9 8 8 (Mi l l ions o f B a r re l s ) C aE ac i t y 19 8 3 19 88 Motor Ga s o l ine D i es e l / D i s t i l l a t e Fue l O i l Re s i dua l Fu e l O i l Tot a l

*

*

I nventor y 1983 1988

101

92

35

48

42 6

37 4

10 2

15 2

149

133

47

66

Tota l s i n c lude surveyed petro l eum produ c t s o n l y .

S ource :

NPC e s t ima te .

- 15 -

TABLE 1 0 E ST I MATED STORAGE CAPAC ITY AND I NVENTORY IN THE TERT IARY S TORAGE S EGMENT AS OF MARCH 3 1 , 1 9 8 3 AND 1 9 8 8 (Mi l l ions o f B a r re l s ) C apac ity 19 88 1983

I nven t o r y 1988 1983

Sector 41 37 213 61 56 100 134

Agr i c u l tu r a l Comme r c i a l E lectric Utilities I ndu s tr i a l M i l i ta ry / Gover nmen t Re s i d e nt i a l T r a n s po r t a t i on * Total

§

40 33 175 52 48 79 1 44

14 8 91 17 23 55 61

14 7 61 10 18 50 87

642

5 71

269

2 47

103

109

42

63

282 21 237

255 22 1 85

131 11 86

113 11 60

642

571

269

247

P roduct Mo tor G a s o l ine D i e s e l / D i s t i l l a te Fue l O i l Kero-Je t Fue l Re s idua l Fue l O i l Total

§

*

I n c lude s on-board and f i xed s torage c apac i ty and i nventory for c a r s , bu s e s , r a i lroads , and av i a t i o n , b u t ex c l ude s pay l o ad s to rage (i . e . , s torage c apac i t y a n d i n ­ vento ry f o r pro duc t b e ing tran s porte d ) o f r a i l ro a d s , tank truc k s , and mar ine ve s se l s . §

To ta l s i n c lude s urveyed petro l eum produc t s o n l y . Tot a l s may not equ a l the sum o f component s due to inde­ pendent round i ng . S ourc e :

NPC e s t ima te .

- 16 -

l eve l s . Mo s t part i c i pants in the mark e t fu l f i l l the i r c o n t r ac ­ tua l ob l i gat i o n s to buy o r s e l l through an oppo s i te , o f f s e t t ing tran s ac t i on , rather th an by de l iver ing or tak i n g de l ivery o f "wet" barre l s . O f the i nven to r i e s h e l d b y r e s ponde n t s who u s ed hedge s , the vo lume -we i gh ted ave rage b acked by hedge s wa s 1 1 p e r ­ c en t . Due to t h e s i z e o f t h e c ompan i e s a n d the i r i nven to r i e s , th i s pe rcentage ranged from 1 to 10 0 . SYSTEM DYNAMICS The petro l eum d i s tr ibution s y s tems are a c omp l e x , i ntegrated network of produc t i on , re f i n ing , s torage , and t r a n s po r t a t ion fac i l i t ie s . I n s tudyi ng the dyn am i c s o f th i s n e twork , the NPC e s t imated to t a l s tor age c apac ity and inve ntor i e s for pr i nc ipal produc t s and crude o i l i n all three s y s tems for March 3 1 , 1 9 8 8 . The f i nd i ng s are s ummar i z ed i n Tab l e 1 1 .

TABLE 1 1 ESTIMATED S TORAGE CAPAC ITY AND INVENTORY IN THE PETROLEUM D I STRIBUTION SY STEM S A S OF MARCH 3 1 , 1 9 8 8 (Mi ll ions o f Barre ls)

Primary Inv . Cap . Mo tor Gaso l ine Kero-Jet Fue l Dist illate Fue l Oil Residual Fue l Oil Total

*

Crude Oil

S econdary Inv . Cap .

Te rt i ary Inv . Cap .

Total Inv . C ap .

45 1 82

23 1 40

92

48

109 22

63 11

65 2 1 04

342 51

261

89

37

15

255

1 13

553

217

1 17

44

4

2

1 85

60

3 06

1 06

911

404

1 33

65

571

247

1615

7 16

5 08

343§

508

3 43 §

*

To tals inc lude surveyed p e t roleum p roducts only . Th ese inven tory levels and u t i l i z a t ion o f storage capacity represent sat isfac t o ry l ev e ls und er normal operat ing cond i t ions . To tals may not equa l the sum o f c omponents due t o ind ep end ent round ing . § Exc ludes SPR and 1 0 . 6 million b arre ls o f l e ase s t o cks . Sourc e : Nat iona l P e troleum C ouncil " 1 9 88 Survey o f U . S . P e t ro l eum Inventories and S t orage Capac i t ies (Primary Dist r ibu t ion Syst em) , " " 1 9 8 8 Survey o f U . S . Petroleum Invent or ies and S torage Capac i t ies ( S ec ond ary , Dist ribut ion Syst em) , " and est ima t e s .

- 17 -

The s e co ndary and te r t i ary inventor ie s a c t a s bu f fe r s b e ­ tween pr imary i nvento r i e s and end- u s e . Und e r norm a l cond i t i o n s , the s e inventor i e s r epre s ent a subs tant i a l s a f e t y c u s h ion - - i n add i t ion t o tha t provided b y pr imary inven tor i e s - - for e ac h produc t . Th i s cu s h ion i s d i f f i c u l t t o qu an t i fy though , b e c au s e i t i s no t po s s i b l e t o d e t ermine actual min imum opera t ing i nven­ tor i e s for the s e c ondary s y s tem and t e r t i ary s e gme n t . Mor eove r , the concept o f min imum oper a t i ng i nventory a s app l i e d to the t e r ­ t i ary s e gme nt i s s omewh a t d i f fe r e nt from the c o n c e p t a s app l i e d to t h e other two s y s tems . Neve r the l e s s , s ome min imum vo l ume o f inventory i s nece s s ary to keep the t er t i ary s egment operat i ng . I t i s be l i eved that m i n imum oper at ing inventory for a g i ve n produc t i n t h e s e c o ndary s y s tem or ter t i ary s egme n t i s a s ma l l e r fract i o n o f s tor age c apac i ty than t h a t i n t h e p r ima r y s y s tem , bec au s e there i s l e s s unava i l ab l e inventory , such a s p i pe l i n e fill . A l s o , the s i z e s o f rece ipt s a n d de l ive r i e s o f produ c t a r e con s id e r ab l y sma l l e r t h a n i n t h e pr imary s y s tem . I n t h e s econd­ ary s y s tem , mo s t movemen t s are made by truck o r r a i l , whe r e a s i n the pr imary s y s tem , t h e m a j or i ty are by b ar ge , p i pe l i ne , and t anker . Motor g a s o l ine i s u s ed here to demon s tr a t e the dynam i c nature o f t h e p e t r o l e um d i s tr ibu t ion s y s tems . T ab l e 1 2 i s b a s e d on t h e e s t ima te that , for ga s o l ine , m i n imum ope r a t i n g i nventor i e s in the s e cond a ry s y s tem and te r t i ary s e gment a r e 2 0 perc e n t o f c apac i ty ( a f igure f e l t t o b e r e a s on ab le b y the NPC ) . N o t e that the s e f i gu r e s s how an add i t i onal cu sh ion of 3 0 m i l l ion b a r r e l s o f g a s o l ine above m i n imum i n the s e c ondary s y s t em and 4 1 m i l l i on barre l s o f ga s o l ine above m i n imum in the t e r t i ary s e gmen t . Hence , i n th i s e xamp l e , e ach o f the s econdary and t e rt i ar y inventor i e s above m i n imum i s greater th an the 2 6 m i l l io n b a r re l s o f c u s h i o n provided b y the p r imary s y s tem a l one . I t shou ld be recogn i z ed , howeve r , that it is more d i f f i cu l t to r e d i r e c t phy s i c a l i nvento r i e s i n the s e condary s y s tem a n d te r t i ary s egment to other c o n s umer s e c to r s or geograph i c are a s . Howeve r , work ing toge the r with the pr imary s y s tem , many d i s t r ibut i o n needs c an be --·me·t th rough exch ange s . S imi l a r c a lc u l a t i o n s for d i s t i l l a t e fue l o i l and re s idual fue l o i l show even greater c u s h i o n s i n the I n the c a s e o f r e s i du a l se condary s y s tem and t er t i ary s egment . fue l o i l , the c u s h ion i s con s iderab l e , s i n c e u s e r s s uch a s ut i l i t i e s ma i n t a i n l arge inventor i e s . Norma l ly , invento r i e s i n the s e c ondary s y s tem and te r t i ary s egme n t r epre s ent add i t ional vo lume s that c an be u s ed to ma i n t a i n cont i nuou s s upp l y o f produc t s f o r c on s umpt ion . Howeve r , c i rcum­ s t anc e s such as expe c t at ion of e i ther a ne ar - te rm s u b s t a n t i a l p r i c e i nc r e a s e or a c rude o i l shortage c a n c au s e ve r y rapid i n ­ cr e a s e s i n c a l l f o r produc t . The s e incre a s e s may c a u s e t empor ary s upp l y d i s l o c a t i o n s i n the pr ima ry s y s tem but s hou l d not l e ad to produ c t d i s rup t i o n s to the end- u s e r , b e c au s e the i nve ntor i e s rema i n ava i lab l e for con s ume r u s e . I n the c a s e o f gas o l ine , a r ap i d s urge i n product c a l l by th e t e r t i ary s egme nt to f i l l the 4 6 mi l l ion b a r re l s o f unu s ed s torage c apac i ty cou ld , po tent i a l ly , a lmo s t d r a i n the s e co ndary

- 18 -

TABLE 1 2 MOTOR GAS OLINE AS OF MARCH 3 1 , (Mi l l ions o f B a r re l s )

1988

P r imary S y s tem I nve nto r i e s Above M i n imum Operating Inventory

26 S e condary Sys tem

T e r t i ary S egme n t

She l l Capac ity

92

109

I nventory * Min imum Ope r a t ing I nven tory Inve n tory Above M i n imum Ope rat ing I nven tory

48 18

63 22

30

41

46

46

Unu sed She l l Capac i t y

*

§

§

A s s umed to be 2 0 percent o f she l l capac i ty . She l l c apac i ty l e s s inventory .

D e r ived f rom Na ti6na l P e t ro l eum Council " 1 9 8 8 Source : Su rvey o f U . S . P e t ro l eum I nven tor i e s and S to r a ge C ap ac i t i e s ( Pr ima ry D i s tr ibut ion S y s tem ) , " " 1 9 8 8 S u rvey o f u . s . Petro l eum I nve nto r i e s and S torage Capac i t i e s ( S econdary D i s tr ibu t i on Sys tem) , " and e s t ima te s .

sys tem o f i t s 3 0 mi l l i o n barre l s o f gas o l ine above the a s s umed min imum ope r a t ing i nventory , and the pr imary s y s t em o f i t s 2 6 mi l l ion barre l s o f g a s o l i ne above th e min imum ope r a t i n g i nven­ A s urge i n c a l l by the s econdary s y s t em , w i th its 4 6 tory . mi l l ion barre l s o f unu s e d ga s o l i ne s torage c apac i t y , c o u l d a l s o B a s ed on expe ­ drain the pr imary s y s tem o f i t s supp ly cu s h i on . r i ence , i t i s conc luded that the over a l l s y s tem h a s s u f f i c i e n t flexib i l ity t o hand l e demand s p i k e s in de f i ne d geograph i c a r e a s as product i s r e d i r e c ted to tho s e are a s v i a p r i c e -dr iven S imi l ar examp l e s extracted from the s urve y data for dyn ami c s . d i s t i l l a te and r e s idua l fue l o i l s wou ld appe a r even mor e e x t r eme , bu t i t shou ld be noted th at a s o f March 3 1 , 1 9 8 8 , s e c ondary s y s tem inventor i e s o f the s e heat ing fue l s we r e l ow , and unu s ed tankage c apa c i t y h i gh .

- 19 -

Sudden p roduct c a l l s s uch a s tho s e i l l ustr a t e d above a r e po s s ib l e a n d c ou l d appear to d i s rupt s upp ly . Howeve r , s eve r a l fac to r s tend t o m i t igate the impo rtance o f s udde n produ c t c a l l s and d imi n i s h the l ike l ihood o f d i s rup t i o n : •

The d emand s urge d e s c r ibed above wou ld n o t b e a con­ ---­ I t wou l d b e s imp ly a t r an s f e r o f s ump t i o n s ur ge . produc t s f rom the pr imary s y s tem to the s ec ondary s y s t em and/or the ter t i ary s egment .

•

H o l de r s o f s e c ondary and ter t i ar y i nvento r i e s wou l d not ne c e s s a r i ly e xpe r i ence a demand s urge for a l l produc t s i n a l l geograph ic are a s a t the s ame t ime . F o r e x amp l e , s e a s o n a l i ty o f p roduct demand wou ld prob ab ly r e s u l t i n l e s s s urge for he a t i ng o i l in s p r i ng than i n the f a l l . Many e l e c t r i c u t i l i t i e s and indu s tr i a l u s e r s have o i l s tor age but burn natu r a l gas , and wou l d n o t n e c e s s ar i ly want to f i l l the i r s torage a s long a s g a s wa s ava i l ­ ab l e .

•

Re f i ner i e s cont inua l ly rep l e n i s h the p r imary s y s t em .

•

F i n i shed produ c t s c an be imported to me e t temporary imb a l a nc e s i n the s y s t em .

The s tudy da ta de f i ne the i nve ntor i e s and s to r age c ap a c i t i e s Invento r i e s f luctuate a s o f a s pe c i f i c date - - March 3 1 , 1 9 8 8 . on a produ c t -by-p roduc t b a s i s , howeve r , and wi l l c o n t inue to do s o a s the s y s tem reacts to var iat ion s i n s upp l y , d emand , p r i ce s , and o ther eco nomic f ac tor s . Th i s shou l d be c o n s i d e r e d a s o n e eva luate s t h e f in d i ng s . The p e t r o l eum d i s tr ibu t i o n s ys tems are f l ex i b l e and dyn am i c , chang ing to me e t d i f ferent s upp l y and demand s i tu a t i o n s . As has been demon s tr a ted b y the i ndu s try over t ime , th i s c ap ab i l i t y h a s enab l ed th e i ndu s try t o min imi z e the e f f e c t s o f s upp l y d i s rupt i on s .

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CHAPTER ONE OVERVIEW OF THE PETROLEUM D I S TRIBUT I ON SYSTEMS AND THE FUNCT I ON OF INVENTORY AND S TORAGE CAPAC I TY

The U . S . petro leum d i s tr ibution s y s tems are c ompr i s ed o f ne twork s o f termi na l s , re f i ner ie s , other s to r age f ac i l i t i e s , p ipe l i ne s , tanker s , barge s , tank c a r s , and tank truck s . The s e e l emen t s move crude o i l from i t s s ource , c onve r t i t into c o n s umer produc t s , and d e l iver the produc t s to c on s ume r s ' f ac i l i t i e s for th e i r u s e . All of the s e component s s tore o i l . Th i s ove rv iew o f the var ious s y s tems and the func tion o f inven tory and s to r age capac i ty is pre s ented as an i n troduc t i on to the a n a l y s i s i n Chapter Two o f change s that have take n p l a c e i n the petro l e um d i s tribution s y s tem . THE PETROLEUM D I S TR I B UT I ON SYSTEMS As shown in F i gure s 2 and 3 , the petro l e um d i s tr i bu t i on s y s tems are compr i s ed o f the pr imary d i s tribut ion s y s tem , the se condary d i s tr ibu t i o n s y s t em , and the t e r t i ary s to r a ge s e gme n t . The pr imary s y s tem gather s c rude o i l , tran s po r t s i t to re f i n ­ e r i e s , re f i ne s i t i n to produ c t s , and de l ive r s tho s e produc t s in bulk to the s e c ondary d i s tr ibu t ion s y s t em . ( I n s ome c a s e s , de­ l iver i e s are made d i r e c t l y to the s torage of l arge end- u s e r s , i . e . , tert i ary s torage . ) The s econdary s y s tem d i s t r ibute s the s e bu lk qu an t i t i e s i n sma l l er l o t s to the r e c e iving t ank s o f the end-u s e r s . The te r t i ary s e gme nt is the s to r age c apac i ty and inve ntory he l d by a l l end- u s e r s . The ga s o l ine s tored in the tank f the fam i l y car i s a common examp le . The i nventory behav i o r o f o the s econdary s y s tem and t e r t i ary s e gme n t s ign i f i c an t l y a f f e c t s E ach s ys tem i s the pr imary s y s tem ' s ab i l i t y t o ope rate smooth l y . de s cr ibed i n more d e t a i l i n the fo l l owing s ec t i o n s . Crude O i l For dome s t i c crude o i l , the pr ima ry crude o i l d i s tr ibu t ion sys tem b e g i n s with a l e a s e tank in wh i ch o i l from a produc i n g we l l i s ac cumul ated . Sma l l p i pe l ine-gathe r ing s y s tems , tank cars , tank truck s , and barge s co l l ect the c rud e o i l from the s e l e a s e tank s and de l ive r i t into interme d i a te s torage for furthe r movement to re f i n i ng fac i l i t i e s or d i r e c t ly to re f i ne r i e s . C rude o i l from fore i gn s ourc e s ente r s the pr imary s y s tem v i a tanke r s at mar ine termi na l s a n d re f i ner ie s o r , i n Canada ' s c a s e , via pipe l i ne and ove r l and . Expo r t s o f crude o i l are a l l owed o n l y for : ( 1 ) crud e o i l d e r i ved from f i e l d s unde r t h e s t ate wa t e r s o f Alaska ' s Cook I n l e t ; ( 2 ) dome s t i ca l ly produced crude o i l de s t ined for Canada ; and ( 3 ) s h i pme n t s to u.s. terr i t or i e s .

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DOMESTIC CRUDE OIL PRODUCTION

..

CRUDE OIL EXPORTS

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CRUDE OIL STORAGE TERMINALS AND TRANSPORTATION NElWORK

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STRATEGIC PETROLEUM RESERVE

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DISTRIBUTION SYSTEM

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CRUDE OIL AND PRODUCT IMPORTS

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TERTIARY STORAGE SEGMENT

Agriculture Commerical Electric Utilities Government!Mi litary Residential

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Figure 2. The Petroleum Distribution System.

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Ma j or c rude o i l p ipe l i ne s y s tems trave r s e the Un i te d S t a t e s , l i nk ing gath e r ing s y s tems i n produc ing a r e a s to s to r age t e rm i n a l s and r e f i ne r i e s . L arge - d i ame ter p ipe l i ne s , c a l l ed t runk l i n e s , move l arge vo l ume s o f o i l b e twe e n ma j o r po i n t s or t o t e rm i na l s . Trunk l i n e s are gene r a l ly routed through foc a l po i nt s , o r hub s , whe r e a number o f p i pe l i n e s c onverge . At s u ch po i n t s , t r a n s fe r s o f c rude o i l t o c a r r i e r s w i th o th e r de s t i n a t io n s may b e made . Examp l e s of such l o c a t i o n s are Midl and and Ode s s a , in we s te r n Texa s ; Longv i ew , i n e a s tern Texas ; Cu s h i n g , O k l ahom a ; F o r t L aram i e and Guer n s ey , Wyoming ; and P atoka , I l l i no i s . Such loca­ t i on s requ i re a l arge s torage c apac i ty t o a c c ommod a t e c rude o i l from nume rou s produc ing r e g i o n s , and to p e rm i t the s e grega t i on , hatch ing , and s to r i ng th at s uppo r t the cont i nuou s movemen t o f o i l through the s y s t em . F rom the s e locat ions , sma l le r branch p ip e ­ l in e s t h e n move the c rude o i l to re f i ne r ie s . The r e we r e 2 1 3 ope rab l e re f iner ie s i n the Un i ted S ta te s a t the be g i nn in g o f 1 98 8 . Th i s compare s to 2 5 8 operable r e f i ne r i e s a t the beg i nn i ng The r educ t i on o f app rox ima te l y 1 MMB/D o f ope r ab l e of 1 9 8 3 . c apac i ty dur i ng th i s f ive -ye ar per iod re f l e c t s a s truc t u r a l change i n th e pr imary d i s tr ibution s y s tem due to i n c r e a s ed marke tp l a c e c ompe t i t ion , improved e f f i c i e nc y , and ch ange s i n gove rnment r e gu l a t i on s . A g r e a t d e a l o f s to rage c apac i ty i s a l s o needed a t mar ine term i na l s to pe rm i t promp t d i s charge of c argo . Th i s s to r age requ i r emen t app l i e s a l s o to r e f i ne r i e s that a c c e p t ma r in e sh ip­ me n t s d i re c t ly . B e c au s e qua l i ty among c rude o i l s var ie s s ub s t a n t i a l l y , they are gene ra l ly s egregated p r i o r to tran s po r t . S e g r e g a t i o n re ­ qui reme n t s , de t e rmined by qua l i ty characte r i s t i c s that inc lude s u l fu r conte n t , s p e c i f i c g rav i ty , a s ph a l t c o n t e n t , pour po i n t , and s u i tabi l i ty for l ube o i l manu fac tu r i ng , are u s ua l l y d i c t ated T ank age by the p a r t i c u l ar n e e d s of the re f iner i e s be ing s erved . is requ i red a t re f i n e r i e s to rece ive and ho l d c rude o i l supp l ie s , The s i z e o f mar i n e ve s s e l s and by gr ade , p r i o r to proce s s i ng . the frequency o f d e l ivery a l s o s i gni f i c an t ly a ffec t the requ i red s torage c apac i ty vo l ume . C rude o i l s tored by the u.s. gover nmen t i n the S P R i s part o f the pr imary d i s tr ibut i on s y s tem but is i n t ended only f o r u s e i n eme r gency s i tu a t i on s . ( Appendix G s umma r i z e s the S PR ' s ro l e . ) There i s a l s o a s ign i f i c an t vo lume o f s torage i n the C ar i bb e a n a t tanker tran s s h ipme nt t e rm i na l s and at the re f i n e r i e s o f s ev e r a l ( I n Append ix H the s e fa c i l it i e s a r e d i s ­ u.s. o i l compan i e s . cu s s ed i n more d e t a i l . ) Pe tro l eum P rodu c t s Once de l ive r e d to a re f inery , c rude o i l i s c o nve r te d t o var iou s produc t s , inc lud ing mo tor ga s o l ine , j e t fue l , d i s t i l l ate fue l o i l , and re s idua l fu e l o i l . Tankage is r e qu i re d a t re­ f iner i e s to r e c e ive and h o l d both u n f i n i shed o i l s and f i n i shed produ c t s .

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F i n i shed p rodu c t s e x i t the re f inery through the p r imary product d i s tr ibut ion s y s tem , wh i ch con s i s t s o f fac i l i t ie s s im i lar to tho s e in the crude oil d i s tr ibu t i on s y s tem : p rodu c t p ipe­ l ine s , barge s and tanker s , and bu lk term i na l s to s tore produ c t f o r fu rther d i s t r ibu t i on . P roduct impo r t s a n d expo r t s a l s o f l ow through the pr imary d i s tr ibut ion s y s tem . Wh i l e product s are s t i l l in re f inery tank s , the re i s u s ua l ly a choice a s to the l oc a t ion to wh i ch the produ c t s may move and the mode o f transport . Once a product i s on i t s way , i t i s c om­ mitted to a geograph i c area , a l though s ome d e l i ve r y o p t i o n s re­ ma in . For examp l e , the C o l on i a l P i pe l ine , wh i ch extends from the Hou s ton-Be aumon t , T e x a s , area to the New York Harbor a r e a , pa s s e s through the B a ton Rouge , Atl anta , Gre e n s boro , R i chmond , Wa s h i ng­ ton , Bal t imo re , and Ph i l ade l ph i a are a s . Produc t s c a n be d e l iv­ ered at numerous l o c a t i o n s a l ong the p ipe l i ne route . S torage c apac ity for e ach of the produc t s carried is provided a t s h i ppe r bu lk termina l s , al s o l o c a t ed along the route . The terminus o f the pr imary product d i s tr ibut i o n s y s tem i s usua l l y a bu lk terminal - - a nonconsume r f ac i l i ty , by E IA de f i ­ ni tion , h a s s torage c apac i ty o f 5 0 , 0 0 0 barre l s o r more o r r e ­ P r oduc t s c e i ve s produc t s d i r e c t l y b y barge , tanker , or p i pe l i ne . le ave the pr imary s y s tem from the s e bu lk term in a l s and , a t th i s po i nt , the ab i l ity to d ivert a product t o anoth e r reg ion become s much more l im i t ed . THE FUNC T I ON OF INVENTORY AND STORAGE CAPAC I TY Pr imary D i s tr ibut i on S y s tem The fun c t i on o f i nventory and s torage capac i ty in the pr i ­ mary petro l e um d i s tr ibu t i o n s y s tem i s be s t und e r s tood b y exam i n ­ i n g the fo l l owi n g component s , each o f wh ich p l a y s an important ro le in the overa l l s y s tem ( s e e F i gure 4) : • • • • • • •

Unava i l ab l e i nventory Work ing inven tory M i n imum ope r a t i n g inventory Operat i ng s pace Maximum ope r a t i n g i nve ntory Cont ingency s pace Unava i lab l e s pace .

Unava i l ab l e i nventory ( equ ipment f i l l and tank b o t toms) and wo rk ing i nventory ( inve ntory above unava i l ab l e nece s s ary to s up ­ port the oper a t i ng cyc l e) toge the r con s t i tu te t h e m i n imum oper a t­ ing invento ry . Equ i pmen t f i l l is inventory w i th i n the ope r a t i ng equipment , exc luding tanks , th at i s re qu i r e d for the r e f i n e r y proce s s ing s y s tem to fu nc t ion norma l l y . T ank b o ttoms are the portion tha t f a l l s be l ow the norma l s u c t i o n l i n e s o f the tank . For f l o a t ing- roo f tank s , i t i s the amount requ i re d to k e ep the legs of the roo f from touch ing the tank bot tom . The p e t ro l eum

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indu s try continue s to deve lop and emp l o y innovat ive techn i qu e s for reduc ing unava i l ab l e inventor i e s . The s pace ava i l a b l e for max imum ope r a t ing i nventory i s the to tal c apac i ty o f the s y s tem l e s s the unava i l ab l e s p a c e ( tank tops and s a fe t y a l l owance) and the cont ingency s pace ( the empty spac e r e s erved to a l low for smooth ope r a t ion wh en inventor i e s appro ach upper leve l s ) . The func t i on and de f i n i t ion o f un ava i l ­ ab le inventory , work ing inve ntory , min imum ope r a t ing inve n tory , operat ing s pace , and max imum ope r a t i ng inventory are d i s c u s s ed in greater deta i l a s fo l l ows . Unava i lable I nve ntory Unava i l ab l e inventory , the vo lume o f o i l conta ined i n pipe l i n e s , re f inery e qu ipme nt , and tank bot toms , i s unava i l ab l e I t a l s o inc lude s without shu t t i ng down p a r t o f t h e s y s tem . inventory i n tran s i t to and from dome s t i c s ource s by truck , tank c ar , barge , or tanker , a s we l l a s fue l set a s ide for u s e wi th in the s_ys tem and a s c rude o i l l e a s e s tocks . Mo re s pe c i f i c a l ly , the three p r i nc i p a l c ompone n t s o f th i s i nventory are : •

P i pe l i ne F i l l - - I n i t i a l ly , p i pe l i n e s y s tem s mu s t b e f i l led to ope rate . Sub s equent l y , an e qu i va l ent vo lume o f crude o i l or produc t mu s t r ema i n in th e l i ne , un ­ ava i l a b l e for con s umpt ion , for normal operat ion .

•

Re f i nery F i l l - - S imi l a rl y , r e f i ne r y equipme nt i s f i l l ed t o de s i gn leve l s with crude o i l and v a r i o u s un f i n i shed petrol eum frac t ion s . As the oi l i s proc e s s ed , new o i l i s added . Con s e que n t l y , the inven tory vo lume w i th i n th e proce s s e qu i pment rema i n s unava i l ab l e whe n the re finery i s i n ope r a t ion .

•

Tank Bot toms - - I n mo s t c a s e s , s to r age t ank s are de­ s igned s o that th ey cannot be t o ta l l y emp t i e d by the norma l s uc t i on p i p i ng . Th i s d e s ign preve n t s r e s idue and water , wh i ch s e t t l e at the bot tom , from be ing introduced into the crude o i l or produc t s tr e am s . Some tank s are equipped wi th a f l oa t i n g roo f , d e s i gned s o that the roo f ad j u s t s to the l e ve l o f o i l i n the t ank . Th i s prevents air from ente r i n g the tank as the o i l is pumped out , and a s the t ank i s f i l l e d , m i n imi z e s hydrocarbon emi s s i o n s from the tank . A t ank o f th i s type i s not pe rm i tted to re ach a l e ve l that wou ld a l l ow the f l o a t i ng - roo f l e g s to touch the tank bo t tom .

The inventory vo l ume s c i ted above , inve ntory i n t r a n s i t by wate r , ra i l , and truck , fue l set a s ide for use w i t h i n the s y s tem , and c rude o i l l e a s e s to c k s are not avai l a b l e to the c o n s ume r and are thu s c l a s s i f i e d " unava i l a b l e . " The s e i nventor i e s a r e r e ­ qu i red t o ma i n t a i n t h e ope r a t i o n o f the f ac i l i ty o r t r an s porta­ t ion mode .

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Work ing I nventory Wo rking i nventory is the quant i ty of c rude o i l and r e f i ned produc t s , above the unava i l ab l e inventory , n e e de d to k e e p the I t i s the pr imary d i s tr ib u t i o n s y s tem func t i o n i n g norma l ly . add i t i ona l i nve ntory nece s s ary to s upport the ope r a t ing c yc l e , h and l e unavo i dab l e ope r a t i ng interrup t i on s , and fac i l i t a t e the b lending o f produ c t s t o the i r f i na l spec i f i c a t i o n s . For a l l prac t i c a l purpo s e s , work ing inven tory i s a l s o unava i l ab l e , bu t i t c an b e u s ed f o r a short t ime at h i gher ope r a t ing c o s t s . D e s c r ip ­ t i on s o f compon e n t s o f wo rk ing inve n tory fo l l ow : •

Ope r at ing Cyc l e s - - Typ i c a l ly , c rude o i l i s de l ivered The r a t e a t wh i c h to a r e f in e ry by p ipe l ine or tanke r . crude o i l i s de l ivered norma l l y doe s n o t m a t c h the r a t e a t wh ich i t i s re f ined . F o r e x amp le , a r e f in e r y m i gh t take t e n days t o proce s s the c ar go t h a t a tank e r h as A vary i n g quan t i ty o f t aken two d ay s to d i s ch arge . c rude o i l i nventory i s he ld a s a r e s u l t o f th i s imb a l ­ Immed iate ly a fte r the tanke r h a s o f f - loaded , ance . c rud e o i l i nventory in t ank age i s h igh . The inven tory i s gradua l ly reduced a s the r e f in e r y proce s s e s the crude o i l and awa i t s the next de l ive ry . S torage capa­ c i ty mu s t be provided for the max imum c r ude o i l de l iv­ ery and ho l dover i nventor i e s ( op e r a t i n g marg i n for d e l ayed d e l ivery) , a l though ac tu a l i nven tor i e s w i l l ave rage s ub s tant ia l ly le s s than c ap ac i t y . P roduc t de l ive r i e s from a re f i ne ry ope r a t e s im i l ar ly . P roduc t s manu f a c tured in a re f inery gene ra l ly accumu ­ l a t e a t rate s s l ower than the ou tbound t r an s po r t a t i on So s u f f i c i e n t wo r k i n g i nventory fac i l i t i e s requ i re . mu s t be on hand a t a l l t ime s to me e t t r a n s po r t a t i on sys tem n e e d s . For examp l e , barge s h ipme n t s o f produc t s from a r e f in e ry gene r a l ly requ i r e that s u f f ic i e n t i n ­ ve ntory b e on h a n d t o l o a d a b a r g e i n l e s s t h a n a day . B atch s h ipme n t s into p i pe l i n e s a r e a s im i l a r examp l e . I nve ntory wi l l the re fore be lowe s t j u s t a f t e r a sh ip­ me n t , gradua l ly inc r e a s ing a s the next s h i pme nt accumu l a t e s from re f inery produc t i on .

•

S y s t em I n te r rup t i o n s - - De l ive ry o f c rude o i l to a re f inery and s h ipment o f produc t s are s ub j e c t t o i n ­ terrup t i on s , d u e to unavo i dab le b u t r e c u r r ing even t s . I nve ntor i e s o f both crude o i l and p rodu c t s are he l d a s p ro t e c t i o n aga i n s t the s e inter rup t i on s . F o r e xamp l e , to be prepared for an immed i ate c rude o i l r unou t c au s e d by a p ip e l i ne shut down or tanke r de l ay , s ome add i t i o n a l crude o i l wi l l a lway s b e he ld i n the re f i n e ry . This i nventory i s h e l d not o n l y be c au s e e c onom i c s d i c t a te continuou s re f inery ope r a t ions , but a l s o b e c au s e i t i s ope r a t i on a l ly unde s i r ab le t o s hu t down a re f i n e r y ins tantly ; su f f i c ient o i l mu s t be on h and to prov i de I n add i t io n , i n the e ve n t o f for an orde r ly shutdown . a r e f inery shutdown , su f f i c i e n t inventory o f f i n i shed

- 28 -

product i s needed to cont i nue to s upp l y c u s tome r s unt i l the re f i n e ry i s b ack i n ope r a t i on . •

B l ending o f P roduc t s Va r i o u s un f i n i s h ed produc t s mu s t b e accumu l a ted unt i l s u f f i c i e nt qu an t i t i e s are ava i l ab l e for b l ending i n spec i f i c p ropor t i on s to make f i n i s hed produc t s , such as d i f f e r e n t grad e s of ga s o l ine and fue l o i l s .

Min imum Ope r a t i n g I nventory Min imum ope r a t i ng i nven tory is the l eve l o f i nventory th a t i s nece s s ary to ma i n t a i n smooth ope r a t i o n s a n d avo i d runo u t s and below wh ich ope r a t i n g pro b l ems and shortage s wou l d beg i n to appear i n a de fined d i s tr i but i on sys tem . It is compo s e d of unavai lable i nventory and wo rk ing inventory and is norma l ly not avai lable for s a l e . The min imum ope r at ing inventory i s a con­ cept , no t a prec i s e l y me a s ur a b l e quant i t y , that c a n b e e s t imated mo re accurat e l y for a company than for the i ndu s try as a who l e . As used by the NPC , m i n imum operating inventory exc lude s the e f fe c t s of s e a s ona l product bui ld-ups . A company ' s m i n imum ope r a t i ng inven tory i s a func t i on o f many fac t o r s , inc l ud ing the loc ation o f both i t s s upp ly and demand , the l eve l o f i t s demand , the ava i l a b i l i t y o f tran s po r t a ­ tion a n d re f i n ing f ac i l i t i e s , t h e mode o f t r a n s po r ta t i on , a nd t h e ava i l ab i l ity , s i z e , a n d l o c a t i o n o f tankage . I t s a c t u a l inven­ tory may , a t t ime s , fa l l be low the m i n imum ope r a t i n g leve l . In such a c i rcum s tanc e , a company may b e able t o avo i d s upply d i s ­ rupt ions b y spec i a l purch a s e s o f supply o r by a n exchange wi th another company , but only i f the s e add i t i o n a l s upp l i e s are a va i l ­ ab le . I n the cour s e o f no rma l oper a t i o n s , compan i e s do not p l an on dr awi ng down s tock s be low min imum ope r a t ing i nventor i e s , due to the co s t s invo lved . E s t ima t i ng the min imum ope r a t i ng i nventory on a n i ndu s try­ wide b a s i s requ i r e s a comp l e x and very d i f f i c u l t j udgme nt . Me rely tota l i ng th e m i n imum ope rat ing i nvento r i e s for a l l c om­ pan i e s , at a g iven time , may not tru ly repr e s ent the m i n imum oper a t i n g inventory for the indu s try , be c a u s e i t i s un l i ke l y th a t a l l ope r ator s wi l l reach the i r m i n imum ope r a t in g l e ve l s s imu l ta ­ neou s ly . I t i s c l e a r that one o r mor e compan i e s may incur shortage s and runou t s be fore the e s t imated m i n imum ope r a t ing i nventory for the total i ndu s try is reached , as other compan i e s i n the sys tem wi l l be above th e i r m i n imum . Th i s e nh a nc e s t o t a l sys tem f l e x i b i l i ty . Ope r a t i n g Space Al though there are many purpo s e s for m a i n t a i n ing c e r ta i n inventory l eve l s with in the " operating space " ( th a t s p a c e i n exce s s o f the min imum ope r a t ing inventory ava i l a b l e f o r h o l d ing add i tional inve nto r i e s ) , th i s d i scu s s ion wi l l fo c u s on two p r i ­ mary e l ement s :

- 29 -

•

S ea s on a l Demand - - Con s ump t i o n o f g a s o l i ne i s g r e a t e s t i n s umme r mo nth s ; c o n s umpt ion o f h e a t i n g o i l i s gr e a te s t i n winter mon th s . During a g i ve n s e a s on , re f iner i e s gene ra l ly do not change the m i x o f g a s o l i n e and h e a t ing o i l s u f f i c i e n t l y to b a l an c e produc t i on with demand . S e a sona l demand a l s o re s u l t s in c h ange s i n d i s tr ibut ion pattern s , s uch a s c hange s i n p ipe l i n e c yc le s a n d extra transportation b y t r u c k and b arge . As a re s u l t , exce s s d i s t i l l a t e fue l o i l produc t i o n i n the s umme r may be he l d for winter demand , and e x c e s s g a s o ­ l ine produc t i on i n the winte r may be h e l d f o r s umme r demand . Th i s inventory i s he ld i n both the p r imary a nd s e c ondary d i s tr ibut i on s y s tems to s up p l y the s h or t fa l l I n the be tween p roduc t ion c apac i ty and pe ak d emand . 1 9 8 0 s , wh i l e over a l l d i s t i l l a t e i nven to r i e s h ave de­ c l ined , the s e i nventor ie s have propo r t i o n a l l y s h i fted from p r ima ry bu lk termin a l s back to the r e f i ne r ie s . F i gure 5 shows the trend s i n pr imary d i s t i l l a t e i nven ­ to ry from 1 9 7 7 to 1 9 8 7 .

•

P l anned Ma i ntenance P e r iod s - - P e r i od i c a l ly , c omp an i e s s hu t d own re f i ne ry equ ipmen t for mai n t e n an c e . To per­ mi t r e gu l ar de l iver ie s o f p roduc t to c u s tome r s dur ing the shutdown , inventor i e s mu s t be bu i l t up ahe a d o f t ime o r a l t e rn a t ive s upp ly arr angeme n t s mu s t b e made . S i nce c rude o i l s upp l i e s c anno t a lway s b e t e rm i na t ed on short no t i c e , inve ntor i e s at th e r e f i n e ry and/o r i n c onnec t i ng p ipe l in e termi n a l s may i n c re a s e dur i n g the shutdown per i od .

1 60 L EG E N D

1 40

1 977 (/) ....J w a: a:

I

Indust rial § ( Inc ludes Agr i cu l ture ) Resident ial / Comme r c ial ,[ Transp o r t a t ion E le c t r i c ity Total

*

**

%

1984 Quant i t�

%

1985 Quant i t�

%

1986 Quant ity

%

1987 Qu ant ity

3.8

25

4. 1

26

4.0

25

4. 1

25

4.3

26

+12

1 .3 9 .4 0.7

8 62 5

1.3 9.8 0. 6

8 62 4

1.4 9 .9 0.5

9 63 3

1.4 10 . 2 0.6

8 63 4

1.4 10 . 5 0.6

8 63 3

+5 +1 1 -29

15. 2

1 00

15 . 7

100

15 . 7

1 00

16.3

1 00

16 . 7

1 00

+9

Calcula t e d using unrounde d numb ers .

§ Includes p e trochemic a l f e e dstock demand . ,[ **

Includes mi l i t ary / government se c t or . Totals may no t equal sum o f comp onents due t o ind ep end ent round ing .

Sourc e :

%

P e r c entage Change , 1 9 83- 1 9 8 7*

Ene rgy Inf o rma t ion Administrat ion , Monthly Ene rgy Revi ew , Mar ch 1 9 8 8 .

fue l e f f i c i e ncy o f the U . S . pa s s enger c a r f l e e t , the rate o f im­ provement s l owed during 1 9 8 5 - 1 9 8 7 , with the ren ewed empha s i s on higher per formance engine s and mod i f i cat ion o f the 5 5 � i � e -p e r ­ hour s p e e d l imit o n rur a l i n t e r s tate h i ghway s . I n add 1 t 1 on , the overa l l number of pa s s enger veh i c l e re g i s t r a t i o n s inc r e a s ed , a s D i e s e l fue l demand d i d the number o f m i l e s tr ave led pe r veh i c l e . increa sed as mo re h e avy truc k i ng wa s r e qu i r e d to s uppo rt the expand ing e c onomy . Av i a t ion fue l demand h a s i n c re a s e d drama t i c ­ a l ly s i nce 1 9 8 3 in re s po n s e to der egu l a t ion o f the a i r l ine indus try , w i th mo re pa s s engers tak ing advan tage of l owe r a i r fares due , i n part , t o l owe r fue l p r i ce s . P e trol eum demand i n the e l e c t r i c u t i l i ty s ec to r c o n t i nued to s t agnate as ene rgy demand growth in th i s s e c tor wa s more than sati s f i ed by th e i n c r e a s ed u s e of c oa l and nuc l e ar e n e rgy . Tab l e 1 6 i l lu s trate s the tre nd i n u .s. demand for e ne r gy , by type , s i nce 1 9 8 3 .

Impact of Gove rnme n t Ac t i o n s on Demand Gove rnme n t ac t i o n s have contr ibu ted to and , in s ome ca s e s , i n i t i a ted s eve r a l s y s tem change s . Such a c t i o n s by the governme nt are a ime d at spe c i f i c s o c i e t a l goa l s , but produ c e s e ve r a l e co ­ nomic e f fe c t s that mu s t b e recogni z e d . Wh i l e d i f f i c u l t to d e ­ termine qu ant i ta t ive l y , t h e NPC be l ieve s th at t h e e f fe c t s o f the s e act ions have been t o incre a s e i ndu s try and c o n s ume r c o s t s , and the reby decr e a s e product demand . S ome o f the s e a c t i o n s inc lude : motor ga s o l ine l e ad pha sedown a n d d e r e gu l a t i on o f the a i r l ine and truck ing indu s t r i e s . O th e r a c t i on s th a t have been propo s e d by gove rnme nt or me ntioned i n the pre s s i nc lude : add i t ional au tomobi l e emi s s ions contro l s ; future envi ronme n t a l contro l s o f d i e s e l fue l qu a l i ty ; and i n c re a s e s i n ta r i f f s and taxe s on raw mater i a l s and mo tor fue l s . Tab l e 1 7 h i gh l i gh t s s ome of the s e government a c t i o n s and the a c tu a l or l i k e l y e f fe c t s on product demand .

Structu r a l Change i n the P e tro leum I ndu s t ry The petro l eum indu s try h a s undergone s ub s t an t i a l s tructur a l change i n a l l a r e a s dur ing the 1 9 8 0 s . The r e l at i o n s h i p be twe en demand and economi c ac t iv i ty h a s been a l tered , as we l l a s the behavior o f the individual produc t s ( behav i o r r e f e r s to ove ra l l demand , s e a s ona l i ty o f dema nd , interchangeab i l i ty o f produc t s , etc . ) The number o f f i rms i n the i ndu s try dec l i n ed a s s ome com­ pan i e s me rged or we re acquired and many f i rms l e f t the bu s i ne s s . Produc t i on o f c rude o i l from f i e l d s i n the U n i t e d S ta te s d e c l i ned by over 3 0 0 thous and barre l s per day ( MB/D ) betwe e n 1 9 8 3 and 1987 . The dec l i ne from the peak produc t i o n year of 1 9 8 5 was ove r 6 0 0 MB / D . O i l expo r t i n g c ountr i e s t r i e d a numbe r o f approa che s in an e f fort to r e t a i n marke t s hare , inc lud ing part i a l a c qu i s i ­ tion o f down s tr e am ( i . e . , r e f i n ing and mark e t i n g ) a s s e t s .

- 39 -

TABLE 1 6 U . S . ENERGY DEMAND B Y TYP E O F ENERGY , 1 9 8 3 - 1 9 8 7 (Mi lli ons o f Barre ls o f Oil Equivalen t p e r D ay )

1983 Quant ity

.t>

0

I

Oil Natural Gas Coal Nu c l ear Other To tal

* §

§

%

1 9 84 Quant ity

%

1985 Quant ity

%

1986 Quan t i t y

%

1987 guant i ty

15 . 2 8.8 8.0 1.6 2.0

43 25 22 4 6

15 . 7 9.4 8.6 1.8 2.0

42 25 23 5 5

15 . 7 9.0 8.9 2.0 1.8

42 24 24 5 5

16 . 3 8.5 8.7 2.3 1.8

43 23 23 6 5

16 . 7 8.7 9.1 2.5 1.7

43 23 24 6 4

+9 - 1 +13 +53 -18

35 . 7

1 00

37 . 5

1 00

37 . 4

100

37 . 6

100

38 . 7

100

+ 8

Ca lcula t e d using unrounded numb e rs . T o t a ls may no t equa l sum o f components due to inde pendent round ing .

Sourc e :

%

P e r c entage Change , 1 9 83- 1 9 8 7*

Ene rgy Inf o rmat ion Administ rat ion , Monthly Ene rgy Review , March 1 9 8 8 .

TABLE 1 7 GOVERNMENT IMPACT ON PET ROLEUM P RODUCT DEMAND

E f fe c t on P r odu c t Demand

Ac tion Lead pha s edown

S teep drop in demand for 'leaded ga s o l ine : add i ­ t i onal ga s o l i ne s e grega­ t i on s : i n t roduc t i on of a "mid-grade " un l e aded g a s o ­ l i ne : reduced i ndu s try i nve ntory f l e x ib i l i t y : in­ cre a s e d raw mater i a l u s e for a g i ven l eve l o f product output

De regu l a t i on o f a i r l i ne / truc k i ng indu s tr i e s

Subs tant i a l i n c re a s e i n demand f o r j e t fue l and d i e s e l fuel

Propo s e d Ac tion

Likely E f fec t on P rodu c t D emand

P ropo sed contro l s on hydroc arbon emi s s i o n s ( ga s o l ine vapo r pre s sure reduct ion )

Redu c t i on in d emand f o r butane i n g a s o l ine : p roduc ­ t i on o f h i gh oc tane b l ending component s to rep l a c e butane : incre a s e d r aw mater i a l u s e to ma i n t a i n ga s o l ine oc tane

Propo s ed reduc t ion o f su l fur and aroma t i c s in d i e s e l fue l

A sub s t ant i a l i nve s tmen t in new re f i n i n g fac i l i t i e s , with th i s co s t re f l e c te d i n h i gher c on s umer p r i c e s : incre a s e d p r i c e s , pro­ mo t i n g con s e rvat ion and demand reduc t i on

I tems impact ing c rude o i l co s t Tar i f f s Supe r fund

Reduc t i on o f petro l eum produc t d emand a s a r e s u l t o f incre a s i n g c rude o i l co s t

Motor fue l exc i s e tax incr ea s e s

Downward pre s sure o n mo tor fu e l c o n s umpt i on ( ga s o l i n e and d i e s e l ) , depe nd ing on t h e l e ve l o f the tax i n c re a s e

- 41 -

E ar ly i n the dec ade , b e c au s e o f dec l i n in g demand , u . s . re f iner s r educed run s by 3 . 0 MMB/D from peak leve l s o f 1 4 . 7 MMB/D s e t i n 1 9 7 8 to 1 1 . 7 MMB/D in 1 9 8 3 . I n i t i a l ly , th i s reduc t ion i n run s w a s n o t ba l anced b y a reduc t i on i n c apac i ty . However , oper ab l e c rude o i l d i s t i l l a t ion c apac i ty was reduced by 2 . 7 MMB/D a f t e r 1 9 8 0 , dec l i n ing from 1 8 . 6 MMB/D i n Janu ary 1 9 8 1 to 1 5 . 9 MMB/D i n January 1 9 8 8 . The decre a s e in r e f i n in g ac t i v i t y and fa l l i n ou tput o f c rude o i l produ c t i o n i n the U n i ted S t a t e s cau s e d t h e vo lume o f crude o i l and p roduc t s t r a n s p o r t e d by p ipe l i ne to de c re a s e from 5 6 4 b i l l ion ton-mi l e s in 1 9 8 1 to 5 5 6 b i l l ion ton-mi l e s in 1 9 8 3 . However , th i s trend wa s reve r s e d i n 1984 . The drop i n produ c t demand e a r ly i n the dec ade and unc e r ­ taint i e s re l a t in g to t h e a c t i o n s o f OPEC led t o a d e c l i n e i n inventory a n d s torage c apac ity betwe en 1 9 8 3 a n d 1 9 8 8 . U nc e r ­ tainty about t h e trend i n price s a f t e r 1 9 8 5 c au s ed many f i rm s t o inte n s i fy e f for t s to hold s to c k s to a min imum . F o r e x amp l e , t h e ratio o f s to c k s above min imum ope r a t ing inve ntory to c o n s ump t i o n ( re ferred t o a s d a y s o f s upp l y ) f o r d i s t i l l a t e fue l o i l dec l ined from four day s on March 3 1 , 1 9 8 3 , to only one day on March 3 1 , 1 98 8 . Th i s reduc t ion wa s i n f l uenced , i n part , by the Apr i l 1 9 8 8 tax i nc r e a s e d i s cu s s e d previou s ly . I n add i t ion , new f i n anc i a l marke t s , inc lud i n g futur e s and forward marke t s , new contractu a l me chan i s ms , and opt i o n s we r e deve loped . The s e market s enab l e f i rms to reduce the f i nanc i a l r i s k a s s oc i a t e d w i th purch a s ing petro l eum , thu s a l lowing a r educ t i on i n ave r age i nventory leve l s .

PRIMARY D I STRIBUT I ON SYS TEM ANALYS I S Min imum Ope r a t i ng I nventory Leve l s i n the Pr ima ry D i s tr ibu t i on Sys tem , 1 9 8 3 and 1 9 8 8 The i ndu s try-wide min imum ope r a t i ng i nven tory i s the i nven­ tory leve l b e l ow wh i ch ope rating prob l ems and s h o r t age s wou l d b e g i n to appe ar i n a d e f i ned d i s t r ibution s y s tem . ( S ee Chapter One for a de s c r ipt ion of i nventory terms . ) M i n imum ope r a t in g invento ry i n c lude s p ipe l i ne f i l l , tank bot toms , and other u n ­ ava i l ab l e inventory , p l u s t h e amou nt o f work ing i nv e n tory needed to keep the d i s tribution s y s tem ope rat ing wi thout s upp ly d i s ­ rup t i on s . Mu ch o f th i s work ing inve ntory i s i n the unava i l ab l e c ategory . Thu s , a s d emand f o r a produ c t dec l i ne s , i t s m i n imum op erat ing inve ntory wou ld not be expec ted to d e c l i ne p ropor ­ t iona l l y . Unava i l ab l e i nventory wi l l d e c l ine to the e x t e n t that some r e f iner i e s and p i pe l i ne s , no l onger needed , are removed from the s y s tem , and/or t ankage u t i l i z at ion become s s o l ow that s ome tankage i s i d l ed . I nventory h e l d above m i nimum wi l l vary mor e d i r e c t l y w i th change s i n demand , p r i ce , intere s t r a t e s , and s ecur i ty of supp ly .

- 42 -

Change s in the Min imum Ope ra t i ng I nventory Leve l s , 1 9 8 3 to 1 9 8 8 The e s t ima ted min imum oper a t i ng inventory l eve l s for c rude o i l and the petrol eum pr oduc t s surveyed in th i s s tudy are 5 mi l ­ l ion barre l s lowe r than tho s e reported i n the 1 9 8 3 s tudy , a s shown in T ab l e 1 8 . Th i s reduct ion i n the m i n imum ope r a t ing leve l i s due to the dec l ine i n the e s t ima ted min imum n e c e s s ary for d i s ­ t i l l a te and r e s idual fue l o i l s , wh ich dropped be l ow the i r e ar l i e r min imum ope r a t i n g inve n to r i e s s eve r a l t ime s be twe e n 1 9 8 3 and 1 9 8 8 , with l i t t l e e f fe c t . Min imum ope r a t i ng leve l s for c rude o i l , motor gaso l i ne , and kero- j e t fue l i nc r e a s e d as a r e s u l t o f i nc r e a s e d demand , and i n the c a s e o f c rude o i l , a s a r e s u l t o f greater depe ndence o n impo r t s with the i r l arger-vo lume s h ipme nt s . Th i s contra s t s with the 1 9 7 9 - 1 9 8 3 pe r iod , whe n a drop i n m i n imum oper ating inventory leve l s was l arge ly due to a dec l i ne in demand TABLE 1 8 NPC MINIMUM OPERAT ING INVENTORY E S T IMATE S FOR THE PRIMARY DI STRIBUT I ON SYS TEM ( M i l l ions o f Barre l s )

Total

�

Change i n To t a l U . S . , 1983-1988

1988 PADD V

Total

230 178 25 77 25

70 27 5 8 5

300 205 30 85 30

+1 5 +5 +5 -20 -10

535

115

650

-5

PADD s I - IV § Crude O i l Mo tor Ga s o l ine Kero-Jet Fue l Di s t i l l ate Fue l O i l Re s i dua l Fue l O i l

*

*

The NP C e s t imat e s o f min imum ope r a t ing i nventory we r e In deve loped through an i nterac t ive dec i s ion-mak ing proc e s s . order t o arr ive at a con s e n s u s , i ndividu a l j ud gme n t s we r e con s ide red wi th the a i d o f ope ra t i ng e xpe r i e n c e and r e l evant s t a t i s t i c a l data . §

Exc lude s SPR . A l a skan crude o i l i n t r an s i t by water i s included i n PADD V to be con s i s tent w i th the E IA repo r t i ng s y s t em . �

Tota l s inc l ude c rude o i l and s urveyed pe t r o l e um produc t s o n l y , but n o t kero s ine , wh ich wa s e s t ima ted to be 5 m i l l i on barre l s in 1 9 8 4 .

- 43 -

for petro l eum produc t s fo s t e r e d by a dec r e a s e i n gen e r a l e conomic growth , a s ign i f i c ant inc r e a s e i n the p r i c e of p e t ro l e um , and consume r c o n s e rvat ion prac t ic e s inc luding fue l swi tch i n g . The changing d emand s for petrol eum produc t s a r e cau s i n g fundame nt a l s truc tu ra l change s i n the re f in ing , . s upp ly , and d i s t r ib u t i on pa tterns o f the u . s . petro l e um i ndus try . The s e i ndu s try ch ange s are dynam i c , a s produc t demand patterns are s t i l l changi n g . As a re s u l t , m i n imum op e r at i ng inven tory i s a dyn am i c , r a th e r th an s t a t i c , f i gure that w i l l cont i nue to change i n r e s po n s e to fac t o r s a f fe c t ing the i ndu s try . I t i s impor t an t to note th a t the NPC min imum oper a t i ng i n ­ ventory to t a l r epre s ent s t h e s um o f o n l y tho s e produc t s i n c luded i n i t s s urvey . A l though kero s ine , a s pha l t , l ub r i c a t ing o i l s , and " other o i l s " p l ay a key ro l e i n the U . S . petro l eum p ic tu r e , d a t a f o r the s e product s were not co l l ec ted . N aphth a - b a s e d j e t fue l wa s a l s o exc luded from the 1 9 8 8 survey . Con s eque n t l y , th i s repo r t pre s e n t s n o e s t ima te o f a tot a l min imum ope r a t i ng i nven­ S e a s on a l ity o f d emand was n o t tory for a l l petrol e um produc t s . c ons i de re d i n d e termin ing min imum ope r a t i ng i nventory leve l s , de s p i te the fac t that c e r t a i n produc t s , such a s d i s t i l l a t e fue l o i l , are sub j ec t to s e a so n a l var i a t ions dur ing the ye a r . The E IA ' s We e k ly P e tro l eum S t atus Repo rt pub l i she s an " ob s e rved m i n imum " ( th e lowe s t end-o f-month to t a l pe tro l eum i n­ ventory l eve l dur i ng the recent 3 6 -month per i od ) f o r c omp ar i s on with the current tota l pe tro leum inve n tor i e s it r e po r t s we e k l y . Data u s e r s are caut ioned tha t the NPC ' s e s t ima ted m i n imum ope r at­ ing i nve nto r i e s for c rude o i l and s e l e c t e d produc t s c a n b e compared me a n i n g fu l ly o n l y w i th the E IA ' s i nventor i e s for t h e s ame commod i t ie s . Methodo logy U s e d in E s t ima t i ng the 1 9 8 8 M i n imum Ope r a t i ng I nve ntory Leve l s A s i n previous NPC e s t imate s o f the min imum oper a t i ng i nven­ tory l eve l s , the 1 9 8 8 e s t ima t e s we re deve l oped through an i n t e r ­ act ive dec i s ion-mak ing proce s s i n wh ich indu s tr y expe r t v i ews we re s o l ic i ted . In o rder to arr ive at a c o n s e n s u s , i nd iv idua l j udgme nt s we r e d i s cu s s e d i n the context o f oper a t i n g e xpe r ie n c e a n d re l evant data . T h e data u s e d we re : ( 1 ) the s um o f the i nd iv i dua l company min imum op e r a t i ng inven to r i e s as reported in the 1 9 8 8 NPC s urvey , ( 2 ) i ndus try-wide e s t imate s of m i n imum 2 ope rat ing inventory leve l s a s reported in the 1 9 8 8 NPC s urvey , and ( 3 ) h i s to r i c a l i nventory data . The NPC s urvey d a t a are repor ted i n App e nd i x E ; the h i s to r i c a l inve ntory d a t a are s hown graph i c a l ly in Appendix J .

2

The s e e s t ima t e s we re u s ed for gene r a l re f e r e n c e o n l y , a s o n l y a few e s t imate s we r e reported .

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The h i s to r i c a l inve ntory data prov ide a me an s o f te s t i ng the re asonab l � n � s s o f the previ ou s min imum ope rat i n g inventory leve l s b y determ 1 n 1 n g whe ther any spot shortage s o r d i s tr ibution prob­ lems occurred when s tocks we re above or be low the 1 9 8 3 NPC m i n i ­ mum oper at ing invento ry leve l s . Tho s e prob l em s c a n t h e n be exp l a ined in the context o f the incre a s ed NPC e s tima te s o f min imum ope r a t i n g inventory s i nce the l a s t NPC s tudy .

Crude O i l Total c rude o i l invento r i e s rema ined above the m i n imum ope rating l e ve l o f 2 8 5 mi l l i on barre l s e s t imated in the NPC ' s 1 9 8 3 s tudy wi thout any s i gn i f ic ant phys i c a l s h o r t a ge s . The re­ fore , no phys i c a l te s t of the e s t imate has occurred . However , becau s e o f inc r e a s ed re f i n ery input s o f crude o i l , dec l i n i n g U . S . crude o i l produc t i on , and incre a s ed depende nce on impo r t s from fore ign count r i e s , the NPC increased i t s e s t ima te o f m i n imum operating inventory to 3 0 0 mi l l ion barre l s , an i n c re a s e amoun t i ng to s l ight l y over one -day ' s requ i rement for r e f i n e r y pro c e s s ing . The NPC e s t imate o f m i n imum ope rat ing i nve ntory i s g r e a te r than the sum of the ind ividual company re spon s e s of m i n imum ope r a t i ng inve ntory ; th i s wa s a l s o true in 1 9 8 3 . The 1 9 8 8 min imum ope rat ing inventory e s t ima te inc lude s 2 1 . 6 mi l l ion barre l s o f A l a skan crud e o i l i n tran s i t by water , ve r s u s 3 1 . 2 mi l l i on barre l s i n the 1 9 8 3 e s t ima te . Th i s Al a s kan vo lume is not s tr i c t l y a m i n imum , s ince the s e i n - t r an s i t s to c k s are The y f l uc tu a t e w i th A l a s kan o f ten l owe r than 2 0 mi l l ion barre l s . North S l ope ( ANS ) p roduc t ion , We s t Co a s t c o n s ump t i on of AN S , and pipe l ine and term i n a l ope ratio n s . Th i s decre a s e i n i n - tr an s i t ANS c rude o i l , howe ve r , was o f f s e t by the i nc r e a s e d qu ant i t i e s o f impo rted crude o i l . Impor te d crude o i l gene r a l l y move s i n batch s i z e s f ive to ten t ime s greater than dome s t i c crude o i l and , hence , h a s a l arger e f fe c t on the wor k i n g inve ntory c omponent o f min imum operat ing inventory . The survey r e s u l t s show that tota l i nventory ( e xc l u d i n g ANS in trans i t and E IA l e a s e s tock ad j u s tme n t s ) on March 3 1 , 1 9 8 8 , wa s abo ut 8 m i l l i on barre l s above th e l eve l on Ma rch 3 1 , 1 9 8 3 . Th i s i s about e qu a l to the i n c r e a s e in p ipe l i ne f i l l and the p ipe l ine con s truc t i on that has occurred dur ing the p a s t f ive ye ars . The survey r e s u l t s a l s o show that be twe e n 1 9 8 3 and 1 9 8 8 , crude o i l s tock ho l d e r s have made more e f f i c i e n t u s e o f s torage c apac ity . Th i s i s re f l e c ted i n a h i gher r a t i o o f i nve n tory he ld to to ta l ope r a t i n g s y s tem c apac ity and a lowe r r a t i o o f tank bottoms , tank top , and s a fe t y a l l owance to c apac i ty . Tankage under con s truc t i on in 1 9 8 8 amounted to 0 . 4 mi l l ion barre l s compa red to 1 0 . 0 mi l l i on barre l s i n 1 9 8 3 .

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Mo tor G a s o l i n e A t the n a t iona l l eve l , motor g a s o l i n e invento r i e s h a v e n o t d ipped be low the 1 9 8 3 e s t imate o f m i n imum ope r a t ing i nve ntory . G a s o l i n e i nven to r i e s c ame c l o s e to the m i n imum ope r a t i n g inven­ tory i n the s p r i ng of 1 9 8 6 and aga i n i n the summe r of 1 9 8 8 , but no s ign i f ic a n t regional shortage s deve loped i n the p r imary d i s ­ tr ibu t i on s y s tem . Howeve r , b e c au s e mo tor ga s o l ine demand i n ­ c re a s e d 6 0 0 MB / D dur ing t h e 1 9 8 3 - 1 9 8 7 per iod , a n d i n r e s po n s e to the s urvey re s u l t s , the min imum ope rat ing i nve ntory for moto r g a s o l i n e h a s b e e n i n c re a s ed from 2 0 0 mi l l ion barre l s to 2 0 5 mi l ­ l ion barre l s . To t a l operat ing s y s tem c apac i ty for motor g a s o l i ne was 4 5 9 mi l l ion barre l s a s o f March 3 1 , 1 9 8 8 , incre a s ing s l i gh t l y from Al though demand for motor ga s o l ine 4 5 6 mi l l i o n barre l s i n 1 9 8 3 . has incre a s ed approx ima t e l y 9 percent , inventor i e s have n o t changed propo r t iona l ly . March 3 1 , 1 9 8 8 i nvento r i e s we re 2 3 1 mi l l ion barre l s , up from 2 2 3 mi l l ion barre l s a s o f March 3 1 , 1983 . Compe t i t ive pre s s ure s have forced the indu s try t o b e more e f f i c i e n t i n its ove r a l l produc t i on , d i s t r i but i on , and i nventory-ho lding pattern s . I d l e tank age h a s incre a s ed from 1 9 8 3 , wh i l e t ankage under cons truc t io n h a s d ropped . Kero s i n e - Type J e t Fue l On a n a t i o n a l l eve l , the actual i nven tor i e s o f k e ro s i ne - type j e t fue l ( kero- j e t fue l ) have not f a l l en b e l ow the m i n imum ope r at ing inventory l e ve l s e s tabl i shed in the 1 9 8 3 s tudy . How­ ever , ke ro- j e t fue l inve ntor ie s c ame c lo s e to m i n imum l eve l s i n e ar l y 1 9 8 4 . N o ac tu a l shor tage s o f thi s produ c t we r e known t o ex i s t dur ing t h e 1 9 8 3 - 1 9 8 8 per iod . Hence , no c r i t i c a l t e s t o f t h e 1 9 8 3 min imum ope r a t ing inventory f igu re s h a s occurred . B a s ed on th i s ope r a t ing expe r i ence , the i nc r e a s ed demand for th i s produc t , and the i n c r e a s e d vo lume o f p i pe l i n e f i l l , th e NP C ' s previou s e s t imate o f the kero- j e t fue l m i n imum ope r a t ing l eve l h a s b e e n i nc r e a s ed from 2 5 to 3 0 mi l l io n b a r re l s . A numb e r o f ch ange s i n s torage c apac i t ie s and i nv e n to r i e s for ke ro - j e t fue l are h igh l ighted b y the l ate s t NPC s urvey r e ­ su l ts . Both t h e amount o f s torage c ap ac i ty a n d tot a l i nventory i nc r e a s e d s in c e the previous NPC s urvey . To t a l p r imary sh e l l c ap ac i ty i n k e ro - j e t fue l s e rvice incre a s e d b y a lmo s t 2 1 p e r c e n t from 1 9 8 3 to 1 9 8 8 . T o t a l invento r i e s i n c re a s ed b y 1 4 p e r c e n t dur ing t h a t pe r i od . The s e inc rea s e s pr ima r i l y r e f l ec t the sub s tant i a l i n c re a s e i n kero- j e t fue l demand e xpe r i en c e d du r i ng the five-year p e r iod . I n contr a s t to the s e incre a s e s , the ad j u s te d min imum ope r a t ing inventory reported in the s urvey actua l ly d e c r e a s e d by 8 percent dur ing the 1 9 8 3 - 1 9 8 8 period . Th i s d e c re a s e i s the re s u l t o f fundamen t a l change s in the way kero- j e t fue l i s supp l i e d to commerc i a l a i r carr i e r s . Mo re dome s t i c re f i n e r -

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I n add i t ion , whe r e a s suppl i e r s now part i c ipate in the mark e t . a lmo s t 1 0 0 pe rcent o f a i r l ine demand wa s me t under contrac t by re f iner- supp l i e r s f i ve years ago , only about 7 0 percent o f demand is now suppl ied under s uch contrac t s . Ke ro- j e t fue l demand h a s inc re a s ingly been me t through nontrad i t iona l c o n t r a c t a nd s p o t purcha s e s b y t h e a i r l i ne s , and the s e volume s a re typ i c a l l y hand l ed through non- re f i ner termi na l t ankage . ( Th e a i r l i ne s , i n add i t ion , now contr o l more s torage i n the t e r t i ary s e gme nt , having purch a s e d a i rport tankage and re l a ted d i s tr i but ion s y s tems forme r l y con tro l l ed by ma j or re fine r s . ) Thu s , i t i s not surpri s ing that m i n imum ope r a t ing i nven­ tor i e s have dec r e a s ed dur ing the pe r i od s ince r e f i n e r s , who forme r l y c arried ne a r l y a l l pr imary kero- j e t fue l inventor i e s fo r contract s upp l y , are now re spon s ib l e for s upp l y i ng o n l y 7 0 pe r ­ cent o f tota l demand by contractu a l arr angeme n t . Add i t iona l ly , the s e companie s are ope rat ing wi th l owe r i nventor i e s to reduce work ing cap i t a l requ i r emen ts . Fu r th e rmo re , it i s b e l ieve d tha t the i nd ividua l non - r e f iner s torage comp a n i e s who s tore k e r o - j e t fue l for the ai r l ine s d i d not report m i n imum ope r a t i ng inven­ tor i e s h i gher than tank bot toms . I n the s ame ve i n , the inc r e a s e i n pr imary s he l l c ap ac i ty ded i c a ted to kero- j e t fue l s e rvice can a l s o be e xp l a i ned , i n part , b y t h e i n c re a s e d amount o f t ankage he ld by i ndepend e n t ( i . e . , non-re f i ne r ) s torage compan i e s f o r a i r l in e s or a i r l i n e con sort iums wi shing to ava i l thems e l ve s o f s po t purch a s e oppor ­ tuni t i e s o n a re gu l a r ba s i s . A l s o , th i s i nc r e a s e i n s he l l capac i ty c an b e attr ibuted to the l a rger numb e r o f dome s t i c re fine r - supp l i e r s now part i c ipating i n the marke t . The s e con s i d e ra t i o n s h e l p to exp l a in the i n c re a s e i n s to rage c apa c i ty and de cre a s e i n min imum ope r a t i ng i nventory a s reported However , the ove ra l l NPC m i n imum by ind ividu a l compan i e s . operat ing inventory i n c re a s e for kero- j e t fue l i s c o n s idered to be va l i d b a s e d upon the s i gn i f i c ant i nc r e a s e in to t a l d emand for th i s product and the increa s e in pipe l i ne f i l l . D i s t i l l ate Fue l O i l D i s t i l l ate fue l o i l inventor i e s fe l l we l l be l ow the previous min imum operat ing l e ve l s in a lmo s t every ye ar s i nce 1 9 8 3 . I nven­ The s um o f the tor i e s we re t i ght , but s hort age s d i d not occur . ind ividua l company min imum operat ing i nve ntor i e s and the f a c t that i nve nto r i e s h ave be e n be l ow t h e min imum ope r a t i n g i nven tory without wide spread shortages support the C ounc i l ' s reduc t io n o f the min imum ope r a t ing inventory e s t ima te s from 1 0 5 mi l l ion bar­ rels to 8 5 mi l l ion barre l s . Tot a l inve n to r i e s o f d i s t i l l ate fue l o i l we re 8 9 . 3 mi l l i on barre l s on March 3 1 , 1 9 8 8 , down sub s tant ia l ly f rom the l eve l reported in 1 9 8 3 , having f a l l e n more sh arp l y than the i nvento r y The dec l i ne re f l e c t s b o th o f a n y o f t h e o th e r s urveyed produc t s . s truc tu r a l change s i n the indu s try and demand p a t t e rn s . Change s i n supp l y manageme nt - - a broadened trad ing e nv i ronment , the

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i n c r e a s i ng soph i s t ic a t i o n o f the indepe nden t marke t e r , and add i t i on a l s ou r c e s o f impo r t s , for i n s tance -- e nh a n c e s upp ly opt i on s , mak i n g i t e a s i e r and l e s s r i sky to run on l owe r i nven­ On the demand s i de , the growth o f on-h i ghway d ie s e l u s e tor i e s . h a s reduc ed the s e a s on a l ity o f d i s t i l l a t e s to ck s , e l im i n at in g the need for a s e x t e n s ive an inventory c u s h i o n to me e t we ath e r ­ i nduce d demand s urge s . ( As noted i n the s ub s equ e n t d i s cu s s i o n o f to ta l pr imary inventor i e s , March 3 1 , 1 9 8 8 d i s t i l l a te invento r i e s we re a l s o depre s s e d b y the change i n the c o l l e c t i o n po i n t f o r d i e s e l fue l e xc i s e taxe s . ) The reduced s e a s on a l ity and incre a s ed s upp l y opt i o n s are a l s o re f l ec ted i n the lowe r share of inve ntor i e s h e l d i n bu l k term i na l s . T h e t r e n d toward l ower bu lk t e rm i n a l s to c k s began be fore the l a s t NPC report . On March 3 1 , 1 9 8 8 , bu l k t e rmi na l s in the pr ima ry s y s tem he ld 45 percent of the s tock s repo r t e d to E IA , compared to 5 4 pe rcent on March 3 1 , 1 9 8 0 , a de c l i n e o f 5 6 mi l l i o n barre l s . The s urvey re s u l t s show that d i s t i l l at e h a s the h i ghe s t vo lume o f i d l e tankage , · 1 9 mi l l ion barre l s , o f the p e t ro l eum produc t s surveyed , even though to tal s torage c apac i ty h a s dec l i ned b y 3 4 mi l l ion barre l s s ince the 1 9 8 3 s urvey . B e c au s e o f regu l atory con s tr a i n t s on bu i l ding new tankage , e s pec i a l ly i n are a s such a s th e North e a s t , compan i e s may b e s lowe r to The dec re a s e i n ove r a l l d i s t i l l a t e c apac i ty deact ivate tanks . appe ar s to b e due to sw i t ch ing o f d i s t i l l a te t ankage to j e t fue l and mo tor ga s o l ine s e rvice . Re s idu a l Fue l O i l The re s i dua l fue l o i l market i s s t i l l undergo ing s i gn i f i c ant change s that a f fe c t work ing inventory requ i r eme n t s . Th e re fore , the r e s i dua l fue l o i l min imum operat ing inventory e s t imate was deve l oped with a l ower degree of conf idence than tho s e of the o ther produc t s . Re s i dua l fue l o i l i nven to r i e s dropped b e low the 1 9 8 3 e s t ima te o f m i n imum ope r a t ing inve ntory i n the spr ing o f 1 9 8 6 and 1 9 8 7 . S hortage s d id not occur , for examp l e , b e c au s e e l ec t r i c ut i l i t i e s carry adequate re s idual fue l o i l inve n t o r i e s . The s trong r e s idu a l fue l o i l i nvento r i e s i n the e l e c tr i c ut i l i ty s e c tor and the s ig n i f i c an t reduc t i on in r e s i du a l fue l o i l demand due to fue l swi t ch ing s upport the reduc t i o n in min imum oper at ing inve ntory for re s idu a l fue l o i l from 4 0 mi l l ion b ar r e l s to 3 0 m i l l i o n b a r re l s . E x i s t in g re f i n e ry down s tream c onve r s i o n c ap a c i ty wa s mo re fu l ly ut i l i z ed and add i t io n a l c apac i t y added i n the U n i ted S tate s to c onve rt r e s idu a l fue l o i l to l i gh t p roduc t s . Wh i l e tota l ope r at ing s y s tem c apac i ty for r e s idua l fue l o i l decre a s ed by a lmo s t 20 percent s i nce 1 9 8 3 , to t a l inve nto r ie s o f p e t ro l eum The r e l a t ive l y sma l l drop i n produc t dropped by o n ly 5 percent . re s idu a l fue l o i l inventory a s compared to s torage c apac i ty c an be attr ibuted to : ( 1 ) re s idu a l fue l o i l s upp l i e r s c o n t i n u i n g to carry adequate pr imary i nve ntor i e s o f re s idu a l fue l to c ompe te with natur a l g a s and ( 2 ) the s torage c apac i ty reduc t i on s .

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The re wa s about 4 2 pe rcent l e s s i d l e t ank age ava i l ab l e for r e s idua l fue l o i l i n 1 9 8 8 than i n 1 9 8 3 ( 7 . 2 m i l l i on b a r r e l s i n 1 9 8 8 ve r s u s 1 2 . 4 mi l l ion barre l s in 1 9 8 3 ) . The N P C b e l i e ve s th at mo s t of th i s tankage wa s converted to c rude o i l o r other p roduc t service wh i l e a sma l l e r p roport ion wa s l i k e l y de ac t ivated . Wh i l e there we re 3 . 7 mi l l i o n barre l s o f re s idua l fue l o i l capac ity under cons truc t ion in 1 9 8 3 , no tankage wa s reported a s unde r cons truc t i on i n 1 9 8 8 for th i s product . Day s ' Supply of I nventory C a l c u l a t i on s The NPC aga i n e x amined how the concept o f days ' s upply o f inventory migh t prov ide a mi s l e ad i ng p i c ture o f inve.ntory leve l s . Min imum ope rating inventory leve l s do not dec l i ne propo r t iona l ly wi th demand . Mo reove r , min imum operat ing inventor i e s are not rout ine ly ava i l a b l e for use wi thout c au s ing shor tage s , but can be used for short p e r i o d s of t ime at h i gher operat ing c o s t s . The re fore , days ' s upp l y o f inventory c a l c u l a t i o n s b a s ed o n total inve ntory do not pre s en t a va l i d ind i c a t i o n of the ade qu a c y o f i nventory leve l s . A b e t te r way t o j udge the adequa c y o f inve ntory leve l s i s to l ook a t how mu ch inve ntory i s a c c e s s i b l e above t h e min imum requ i re d t o run t h e s y s t em : to ta l inventory - min imum ope rating inve ntory current da i l y demand

=

days ' supp l y o f inve n tory above min imum

By us ing th i s method , March 3 1 , 1 9 8 8 data for motor ga s o l i n e wou ld ind ic a t e 3 . 6 days ' supp ly o f t h a t produc t , a s d i s p l ayed be low , compared to 3 1 . 6 day s ' s upp ly whe n c a l cu l a te d o n the b a s i s o f to t a l inventory :

2 3 1 MM B - 2 0 5 MMB = 2 6 MM B 7 . 3 MMB /D ve r s u s

2 3 1 MMB = 7 . 3 MMB / D

=

3 . 6 days ' s upp l y o f inve ntory above m i n imum

3 1 . 6 days ' s upp l y o f to tal invento ry

Tab l e 1 9 compare s the days ' s upp l y o f i nventory for March 3 1 , 1 9 8 3 w i th March 3 1 , 1 9 8 8 , wh e n c a l c u l a te d on the b a s i s o f to tal inventory and inve n tory above min imum . C l e a r l y , the day s ' supp l y o f inventory above min imum is a mu ch l owe r numb e r than the d ay s ' s upp l y o f tota l invento ry . T h e forme r i s mor e ind i c a t ive o f ava i l ab l e s upp l y , however , a n d i s th e re fore mo re use fu l for eme rgency preparedne s s p l anning . A s e em i n g l y l ow numb er o f days ' s upply above min imum shou ld no t be o f concern in t ime s of normal ope r at i on s . The f l e x ib i l i t y inherent in the petro l eum s upp l y and d i s t r ibution s y s tems , together w i th amp l e c rude o i l supp l y , re fin ing c apac i ty , a n d tran s p o r t a t i on f ac i l i ­ t i e s , e n s u r e s the ab i l i ty o f the s y s tems t o mee t p rodu c t d emand ove r t ime . Wh i l e tota l i nvento r i e s have d e c re a s e d s i nce 1 9 8 3 ,

- 49 -

TABLE 1 9 DAYS ' SUPPLY OF INVENTO RY IN THE PRIMARY D I S TRI BUT I ON SY STEM

March 3 1 , 1 9 8 3 I nventory Total Above * I nventory M i n imum � C rude O i l Motor G a s o l ine Kero-Je t Fue l D i s t i l l a t e Fue l O i l Re s idua l Fue l O i l

33 33 44 40 29

6 3 12 4 4

March 3 1 , Total I nve n t o r y 27 32 33 25 31

1988 I nven to ry Above § M i n imum 4 4 8 1 10

*

The NPC ' s 1 9 8 3 e s t imate u s ing 1 9 8 3 m i n imum ope r a t i n g i nventor i e s . §

The NPC ' s 1 9 8 8 e s t imate u s ing 1 9 8 8 m i n imum ope r a t i n g i nven to r i e s . �

Exc l ud e s S P R , wh i ch on March 3 1 , 1 9 8 8 he ld 5 4 5 mi l l i o n barre l s , or 1 1 4 day s ' s upp l y o f crude o i l import s . Source : N a t i o n a l P e t r o l eum Counc i l " 1 9 8 8 S urvey o f u . s . P e t ro l eum Inventor i e s and S torage C apac i t i e s ( P r imary D i s tr i ­ but ion S y s tem ) . "

the amount o f i nve ntory above min imum ( in te rms o f days ' s upp l y ) The p o t e n t i a l i s gener a l l y co n s i s te n t with the 1 9 8 3 leve l . dr awdown o f i nve ntory he ld b y the s e c ondary s y s t em and c e r t a i n s e c to r s o f t h e ter t i ar y s torage s egment prov i d e s s ub s t a n t i a l add i t io n a l f l e x i b i l i ty i n t ime s o f t i ght supp l y . S ince 1 9 8 3 , the p e r c e ntage o f crude o i l s upp l i e d to r e f in e r s from dome s t i c s ourc e s h a s fa l l e n from appro x imate l y 7 5 pe r c e n t t o abou t 6 4 percent . Wh i l e the pr imary d i s tr ibu t ion s y s tem i s somewh a t more vu l n e r ab l e than i n 1 9 8 3 with regard t o impo r t e d c rude o i l , the r e are s ever a l f a c t o r s that m i t i g a t e any po tent i a l d i s rup tion in product supp ly . •

A s i gn i f ic an t proport ion o f impo r t e d crude o i l h a s a long i n - t r an s i t time ( 3 0 - 5 0 day s ) . S u f f ic i e n t t ime i s ava i lab l e t o locate a l ternat ive n e a rby c rude o i l and produc t s as import r ep l acemen t s .

•

The comb i n e d s y s tems hold ing U . S . pe tro l eum produc t inven tor i e s ( p r imary , s e condary , t e r t i ar y ) are

- 50 -

ava i l ab l e to mo derate short-term " demand s u r ge s " a nd s upp l y tran s i e n t s . •

I n the pa s t f ive year s , sub s tant i a l c ap i t a l inve s tme n t s have b e e n made in down s tream re f i n i ng c apac i ty , s uch a s vac uum d i s t i l l at ion , the rma l a n d c a t a l y t i c crack i ng , cok ing , and c a t a l yt i c hyd rocrack ing and hydrotre at ing . Thus , the s y s tem ' s f l ex ib i l i ty to h and l e v a r i o u s grade s o f c rude o i l and to produce a gr e a t e r pe r c e n t age o f l i ght produc t s h a s improved .

•

F i n a l l y , i n the event o f a severe d i s rupt i on , the S P R s tock s a r e i n t ended , and ava i l ab l e , for d r awdown and use .

Tot al I nve ntory Leve l s i n the P r imary D i s t r i b u t i o n S y s tem , and 1 9 8 8

1983

The tota l i nventory l eve l o f crude o i l and the p r inc i p a l petrol eum produ c t s h a s d e c r e a s e d s i nce t h e previous s tudy , a s shown i n Tab l e 2 0 . Almo s t a l l t h e dec l i ne occurred i n d i s t i l ­ The a ggregate amount o f inventory a c t ua l l y he l d late fue l o i l . above min imum ope rat ing inventory leve l s h a s r ema i ned r e l a t ive l y con s tant . I n the pr ima ry s y s tem , the amount o f inve ntory h e ld above min imum ope r a t i n g inve ntory is l arge l y de termined by the l e ve l o f product demand , pr i c e expe c ta t i on s , the co s t o f s to r i n g produc t s and crude o i l , the perce ived s e cur ity o f c rude o i l and produc t supply , and the s e a s on a l s torage and ma i ntenance f a c t o r s di s cus sed i n Chapter One . S e a s o na l i ty o f P e t ro l eum P roduct Demand The petrol eum produc t s h i s to r i c a l l y exh i b i t in g the greate s t s e a s o na l i ty o f demand ( d i s t i l l ate fue l o i l and r e s i dua l fue l o i l ) are becoming l e s s s e a s ona l . As s e a s on a l i ty de c l ine s , l e s s prod­ uct mu s t be he ld in i nve ntory to e n s ure s uppl i e s dur i n g pe ak pe r i ods of demand . D emand and inventory leve l s for the s urveyed produc t s for the ye a r s 1 9 8 3 to 1 9 8 7 are found in Append i x J . E f fect o f P r i ce E xpe c ta t i o n s As noted above , i nventory h e l d above min imum i s s tored pr i ­ I n a free-mark e t environment , a c ompany ' s ma r i l y t o me et demand . expe c t a t i o n s r e garding future pe tro l eum pr i c e s a l s o i n f luence the leve l of inve ntory it h o l d s . For examp le , i n c re a s i n g wor l dwide demand expe r i enc ed in l a te 1 9 8 7 and e ar ly 1 9 8 8 c re a t ed s i gni f i ­ cant upward pr i c e expe c t a t ions i n the s pr i ng o f 1 9 8 8 ; a c cord i ng­ ly , compan i e s we re incre a s ing the i r c rude o i l i nven tory l e ve l s . Co s t o f S tor ing P r oduct The p r i c e o f o i l and l eve l of intere s t r a te s a r e the two The ma j o r facto r s a f fe c t ing the c o s t o f ho lding i nventory .

- 51 -

TABLE 20 TOTAL INVENTORY OF CRUDE OIL AND PRINC IPAL P ETROLEUM PRODUCTS IN THE PRIMARY D I S TRIBUT ION SYSTEM (Mi llions o f B arr e ls)

March 3 1 , 1 9 83 Total,[ PADD V PADDs I - IV *

Crude O i l Mo tor Gaso l ine § Ke ro-Jet Fue l D ist i l lat e Fu e l O i l Residua l Fue l O i l To tal ,r

269 197 28 107 37

86 26 6 11 9

355 2 23 35 1 18 46

263 203 33 80 35

80 29 6 9 9

3 43 231 40 89 44

639

138

777

6 14

133

747

Sep t emb er 3 0 , 1 9 8 2 Total ,[ PADD V PADDs I - IV --

*

Crude Oil Mo tor Gaso line § Kero-Jet Fue l Dist i l l a t e Fue l O i l Residual Fue l Oil Total ,r

March 3 1 , 1 9 8 8 To t a l ,[ PADDs I - IV PADD V

S ep t emb er 3 0 , 1 9 8 7 T o t a l ,[ PADD V PADDs I - IV

258 206 27 15 1 51

82 28 6 10 10

34 1 234 33 161 62

26 1 198 38 1 16 35

76 31 6 11 9

337 230 44 127 44

694

137

831

648

134

7 82

*

Exc ludes SPR and 1 0 . 6 mi llion b arr e ls o f l e ase sto cks adj ustments . Alaskan crude o i l in t ransit by wat e r is inc luded in PADD V ( 3 1 . 2 mi l li on barr e ls in 1 9 8 3 ; 2 1 . 6 mi l l ion b arre ls in 1 9 8 8 ) . § Mo tor gaso l ine st o cks data represent f inish e d mo t o r gaso l ine and mo t o r gaso l ine b lending c omponents . ,[

T o t a ls inc lude crude o i l and surveyed p e t r o l eum products only . may not equal the sum o f components due to indep endent round ing .

To t a ls

Source : Ener gy Inf o rma t ion Administrat ion , P e tro leum Supp ly Annual , Vo l . 2 . 1 9 8 2 , 1 9 8 3 , and 1 9 8 7 , and Pe tro leum Supply Month ly , March 1 9 8 8 .

- 52 -

e s t ima ted co s t o f h o l d i ng one g a l lon o f g a s o l i n e i n i nven tory , wh i ch was about 1 4 ¢ per ga l l on per year in 1 9 8 2 i s about 4 ¢ per ga l l on per year in 1 9 8 8 . As shown i n Tab l e 2 1 , the e s t imated to t a l annu a l ho ld ing and t ankage co s t of g a s o l i ne has dec l i ned from 1 9 8 3 to 1 9 8 8 . Howeve r , f i rms i n the p e t ro l eum i ndus try cont inue to manage the i r i nve ntor i e s s o tha t no more than the min imum e conom i c l eve l s are h e ld . Secur i ty o f Wor ld Crude O i l and P e tro l eum P roduc t Supp l y P e r c e i ved s e cur i t y o f wor l d c rude o i l a n d pe tro l eum product supply is anoth e r factor i n d e t e rm i n i n g how muc h inve ntory i s he ld above min imum ope rat ing inventory leve l s . The dependence o f th e Un i ted S t a te s o n n e t pe tro leum import s ( e xc lud i ng S P R f i l l ) incre a s e d from 2 7 pe r c e n t in 1 9 8 2 to 3 5 pe r c e n t i n 1 9 8 7 . Impo r t s are curren t l y h i gh e r than 1 9 8 2 leve l s , a n d forec a s te r s pred i c t that U . S . impo rt requ i reme n t s wi l l , ove r the longe r t e rm , con­ ti nue to incre a s e . Howeve r , even in l i ght of i n c re a s i n g impo rt s , today ' s conc e r n s about s hort-term s e cur i ty o f s upp ly h ave e a s e d s igni fic ant l y s i nce the 1 9 8 4 N P C report . Thi s i s p r i n c i pa l ly because wor ld c rude o i l i s now i n over supp l y due to i nc r e a s e s in to tal OPEC and non-OPEC produc t i on above wor l dwide petro l eum demand . OPEC produ c t ion o f crude o i l and na tu r a l g a s l i qu i d s i n 1 9 8 7 w a s 1 9 . 5 MMB / D ve r s u s 2 0 . 0 MMB /D i n 1 9 8 2 , wh i l e non-OPEC product ion inc lud i n g the E a s tern B lock wa s 4 1 . 1 MMB / D ve r s u s 3 7 . 1 MMB / D in 1 9 8 2 . TABLE 2 1 E S T I MATED GAS OLINE S TORAGE C O S T

Produc t Va lue ( ¢ / ga l . ) * I n tere s t Ra te ( % ) § Ho lding Co s t ( ¢ / g a l . / yr . ) T ankage Co s t ( ¢ / ga l . / yr . ) � To t a l S to rage C o s t ( ¢ / ga l . / yr . )

*

19 8 8 .

1982

19 85

1988

90 . 9 14 . 9 14 7

78 . 4 9.3 7 6

51 . 6 8.6 4 7

21

13

11

Data taken from P l a t t ' s O i l P r i c e Handbook and O i lmanac ,

§

Ave rage pr ime r a te for year , a s c i ted in Th e F ed e r a l Re s erve B o ard Bu l l e t i n . �

E s t ima ted co s t o f c omme rc i a l s torage space .

- 53 -

The S tr a t e g i c P e tro leum Re s e rve Th e S PR he l d 5 4 5 mi l l ion barre l s o f c rude o i l a s o f March 3 1 , 1 9 8 8 , ver s u s 3 1 2 mi l l i on barre l s of c rude o i l as of March 3 1 , 1983 . Th a t r e s e rve i s he ld by the U . S . gove r nment to reduc e ma j or adve r s e e f fec t s o f d i s rup t i on s i n pe t ro l eum s upp l ie s . The SPR drawdown c apab i l i ty is current ly 3 . 5 MMB / D ; however , c u r r e n t pipe l in e throughpu t l im i t at ions re s t r i c t d i s tr ibu t ion c ap ab i l i ty to 3 . 0 MMB / D . D i s tr ibu t i on / dr awdown c apab i l i ty wa s 1 . 7 MMB / D i n 1983 . The S P R fac i l i t y deve l opme nt program i s curre n t l y de s igned to provide a cumu l a t ive s torage c apac i ty of 7 5 0 mi l l ion b ar re l s and a d r awdown / d i s t r ibut ion c apab i l ity o f 4 . 5 MMB / D b y 1 9 9 2 . Al l re s ponde nt s to the NPC ' s que s t ionn a i r e c o nc e r n i ng the S tr at e g i c P e t ro l eum Re s e rve i nd icated tha t the SPR has n o t in f luenced t h e amount o f o i l they rout i ne l y h o l d i n inve ntory . About two - th ird s o f tho s e who re sponded to the S P R que s t i o nn a i r e favo red e a r ly dr awdown o f the S PR dur ing an eme rgency . About one - th ird o f the compa n i e s r e spond ing to the S P R que s t i onn a i re we re f ami l i ar w i th and had opin ions concern ing the D OE ' s D rawdown P l an for the S P R ; mo s t o f the s e were re f i n e r s who favo red r e ­ s t r i c t in g SP R purch a s e s t o U . S . re f i ne r s . ( S ee Appendix D for a copy o f the S P R que s t ionn a i r e and Append i x G for mor e de t a i l e d informat ion conc e r n i ng t h e S P R and re s u l t s o f the S P R que s t i o n ­ naire . ) Spare Re f i n ing C apac i ty S i nce 1 9 8 3 , i n re spon s e to the s h i f t i n demand from h e avy low-va lue produc t s , such as re s idual fue l o i l , toward l igh t e r produc t s , s uch a s mo tor g a s o l i n e and d ie s e l fue l , r e f i n e r s h ave s ign i f i c an t ly i nc r e a s e d c r ud e o i l proce s s ing f l e x ib i l i t y by upgrading down s tr e am r e f i n ing c apac i ty . B e twe e n 1 9 8 3 and 1 9 8 7 , the i ndu s try incre a s e d th i s down s tream c apac i t y by ove r 1 , 4 0 0 MB / D ( s e e Tab l e 2 2 ) •

Dur ing thi s t ime , U . S . c rude o i l d i s t i l l a t io n c apac i t y wa s reduced by 1 MMB / D wh i l e re f inery input to c rude o i l d i s t i l l a t ion i ncr e a s e d by 1 . 1 MMB / D and demand for pe tro l e um produc t s incre a s ed b y rough l y 1 . 5 MMB / D . The s e f ac tor s have l e d t o a s i gn i f ic a n t reduc t i o n i n spare c rude o i l d i s t i l l a t ion c apac i ty i n the Un i te d S t at e s . However , t h e 1 9 8 7 u t i l i z at i on r a te o f 8 3 perc e n t i s s t i l l l ower than the 8 4 to 9 4 pe rcen t u t i l i z a t i o n r a te o f the 1 9 7 0 s and i s j u s t approaching the 8 5 to 9 0 p e r c e n t u t i l i ­ z at ion r a t e for wh i ch mo s t re f i n er ie s are d e s i gne d for g r e a t e s t e f f ic iency . ( S e e Appe ndix I for a n h i s to r i c a l pe r s pec t iv e o n r e f i n e r y capac ity and ut i l i z at i on . ) The u.s. r e f i n ing i ndus try cont i nu e s to be the mo s t soph i s ­ t ic a t e d i n the wo r l d . Dur ing the 1 9 8 3 - 1 9 8 7 p e r i o d , abou t 8 8 pe rcent o f to ta l U . S . produc t demand and about 9 5 p e r c e n t o f U . S . ga s o l ine and d i s t i l l a te fue l o i l demand we r e s upp l i ed from U . S . re finery produc t ion . The b a l ance o f the ga s o l i n e and d i s t i l l at e fue l o i l d emand i s p r ima r i l y supp l ied from s ecure We s tern Hem i s ph e r e sourc e s . Add i t iona l l y , the United S t a te s produc e s

- 54 -

TABLE 2 2 I NC REASE IN DOWNSTREAM REF IN ING CAPAC I TY , 1 9 8 3 - 1 9 8 8 C apac ity I n c r e a s e ( MB / D )

% Increase

18 365 (84) 319 816

0.3 21 . 3 -1 . 4 36 . 1 9.8

Vacuum D i s t i l l a t ion The rma l Crac k i n g / Cok i n g Cata lyt i c C rack ing Cata lyt i c Hydroc r ack ing Catalyt i c Hydrotre ating Tota l

*

6.0

1 , 434

*

Inc lude s 7 1 MB / D add i t iona l , re s u l t i n g from i n c l u s ion o f Hawa i ian I ndependent Re f i nery i n the U . S . tota l , b e g i n n i n g in 1987 . Source :

E IA , P e tro leum Supp ly Annua l ,

1987.

about 6 0 - 7 0 pe r c e nt o f i t s re s idu a l fue l o i l requ i reme nt s , w i th the b a l ance a l s o supp l i ed f rom trad i t iona l s e cu r e impo r t source s . ( S e e Appe nd ix H . ) Unused operat ing , p l u s i d l e c rude o i l d i s t i l ­ lat ion c ap a c i ty can b e u s e d to make s ub s t an t i a l quant i t i e s o f add i t i ona l re s idua l fue l o i l i f nece s s ar y . Petro leum Futur e s Marke t s P e tro leum fu ture s ( a s traded on t h e N e w York Me r c an t i l e Exchange and London ' s I n ternat iona l P e t r o l eum Exchange ) m a y be pe rce ived by s ome compan i e s as a way to reduc e i nve ntory and ensure supp l i e s . The r e s u l t s o f the 1 9 8 8 NPC s urvey o f the pr imary and s econdary d i s tr ibution sys tems s u gge s t that , at pre s e n t , pe tro l eum futur e s do not s i gn i f i c a n t l y a f fe c t the l e ve l o f inve nto r i e s he ld i n the pr imary s y s tem ( s e e Appendix F ) E i ghty- seven percent o f the s urvey re s ponde n t s i n d i c a t e d that the fu ture s mark e t s had not a f fe c ted the l eve l of phy s i c a l inven­ tor i e s h e l d . Of the i nventor i e s held by r e s ponden t s who u s e d hedge s , the vo lume-we i ghted ave r age typi c a l ly backed b y he dge s wa s 1 1 pe rcent . Due to the s i z e o f the compa n i e s and the i r inventor i e s , th i s percen tage r anged from 1 t o 1 0 0 . •

Mo s t par t i c ipan t s i n the marke t ful f i l l the i r c o n t r a c tu a l ob l i ga t i o n s t o buy or s e l l through an oppo s i te , o f f s e t t i ng future s trans ac t ion , rather than by de l ive r i n g o r t a k i n g d e l ivery o f "we t " barre l s .

- 55 -

Max imum Ope r a t i n g I nventory in the P r imary D i s tr i bu t i o n S y s tem The max imum ope rat ing i nventory i s the max imum quant i ty tha t c ou l d be s to r e d i n a de f ined d i s tr ibution s y s tem whi l e s t i l l ma i nt a i n i ng a wo rk a b l e ope r a t ing s y s tem . The NPC recogn i z e s tha t the l im i t s o f the i ndu s tr y-wi de max imum oper at ing inventor i e s have not b e e n te s te d i n the s ame s e n s e a s have the m i n imum ope r a t i ng inventor i e s . The r e fore , the NPC c annot e s t ima te va l i d l im i t s for max imum ope r a t ing i nven­ tor ie s on an i ndu s try-wide ba s i s . Furthe r , the NPC is conce rned th at a qu ant i f i c a t ion of the max imum l im i t s m i gh t imp l y the s ame degr e e o f con f i dence a s that inher ent in the e s t ima t i o n o f the min imum l im i t s . The s urvey re s u l t s o f the s um o f the i n d i v idua l company max imum ope r at ing inventory leve l s and the i ndu s try-wide e s t imate s are shown i n Appendix E . The NPC urge s c au t ion i n the interpr e t a t ion o f the s e data . F ac i l i ty l o c a t ion and a c c e s s to tran s por t a t i o n n e two rk s , re f i n ing cente r s , and mark e t s a l l a f fe c t the upper l im i t s o f petro l eum i ndu s try ope r a t ion s . T o t a l S t o r age C apac i ty i n the P r imary D i s t r ibut ion S y s tem The to t a l capac i t i e s of t ankage i n ope r a t i o n and t ankage under c o n s truc t ion i n 1 9 8 3 and 1 9 8 8 are s hown i n T ab l e 2 3 . The grand to t a l for both categor i e s of s torage c apac i ty for c rude o i l and the petro l eum p rodu c t s s urveyed dec l ined b y about 4 perc ent s i nce the 1 9 8 4 repo r t . Howeve r , tankage fo r c rude o i l rema ined cons tan t dur i n g that s ame per iod . Wh i l e a numb e r o f r e f i ne r i e s c l o s ed ( p ar t i c u l a r l y e a r l y on ) , c rude o i l c ap ac i ty i n c re a s e d i n the rema ining re f in e r i e s a s a re su l t o f the up turn i n over a l l demand for p e t ro l eum ( p ar t i cu l a r l y dur in g th e l a tt e r p a r t o f the per iod ) and to accommodate the l a r ge r ve s s e l c a rgoe s a s s o c i a ted wi th r i s ing crude o i l impor t s . T ankage for mo tor g a s o l ine decre a s e d s l i gh t l y from 1 9 8 3 to 1 9 8 8 , re f l e c t ing greater e f f i c iency i n t ankage u ti l i z at i o n to mee t i nc re a s ed demand fo r th i s p roduc t . Ke ro- j et fue l t a nkage inc r e a s ed s ub s t a nt i a l ly dur ing th e per iod in r e s po n s e to the s igni f ic an t i n c re a s e i n demand for th i s produc t . Tankage for d i s t i l l a te and re s i dua l fue l o i l s dec l ined s ign i f i c an t l y during the 1 9 8 3 - 1 9 8 8 p e r i o d , due p r ima r i l y to the dec l i n in g s e a s o n a l i ty o f demand for d i s t i l l a te fue l o i l and dec r e a s e d con s ump t i o n o f r e s idua l fue l o i l . As noted , the total tankage i n ope r a t i o n on March 3 1 , 1 9 8 8 , wa s s l i gh t l y l e s s than that on March 3 1 , 1 9 8 3 . B e s i d e s vary i n g t r e n d s i n tankage c apac i ty for t h e d i f fe r e n t product s , a s d i s ­ cu s s ed above , there appear t o b e three other r e a s o n s for the the reduc t i on i n c rude o i l and ove ra l l r educ t i on i n tankage : produc t demand i n the l a te 1 9 7 0 s and e a r l y 1 9 8 0 s , c a u s ing furthe r re f inery and t erm i n a l shutdowns and tankage con s o l i d a t i o n s ub s e ­ que n t t o March 3 1 , 1 9 8 3 ; the de l e t ion from s e rv i c e o f t ankage tha t wa s not r e tro f i tted to meet envi ronmenta l r e gu la t ion s ; and

- 56 -

TABLE 2 3 SHELL CAPAC I TY OF TANKAGE I N OPERAT I ON AND TANKAGE UNDER CONSTRUCT I ON IN THE PRIMARY D I STRI BUT I ON S Y S TEM ( M i l l ions o f B a r re l s )

March 3 1 , 1 9 8 3 T ankage Tankage Under in o :e e r a t i o n Cons truc t i o n *

Crude O i l Mo tor G a s o l ine Ke ro-Je t Fue l D i s t i l l a te Fue l O i l Re s idu a l Fue l O i l Total

�

March 3 1 , 1 9 8 8 Tankage Tank age Under in C o n s truc t ion o :e e r a t i o n

499 456 68

10 3 §

508 451 82

§ 1 §

295

1

261

§

1 43

4

117

0

1 , 461

18

1 , 419

2

*

Exc l ude s S P R and a por t ion o f l e a s e s to c k s t ankage . Reported i nven to r i e s o f l e a s e s tocks we re 1 1 mi l l ion b a r r e l s i n both 1 9 8 3 and 1 9 8 8 . §

Le s s than 0 . 5 mi l l ion barre l s

�

To t a l s inc l ude t ankage for c rude o i l and s urve yed petro­ leum produc t s on ly . To t a l s may not e qua l the s um of compo n e n t s due t o i nd epe ndent round i ng . Source : N a t i o n a l Pe tro leum Counc i l " 1 9 8 8 S u rvey o f u .s. Petro l eum I nventor ie s and S tor age Capac i t i e s ( Pr imary D i s tr i ­ but ion Sys tem ) . " the phys i c a l d e te r i o r a t i on o f t ank a ge . To br ing s ome o f th a t tankage back into s e rv i c e , e nvi ro nmenta l regu l a t i on s wou l d h ave Tankage i d l e but to be wa ived or tankage s y s tems upgr aded . ava i l ab l e w i th i n 9 0 days ' no t i c e is shown i n T ab l e 2 4 . Th i s tankage , th e tankage i n ope rat ion , and t ankage und e r c o n s truc t i on toge ther provide an e s t imate o f the total t ankage ava i l a b l e to the s y s tem . Al though the i d l e tankage can be re s to r e d o f i t is d i s pe r s e d i n re l a t ive ly sma l l vo lume s nat ion . There fore , r e l y i ng on any s ub s t a n t i a l tankage for emergency pr eparedne s s p l anning i s

to s er v i c e , much throughout the p a r t of th i s n o t p r ac t i c a l .

i Tab l e 2 5 compare s the percer t age ut i l i z a t io n o f t ank capac i ty in the pr imary d i s tr ibu t i on s y s tem ove r the 4 0 - y e a r

- 57 -

TABLE 2 4 P OTENT IALLY AVAI LABLE TANKAGE IN THE PRIMARY D I S TR I BUT I ON SYS TEM AS OF MARCH 3 1 , 1 9 8 8 , THAT I S I D LE BUT CAN BE REACTIVATED WITHIN 9 0 DAYS ( Mi l l ions o f B a r re l s ) 18 17 4 19 7

Crude O i l Mo tor G a s o l i n e Ke ro-Jet Fue l D i s t i l l ate Fue l O i l Re s idua l Fue l O i l To t a l

*

66

*

Tot a l inc lude s t ankage for c rude o i l and s u rveyed petroleum produc t s o n l y . T o t a l may not equ a l the s um o f compo n e n t s due t o independent round ing . S ource : N a t i o n a l P e tro l eum Counc i l " 1 9 8 8 Survey o f U . S . P e t r o l eum I nventor i e s and Sto rage C apac i t i e s ( Pr imary D i s tr i ­ b u t i on Sys tem ) . "

TABLE 2 5 PERCENTAGE U T I L I Z AT I ON OF TAN K CAPAC I TY IN THE P RIMARY D I STRIBUT I ON SYS TEM , 1 9 4 8 - 1 9 8 8

NPC Survey D a t e

I nventory a s a P e r c e n tage o f T ank C apac i ty 42 45 45 48 45 50 53 48 48 40 41

Mar ch 3 1 , 1 9 4 8 June 3 0 , 1 9 5 0 March 3 1 , 1 9 5 2 March 3 1 , 1 9 5 4 Mar ch 3 1 , 1 9 5 7 S eptembe r 3 0 , 1 9 6 2 S e p tembe r 3 0 , 1 9 6 9 S eptemb e r 3 0 , 1 9 7 3 S e p temb e r 3 0 , 1 9 7 8 March 3 1 , 1 9 8 3 March 3 1 , 1 9 8 8

1988 .

Sourc e :

N a t ional P e tro leum Counc i l Survey s ,

- 58 -

1 9 4 8 to

h i s tory o f the NPC i nventory report s . I nve ntory i n t ankage h a s averaged about 4 6 pe rcent o f s torage c apac i t y ove r t h e per iod a nd has ranged from a h i gh o f 5 3 pe rcent i n 1 9 6 9 to a l ow o f 4 0 per­ cent in 1 9 8 3 . Dur ing the operat ing cyc l e , tank s do f l uctuate between the min imum and max imum ope r a t i n g leve l s . However , the aver age has var i e d l i t t l e . Tab l e 2 6 shows the u t i l i z a t i on o f s tor age capac i ty b y s urveyed product a s o f March 3 1 , 1 9 8 8 . Wi th product demand once aga i n increas ing and with re f i n e r i e s runn ing at h i gh ut i l i z a t i on rate s , i t is ant i c ipated that very l i tt l e s torage c apac ity wi l l b e deact ivated dur ing the n e x t few years . I n summary , the NPC h a s conc luded th at the m i n imum ope rat ing inventory for c rude o i l , mo tor g a s o l ine , and kero- j e t fue l h a s inc r e a s ed , a n d d e c re a s e d f o r d i s t i l l ate fue l o i l a n d re s idual fue l oi l . The s e chan ge s in min imum ope r a t i ng inventory r e f l e c t s truc tural chang e s i n the di s tr ibution s ys tem , i n c re a s ed c o n s ump­ tion of c e r t a i n produc t s , reduc ed u.s. c rude o i l produc t i on w i th an incre a s e i n c rude oi l import s , and c o n t i nued e c onom i c pre s s ure s to hold i nve n to r i e s at min imum leve l s . The pr imary d i s tr ibut ion s y s tem h a s a l s o undergone c o n s ider­ able s y s tem change i n th e past five years : pe t r o l eum demand has grown , s e gre g a t i o n of re fined prouc t s h a s i n c r e a s ed , r e f i n e r i e s have conti nued t o c l o s e , and U . S . depe nde n c e o n fore i gn c rude o i l ha s grown . The mo s t s ig n i f i cant sys tem change h a s b e e n th e shu t ­ down and c on s o l i d a t i o n o f uneconomica l or ob s o l e t e r e f i n er i e s fo l l owing gove rnme nt decontro l . Incre a s e d compe t i t i on h a s tended Re s u l tant fac i l i t y shutdown s h ave to reduce p e t ro l eum p r i c e s . dec reased s torage c apac ity ; lowe r price s have reduced d ome s t i c c rude o i l produc t ion a n d incre a s ed import s ; r e f i nery capac i ty i s more fu l ly ut i l i z ed . SECONDARY D I STRIBUT I ON S YSTEM ANALY S I S Ana lys i s o f s to r age l eve l s and c ap ac i t y i n the s ec ondary d i s t r ibut ion s y s tem i s s im i l ar i n ob j ec t i ve to tha t o f the pr imary s y s t em . Emph a s i s i s p l aced on deve lop i n g e s t ima te s o f s to rage c apac i ty and i nvento r i e s for ma j o r pe t r o l eum produ c t s i n the s e condary s ys tem a s o f March 3 1 , 1 9 8 8 . The s e condary s y s tem pre s e n t s analyt i c a l d i f f icu l t i e s , however , part i c u l a r l y s i nce i t s popu l a t ion i s mu ch l arger and some t ime s d i f f i c u l t to de f i n e . It i s , neve r the l e s s , an important element of the ove ra l l product d i s tr ibution s y s t em , and one tha t i s o ften ove r l ooked . Th i s s tudy repre s e n t s t h e NPC ' s s e c ond survey-ba s e d e f fort d e s igned to improve the ava i l ab i l i ty and accuracy of i n fo rma t i on about s e c ondary i nven to r i e s and s torage capac i t i e s . The s e condary s y s tem i s that por t ion o f the ove r a l l d i s ­ It tribution ne twork th a t fa l l s between produc e r s and end-u s e r s . i s gene r a l l y de f i n e d to inc lude bulk p l a nt s , wh i ch s tore mo tor fue l s , h e a t i n g fue l s , and other produ c t s pr ima r i l y for who l e ­ s a l e r s , a s we l l a s r e t a i l mo tor fue l out l e t s .

- 59 -

TABLE 2 6 UT I L I Z AT I ON OF STORAGE CAPAC I TY IN THE P R I MARY D I S T RI BUT I ON SYS TEM AS OF MARCH 3 1 , 1 9 8 8 * ( Mi l l ions of B ar re l s )

C rude O i l Ac tu a l I nventory Reported to NPC

I

K e r o - Je t Fue l

D i s t i l l a te Fue l O i l

Re s i du a l Fue l O i l

Tot a l

283 . 1

203 . 1

38 . 5

75 . 7

31 .9

632 . 3

72 . 2

37 . 0

8.6

14.5

0.8

133 . 1

I nventory in Tankage

210 . 9

166 . 1

29 . 9

61 . 2

31 . 1

499 . 2

She l l Capac i ty o f Tankage Repo r te d to NPC

447 . 2

396 . 5

79 . 5

221 . 1

84 . 8

1 , 229 . 1

Le s s : 0'1 0

Gasol ine

I nve ntory O u t s ide of Tank age

Pe rcentage U t i l i z a t i on

47

42

38

28

37

41

1 9 8 3 U t i l i z at io n s

45

40

39

34

32

40

*

D a t a are a s reported by survey r e s ponde n t s and have not b e e n ad j u s te d to re f l e c t non-re s ponde n t compan i e s . Source : N a t iona l P e t r o l eum Counc i l , " 1 9 8 8 S u rvey o f u . s . P e t r o l eum I nventor i e s and S torage C apac i t i e s ( P r imary D i s t r ibut ion S y s tem ) . "

The NPC s urveyed a s amp l e o f bu l k p l an t ope rator s and fue l o i l de a le r s to deve lop i nventory and capac i t y d a t a for the U . S . Data on re t a i l moto r fue l out l e t s were bu lk p l ant popu l a t i on . deve l oped u s ing ava i l a b l e gove rnment and pr ivate s ou rc e s , t r ade pub l i c a t ions , and the expe r t i s e of var i ou s indu s try repr e s en t a ­ tive s . S e e Appe nd i x K for me thodo l o g i e s a n d s u rvey r e su l t s . Bu lk P l ant s Bulk p l ant s are an important l i nk in the petro l eum d i s t r ibu­ tion netwo rk , and account for a l arge por t i o n o f tota l s to rage capa c i ty and inventory in the s e c ondary s e c to r . Approx ima te ly 1 7 , 0 0 0 compan i e s , from r e f i n e r s to indepe ndent who l e s a le r s , operate i n the s ec ondary s y s tem , and abou t 1 5 , 0 0 0 are i nvo lved i n the ope ration o f bu l k p l ant fa c i l i ti e s . P rodu c t typ i c a l l y f l ow s from the pr ima ry s e c t o r through bu lk p lant s b e fore d e l i ve ry to ret ai l outl e t s or u l t imate e nd -u s e r s . As i l lu s trated in Tab le 2 7 , to t a l bu lk p l ant s to r age capa­ c i ty to t a l ed an e s t imated 50 mi l l ion b arre l s a s of March 3 1 , 1988 . Thi s repr e s e nt s a dec l ine o f 1 5 mi l l io n b a r re l s o r 2 3 pe rcent compared with to t a l s torage c ap ac i t y reported f i ve ye a r s ago . The c apa c i ty t o s tore motor g a s o l i n e dec l ined from 2 2 mi l l ion barre l s to 1 7 mi l l i on barre l s , wh i l e d i s t i l l a t e c apac i ty dropped from 3 7 mi l l i on barre l s to 2 9 mi l l ion b a r re l s , and re s i dual fue l o i l c apac i ty decre a s ed from 6 mi l l ion barre l s to 4 mi l l ion barre l s . Shrinking bu l k p l ant capac i ty ove r the pa s t f i ve year s i s re l a ted mor e to indu s try r e s truc turing than t o change s i n con­ sumption pat tern s . Wh i l e pe tro leum demand h a s b e e n on the r i s e , economic factors have forced compan i e s to s ee k new way s to r ema i n compe t i t ive . F i rms have foc u s e d o n s tr eaml i n i n g ope r a t i o n s and have dive s ted uneconomi c a l fac i l i ti e s . I n add i t i o n , th i s period has been ch arac te r i z e d by unpre cedented me rger a nd acqu i s i t ion ac t ivi ty . One d i r e c t re s u l t o f both factors h a s b e e n the c l o s ur e o f a l arge number o f o l der , le s s economica l bu lk p l ant ope r a t i o n s and t h e i d l ing o f ob s o l e te t anka ge . Thi s proce s s h a s b e e n acce l ­ e rated by the adve nt o f even more s tr ingent environme n t a l r e gu l a ­ tions at the l o c a l , s t ate , and fede r a l leve l s , a t r e nd th a t i s expec ted t o c on t i nue . Howeve r , wh i l e s tor age c apac i t i e s dec l i ned , the t o t a l As quant i ty o f ma j or produ c t s he ld at bu l k p l an t s i n c r e a s ed . i l lus trated in Tab l e 2 8 , tota l invento r i e s i n c re a s ed from 1 9 mi l l ion barre l s on March 3 1 , 1 9 8 3 , to 2 2 mi l l i on barre l s on March 3 1 , 1 9 8 8 . Th i s i s the r e s u l t o f a 3 8 pe r c e n t i n c re a s e in d i s t i l l a te inventor i e s , wh i ch ro s e from 8 mi l l i on barre l s to 1 1 I nventor i e s o f mo tor mi l l ion barre l s over the s ame period . ga s o l ine and re s i du a l fue l o i l rema ined f l a t . The i n c re a s e i n d i s t i l l ate i s part i c u l a r l y no t i c e ab l e s i nce it occurred at the end of th e heat ing s e a s on , the norma l trough for s tock leve l s . Th i s apparent anoma l y is e xp l a i n e d by an

- 61 -

TABLE 2 7 BULK PLANT S TORAGE CAPAC I T Y IN THE S ECONDARY D I STRI BUT I ON S Y S TEM , ( Mi l l ions o f Barre l s ) March 3 1 , Mo tor G a s o l i n e D i e s e l / D i s t i l l a te F ue l O i l Re s i dua l Fue l O i l Tota l

*

*

1983

1 9 8 3- 1 9 8 8

March 3 1 ,

22 37

17 29

6

4

65

50

19 8 8

To t a l s i n c lude s urveyed petro l eum produc t s o n l y .

S ourc e : Nat iona l P e t ro l eum Counc i l , " 1 9 8 8 S urvey o f U . S . P e t r o l e um I nve ntor i e s and S to rage C ap ac i t i e s ( S ec ondary D i s tr ibu t ion S y s tem ) . "

TABLE 2 8 BULK PLANT INVENTORY LEVELS IN THE S ECONDARY D I S TRI BUT I ON SYS TEM , 1 9 8 3 - 1 9 8 8 ( M i l l ions o f B a r re l s ) March 3 1 , Motor G a s o l ine D i e s e l / D i s t i l l a te Fue l O i l Re s idua l Fue l O i l Total *

1983

Ma r ch 3 1 ,

9

8

8 2

11 2

19

22

1988

*

To t a l s inc l ude s urveyed p e tro l eum produc t s o n l y a nd may not equ a l the s um o f the compone n t s due to i ndependent round ing . Sourc e :

N a t i o n a l Pe tro leum Counc i l ,

" 1 9 8 8 S urvey o f ( S e c ondary

u.s. P e t ro l eum I nve ntor i e s and S torage C apac i t i e s

D i s tr ibut ion S y s tem ) . "

- 62 -

Apr i l 1 change i n the l aw gove rning d i e s e l e xc i s e t a x co l l e c ­ t ions , wh ich i n e f fe c t encouraged s tockbu i l d in g at the s ec ondary and terti ary leve l s . The rat iona l i z a t i on that has taken p l ace i n the i ndus try ove r the pa s t f ive y e a r s is re f l ected in i nc r e a s ed c ap a c i ty ut i l i z a t i on r a te s . I n March 1 9 8 3 , tota l i nvento r i e s amounted to I n March 1 9 8 8 , u t i l i z a t ion had 2 9 percent o f t ank c apac i ty . increa sed to 4 3 percent , l argely a s a re s u l t o f t ank c l o s ure s and decr e a s ed c apac i t ie s . S ec ondary s torage l eve l s vary by type o f produc t , by type o f bu s i ne s s , and by geograph i c loc a t i on . B u l k p l ant i nvento r i e s are part icular ly s en s i t ive to dev i a t ions from the norm i n f a c to r s such a s s e a s o n a l demand pattern s but may b e a f fe c t e d by a h o s t o f o ther i n f luence s . Re t a i l Out l e t s There wer e appro x imate ly 1 7 0 , 0 0 0 reta i l mo tor fue l out­ l e t s in the Un i ted S t ate s in March 1 9 8 8 . It is e s t imated tha t the combined s torage c apac ity i s 8 3 mi l l ion b a r re l s , ho ld ing a tota l inventory o f 4 4 mi l l ion barre l s . Th i s c ompar e s to s to rage c apac i ty and i nventory o f 8 4 mi l l ion bar re l s and 2 8 mi l l i on barre l s , r e s pe c t ive l y , for 1 9 8 3 . I n s ummary , the s e c ondary di s tr ibut i o n s y s tem s tore s and tran s po r t s produ c t s b e twe en produc e r s and e nd-u s e r s , and inc lude s bu lk plants and r e t a i l mo tor fue l out l e t s a s i t s two ma j or com­ ponent s . The s e condary s y s t em compr i s e s 6 6 mi l l ion b a r r e l s o f i nve ntory , repr e s ent i n g about 9 percent o f t o t a l u . s . i nventory and s torage c apac i ty for produc t s s urveyed . The s e s ign i f i cant vo lume s of i nve ntory are v i t a l a s bu f fer s be twe e n p r ima ry s y s tem inventor i e s and end - u s e consume r s . Wh i l e the f l e x i b i l ity to red i r e c t product invento r i e s from the s e condary s y s tem is s ome ­ wh at l imi ted , s econdary inventory vo lume s wi l l be n eeded to hand l e d i s rup t i on s . I n the s e c ondary s y s tem , c o n s ide r ab l e c on s o l i d a t i o n h a s occurred : the numb er o f bulk pl ant ope r a t o r s h a s d e c re a s ed from 1 8 , 0 0 0 to 1 5 , 0 0 0 , and the number o f reta i l ou t l e t s h a s dec r e a s e d from 2 1 0 , 0 0 0 t o 1 7 0 , 0 0 0 . Shr ink ing bu lk p l ant c ap a c i t y i s r e ­ l a t e d more t o i ndu s try r e s tructuring than to change s i n c o n sump­ tion patterns . Wh i l e pe tro l eum demand ha s i n c re a s ed , e c o nomi c fac tors have forced c ompan i e s t o s eek new ways t o r ema i n compe t i t ive . TERT IARY S TORAGE S EGMENT ANALYS I S The s torage c apac i ty and i nvento r ie s o f p e tro l eum p roduc t s he ld b y end-u s e r s repre s e n t the ter t i ary s torage s egme n t o f the petro leum d i s t r ibu t io n s y s t em . Only the ma j or fue l produc t s - ­ mo tor g a s o l ine , kero- j e t fue l , d i s t i l l a te fue l o i l , and r e s i du a l fue l oi l - - a r e i nc luded i n the fo l l owing d i s cu s s i o n s . The s e a re

- 63 -

the s ame p roduc t s that were cons idered for the p r imary and s e c ondary d i s t r ibu t ion s y s tems . The amount o f s to r age c apac i t y and i nventory i n t h e t e r t i ary s egme nt i s a s ign i f i c an t por t io n o f to t a l U . S . c apac i ty and produc t i nventory , about 3 5 p e r c e n t e ach . The te r t i ary s to r age s e gment h a s been broken down into s even d i f ferent s ec to r s for a n a l y s i s , and the me thodo l o g i e s used to deve l op the e s t imat e s for s torage c apac i ty and i nventory i n e ach s e c tor vary c o n s i d e r ab ly . I n mo s t t e r t i ary s e c to r s , s eve r a l d i f ferent e s t ima t i ng technique s were reviewe d ; tho s e s e l e c te d for deve loping the s e c to r e s t imate s are cons idered to b e the mo s t The r e a s on ab l e and accurate , b a s e d on data ava i l ab i l i t y . indiv idua l s e c tor me thodo log i e s are d i s cu s s ed i n d e t a i l i n Appendix L . Wh i l e e s t imate s for s tor age and i nve n tory a r e p r e s ented by produc t , there i s l e s s c o n f idence in the i nd iv i du a l produ c t bre akdown s than i n t h e aggregate produc t vo lume s . Al s o , i n a l l s ec tor s , s torage c apac i ty and inve ntory for k e ro s i n e i s a ggre ­ gated with that o f d i e s e l / d i s t i l l ate fue l s . The ove ra l l e s t imate s o f s tor age c apac i ty and inve ntory for the te r t i ar y s to r age s egme nt are s hown i n T ab l e 2 9 . I nd i v i du a l s e c to r e s t imate s are inc luded with t h e d i s c u s s ion o f e ach p ar t i c ­ u lar ter t i ary s e c to r . Ag r i cu l tu r a l S e c t o r T h e agr i cu l tur a l s e c tor inc lude s a l l f arms , r anche s , and s imi l ar ope r a t i o n s i n the Un i ted S ta t e s . P e tro l eum s torage and i nven tory for thi s s e c t o r inc lude mo tor ga s o l i n e and d ie s e l fue l u s e d i n veh i c l e s and equ i pment . D i s ti l l a te fue l s u s ed for r e s i ­ dent i a l h e a t ing are i nc luded i n the re s ident i a l s e c tor ana l y s i s . T r end s i n U . S . agr i c u l ture ( and c on s eque n t l y fue l s to r age c apac i ty and i nventory ) are o ften obs cured by gove r nment po l i c y and externa l event s . The acre age u nd e r cu l t iv a t i o n h a s fa l l e n e rrat i c a l ly s in c e the 1 9 8 1 pe ak whe n over 3 6 3 m i l l io n ac r e s were Contr ibut ing to the dec l in e h ave b e e n in pr i nc ipa l crops . product ion- l im i t ing programs s uch a s t h e P ayme nt - i n - K i n d program and the s t rong do l l ar o f the mid- 1 9 8 0 s . Low or no - t i l l a ge programs , fos tered i n p a r t by h igh energy p r i c e s through 1 9 8 5 , are now a s s oc i a t e d mor e w i th so i l c o n s erva t i o n programs . Wh i l e s uch me thods r e duce the number o f t r ip s that farm e qu ipme n t make s ove r c u l t iva ted l and , to t a l fue l consumpt io n i s n o t r educ ed p ropo r t iona l ly be c au s e mo re mach inery is requ i re d for e ach t r i p . The fede ra l ly sponsored Cons ervat ion Re s e rve P rogr am a im s to r e t i re 4 5 mi l l i o n acre s of h i gh l y erod i b l e l an d by 1 9 9 0 . A l r eady 2 3 mi l l ion acre s h ave been p l aced i n r e s e rve , a s i gni f i c a n t amount whe n compared to t h e 3 0 5 mi l l i o n acre s o f p r i n c i p a l c rops in c u l t i va t ion i n 1 9 8 7 . The n e t e f f e c t o f both the Cons e rvat ion Re s e rve Program and co n s erva t i o n t i l lage is to reduce fue l demand s . Howeve r , the r e

- 64 -

TABLE 2 9 E S T I MATED S TORAGE CAPAC I T Y AND I NVENTOR Y IN THE TE RT IARY S TORAGE S E GMENT AS OF MARCH 3 1 , 1 9 8 3 AND 1 9 8 8 ( M i l l ions o f B a r re l s ) C apac i ty 19 88 1983

I nve ntory 19 8 8 1983

Sector Agr i cu l tur a l Commerc i a l E lectr ic Uti l i t i e s I ndu s t r i a l M i l i t ary / Governmen t Re s i dent i a l Transpo r t a t i on * Total

§

41 37 213 61 56 100 134

40 33 175 52 48 79 144

14 8 91 17 23 55 61

14 7 61 10 18 50 87

642

571

2 69

247

103

109

42

63

282 21 237

255 22 1 84

131 11 86

113 11 60

642

571

269

247

Produc t Mo tor Ga s o l ine D i e s e l / D i s t i l l a te Fue l O i l Kero-Jet Fue l Re s i dua l Fue l O i l Tot a l

§

*

Inc lud e s on-board and f i xed s torage c apac i ty and i nve ntory fo r c a r s , bu s e s , r a i lroad s , and avi a t ion , but e x c lude s payload s torage ( i . e . , s to ra ge c apac i ty and inve ntory for produ c t be ing transported ) of r a i l roads , tank truck s , and m a r i n e ve s s e l s . §

Tota l s inc lude s urveyed petro l eum produ c t s o n l y . To t a l s may no t equ a l the sum o f component s due to i ndependent round ing . S ourc e :

NPC e s t ima te .

- 65 -

are no data ava i l a b l e a t th i s t ime to e s t imate a r educ t io n o f inventory or s to r age c ap ac i ty . Demand and inventory leve l s for petro l eum produc t s i n the agr icu l tu r a l s e c tor tend to be l owe r in the w i n t e r s e a s o n and h ighe r dur ing the p l an t i ng and harve s t ing s e a s o n s . The i nventory shown i n T ab l e 3 0 for Ma rch 3 1 , 1 9 8 8 , r epre s e n t s a " trend " pro­ j e c t e d l eve l , and doe s no t i nc lude the imp a c t o n March 3 1 of the change i n c o l l e c t ion po int ( from produc e r to c o n s ume r ) o f fede r a l d i e s e l fue l tax . Th a t change c au s ed March pr imary inven to r i e s t o be l ow e r than norma l , and s e c o ndary and t e r t i ary inventor i e s t o b e h i gh e r than norma l , p r e s umab ly re f l e c t ing c o n s ume r f i l l ing o f i nventory be fore the ch ange . Comme r c i a l S e c to r T h e comme rc i a l s e c to r inc lude s t h e s to rage c apac i t y and inve ntory nece s s a ry for the h e at ing requ i r ement s o f c omme rc i a l e s tab l i shme n t s s uch a s o f f i ce bu i ld in g s , nur s i ng h ome s , b a nk s , shopp ing c ente r s , r e a l e s tate o f f i c e s , c ar de a l e r s h ip s , a nd apartmen t comp l exe s w i th mor e than four un i t s . I t e x c lude s comme r c i a l t r a n s p o r t a t ion ( s ee Tran s portat ion S e c tor ) , r e s iden­ t i a l h e a t ing ( s e e Re s ident i a l S e c tor ) , indu s tr i a l manu fac tu r ing fac i l i t i e s ( s ee I ndu s t r i a l S e ctor ) , and pub l i c s ch oo l s ( s e e Mi l i tary / Gove r nmen t S e c to r ) . The comme rc i a l s e c tor s to rage c apac i t y i s e s t imated to be 3 3 mi l l i on b a r re l s . I n the comme rc i a l s ec tor , many d ivergent t r e n d s have occurred b e twe e n 1 9 8 3 a n d 1 9 8 7 , such a s t h e 1 7 . 3 pe r c e n t re a l ( in f l a t i on - ad j us ted ) incre a s e i n gro s s n a t i o n a l p rodu c t ( GNP ) , t h e i n c re a s e i n t h e number o f l a rge shopping c e n t er s , and the trend away from o i l h e a t ing , p art i cu l ar l y the r e p l a c emen t o f r e s idua l fue l o i l burne r s w i th c l e aner-bu rn ing n atur a l g a s and d i s t i l l a te fue l o i l burne r s i n urban are a s . I t i s e s t imated th at t ankage c apac ity and o i l i nventory droppe d s l i gh t ly dur i n g th i s pe r i od . S torage c apac i ty and i nventor i e s i n the c omme rc i a l s e c tor are s hown i n T ab l e 3 1 . E le c t r i c U t i l ity S e c tor The e le c t r i c u t i l ity s e c to r inc lude s e l e c t r i c powe r gene­ rating s ta t i o n s ope rated by c ommerc i a l e l ec t r i c c omp a n i e s . It e xc lude s powe r p l a n t s that gene r ate e le c t r i c i t y w i t h i n a n i ndu s ­ tr i a l s i te ( s e e I ndus tr i a l S e c t or ) . S torage c apac i t y i n the e l e c t r i c ut i l i t y s e c to r i s e s t ima ted to be about 1 7 5 mi l l ion barre l s in 1 9 8 8 , down f rom the e s t imated l eve l o f 2 1 3 m i l l ion barre l s i n 1 9 8 3 . The dec l in e i n the demand for petro l eum as e l e c t r i c powe r gener a t i on fue l h a s c au s ed mo s t o f the reduc t i on i n s torage c apac i ty a s u t i l i t ie s h ave taken The u s e o f petro l eum for e l ec t r i c power tankage out o f s ervice . gene r a t i o n has de c l ined by ove r 1 8 pe rcent from 1 9 8 3 de sp i t e an inc r e a s e i n to t a l net genera t i on . Th i s i s shown i n T ab l e 3 2 .

- 66 -

TABLE 3 0 AGRI CULTURAL S ECTOR E S T I MATE D S TORAGE CAPAC I TY AND I NVENTORY AS OF MARCH 3 1 , 1 9 8 8 ( Mi l l io n s o f B a r re l s ) Capac i t y 19 88 1983 Mo tor Ga s o l ine D i e s e l / D i s t i l l at e Fue l O i l To t a l

S ourc e :

I nve ntory 1988 1983

19 22

20 20

7 8

7 7

41

40

15

14

NPC e s t ima te .

TABLE 3 1 COMME RC IAL SE CTOR E S T I MATED S TORAGE CAPAC I TY AND I NVENTORY AS OF MARCH 3 1 , 1 9 8 8 ( M i l l i o n s o f Barre l s ) C a E ac i t :t: 1988 1983 D i s t i l late Fuel O i l Re s idua l Fue l O i l To t a l

Source :

I nve ntor:t: 1988 1983

22 15

26 7

5 3

6 1

37

33

8

7

NPC e s t imate .

The dec l i ne i n the u s e o f petro leum for e l e c t r i c power gene­ rat ion from 1 9 8 3 to 1 9 8 5 is due pr ima r i l y to the r e l at ive c o s t o f The i n c re a s e over 1 9 8 5 l eve l s in pe tro l eum ve r s u s othe r fue l s . the use o f p e t r o l eum in 1 9 8 6 and 1 9 8 7 i s due to the imp roved compe t it ivene s s o f o i l as a bo i l e r fue l r e l a t i ve to c o a l and na tural g a s . The change s in the u s e o f pe t ro l eum produc t s a s e l e c t r i c powe r gener a t ing fue l s h ave b e e n mo s t app a r e n t i n re s idua l fue l o i l u s e ; 1 9 8 3 r e s i dua l fue l o i l u s e b y u t i l i t i e s

- 67 -

TABLE 3 2 U . S . NET ELECTRI C ITY GENERAT I ON ( 1 , 0 0 0 G i gawatt-hou r s ) Ye ar

Total

P e t ro leum

P e r c e nt P e tro l eum

1983

2, 310

144

6.3

1 9 84

2 , 416

120

5.0

1985

2 , 470

100

4.1

1986

2 , 487

137

5.5

1987

2 , 572

118

4.6

Ene rgy I n format ion Admin i s tr a t i o n , E l e c t r i c P owe r Source : Month l y , March 1 9 8 8 , T ab l e 4 .

was about 6 2 7 MB / D dec l i n ing to about 5 0 0 MB / D i n 1 9 8 7 ( a d e c l i ne o f over 2 0 pe r ce n t ) wh i le d i s t i l l at e fue l o i l u s e de c l i ne d from 4 5 MB / D in 1 9 8 3 to 4 2 MB / D i n 1 9 8 7 ( a dec l i ne o f about 1 0 percent ) •

I nvento r i e s o f r e s idua l fue l o i l and d i s t i l l a te fue l o i l he ld a t e le c t r i c u t i l i t i e s s tood a t 6 1 mi l l i o n b a r r e l s o f o i l on The d e ­ March 3 1 , 1 9 8 8 , d own from 9 1 mi l l ion barre l s i n 1 9 8 3 . c r e a s e i n p a r t re f l e c t s t h e i n c re a s e d ava i l ab i l i t y o f a l t e r n a t ive ( non-o i l ) fue l s for e le c t r i c power generat ion . Many ut i l i t i e s tha t have the ab i l ity t o generate e l e c t r ic i ty w i th o i l o r g a s are curr en t l y u s ing g a s as the p r imary bo i l e r fue l . The s e u t i l i t i e s wi l l h ave s ome o i l o n hand ; bu t a t r educ e d l eve l s from 1 9 8 3 . E s t ima te d s to rage c apac ity and i nventory for p e t r o l eum produ c t s at e l e c t r i c ut i l i t i e s i s shown i n T ab l e 3 3 . I ndu s tr i a l S e c tor The i ndu s t r i a l s e c to r inc lude s p l a n t s and f a c to r i e s i n the Un i ted S ta te s , bu t exc lude s r e t a i l and s er v i c e f i rms ( s e e C omme r ­ I n th i s a n a l y s i s , cons truc t i on a nd o f f - h i ghway c i a l S e c to r ) . non - t r an s porta t i on u s e s ( e . g . , logg i ng and m i n i n g ) are a l s o i n ­ c lude d i n t h e indu s tr i a l s e c to r . For t h e purpo s e o f th i s d i s ­ cus s i on , p e t r o l eum r e f i ne r i e s and e l ec t r i c u t i l i t i e s a r e n o t c ons idered i n t h e indu s t r i a l s e c tor , b e c au s e fue l for r e f i n e ry u s e i s part o f the pr imary s y s t em , wh i l e u t i l i t i e s are r epo r t e d a s a s eparate t e r t i ary s e c tor .

- 68 -

The indu s tr i a l s e c to r u s e s pe tro l eum produc t s pr ima r i l y for space or proce s s h e a t ing and to powe r mach inery e i th e r d i re c t l y or through s t e am generation . Some indu s t r i a l c o n s ume r s , par­ ticularly tho s e i n the chemi c a l indu s try , u s e p e t ro l e um produc t s a s r aw ma te r i a l i n manu fac tur ing proc e s s e s ; a l s o , s ome un f i n i s hed hydroc arbon s may be u s ed in the b l e nd ing of f i n i s h e d produc ts . The s torage c apac i ty and i nventor i e s o f fe e d s to c k s and un f i n i shed blend i ng s tocks are out s ide the s c o pe of th i s s tudy ; o n l y f i n i s he d pro duc t s u s e d f o r fue l in the indu s t r i a l s e c to r { mo tor gasol ine , d ie s e l / d i s t i l l a te s { i nc lud i n g k e ro s i ne ) , and r e s i dua l fue l o i l ) have been con s idered . I ndu s t r i a l pe tro l eum produc t u s e dec l i n e d f rom 1 9 8 3 to 1 9 8 8 , fo l lowing the trend obs erved betwe e n 1 9 7 8 and 1 9 8 2 a s reported i n NPC ' s 1 9 8 4 s tudy . I t i s be l i eved tha t thi s con s umpt i o n d e c re a s e re s u l te d not only from p l ant c lo s ings i n energy - i n t e n s ive i ndu s tr i e s , but a l s o from c o n t i nued ene rgy con s e rva t ion e f fo r t s and fue l - switch i ng . Even cons ider ing th at i ndu s t r i a l u s e r s o f swi tchab le natur a l gas c o n t i nue to have s to rage f ac i l i t i e s capab le o f h and l ing th e i r c omp l ete l i qu id fue l n e e d s , i t i s e s tima ted th at s to rage c apac ity dec l i ned b e twee n 1 9 8 3 and 1 9 8 8 . I ndu s t r i a l i nventor ie s exh i b i t a c l o s e re l a t i o n s h i p to demand and a l s o to the vo l ume of s tor age c apac i ty i n s e rvi c e . S i nce it i s e s t ima ted th at bo th the s e e l ement s have d e c l ined s i nce 1 9 8 3 , the r e is s uppor t for the e s t ima te that i nve ntory leve l s have a l s o dec l ined in the pa s t f ive ye a r s . TABLE 3 3 ELEC TR I C UT I L I T I E S E S T I MATED STORAGE CAPAC I T Y AND I NVENTORY AS OF MARCH 3 1 , 1 9 8 8 { M i l l ions o f B arre l s ) *

C a p ac i ty 1988 1983 D i s t i l l a te Fue l O i l Re s idua l Fue l O i l To t a l

*

§ I nventory 1988 1983

36 1 77

41 134

22 70

13 48

213

175

91

61

NPC e s t imate .

§

Energy I n f orma t i on Adm in i s tra t i on , E l e c t r i c Powe r Monthly , March 1 9 8 8 , ad j u s t ed by the NPC to e x c l ude s tock s he ld i n the pr imary di s tr ibution · s y s tem for e l e c t r i c u t i l i ­ ties .

- 69 -

I n du s t r i a l p roduc t ion for tho s e fac i l i t i e s ope r a t i n g h a s cont inued to i n c re a s e s ince 1 9 8 6 , the l a s t ye a r f o r wh i c h d e ­ tai l e d pe t r o l eum c o n s ump t i on d a t a a r e ava i l ab l e . The Federal Re s e rve B o a rd I ndex o f manu facturing c apac i t y u t i l i z at io n h a s r i s e n from 7 9 . 6 ( 1 9 8 6 ' s ave rage ) t o 8 2 . 5 ( March 1 9 8 8 ) . The i nven tory vo lume for March 3 1 , 1 9 8 8 , i s a " t i end " pro­ j ec t e d l e ve l , and doe s n o t repre s e n t the imp a c t of the change i n c o l l e c t i on po i n t ( from produc e r to c o n s ume r ) o f the fede r a l di e s e l fue l t a x on Ap r i l 1 , 1 9 8 8 . That change c au s e d March 1 9 8 8 s e c ondary and t e r t i ar y inventor i e s to be h i ghe r , pre s umab ly re f l e c t i ng c o n s ume r f i l l i ng of inve ntory be fore the t a x ch ange bec ame e f fec t ive . S to r age c apac i ty and i nventory e s t imate s for the i ndu s tr i a l sec tor are shown i n T a b l e 3 4 . TABLE 3 4 INDUS TR IAL S ECTOR E S T I MATED STORAGE CAPAC I TY AND I NVENTO RY AS OF MARCH 3 1 , 1 9 8 8 ( M i l l ions o f Barre l s ) C apac i ty 19 88 1983 *

Mo tor G a s o l i n e D i s t i l l at e Fue l O i l / Ke r o s ine Re s i dua l Fue l O i l Total

*

I nventory 19 88 1983 *

30 31

1 22 29

9 8

0.5 4.5 5.0

61

52

17

10 .0

Le s s th an 0 . 5 mi l l ion barre l s .

S o u rc e :

NPC e s t ima te .

Mi l i ta ry / Gove rnme nt S e c tor The m i l i t ar y / gove r nme nt s e c tor i nc lude s feder a l , s t a t e , and lo c a l governme n t s and a l l branche s of the u . s . m i l i tary l o c ated i n the Un i t e d S t a te s . O f the 4 8 mi l l ion barre l s o f s tor age c apac i ty i n t h i s s e c tor , 3 2 m i l l ion barre l s are he ld by the u . s . mi l i t ary . The reported c apac i ty inc lude s s to r age he ld by both the D e f e n s e F u e l Supp ly Center a n d t h e a rmed forc e s . T h e t r e n d i n U . S . mi l i tary s torage repre s en t s a r educ t ion of about 1 5 p e r c e n t , or 6 mi l l i on barre l s b e twee n 1 9 8 3 and 1 9 8 8 . Mainly , th i s r e duc t i on re f l e c t s the c l o s ing o f s ome m i l i tary i n s ta l l at i on s .

- 70 -

O f the rema 1 n 1 n g gove rnme nt s torage , 1 0 mi l l ion b ar re l s repre s e n t loc a l governme nt c apac ity for h e a t ing pub l i c s choo l s and mun i c i pa l bui l d i n g s and for fue l ing po l i c e c a r s and o ther S t ate and fede r a l gover nme n t s to r a ge mun i c ipal cars and truck s . capa c i ty i s 4 mi l l ion b arre l s for h e a t i n g and 2 mi l l ion b a r re l s for transpo r t a t i on . B a s ed o n the 1 9 8 8 an a l y s i s , the r e app e a r s to have been a 1 0 percent r educ t i on , or about a 2 mi l l ion b arre l drop , in s torage c apac i ty dur ing the l a s t f ive y e a r s , a s govern­ me nt , l ike the pr ivate s e c tor , improve s s to rage e f f i c i e nc y i n the tran s portat ion s e c tor and rep l a c e s o ld r e s idua l - fue l -o i l burn ing un i t s . S torage c apac i ty and i nventor i e s i n the m i l i t ary / governmen t sector are shown in Table 3 5 .

TABLE 3 5 MI L I TARY / GOVE RNMENT S E CTOR -E S T I MATED S TORAGE CAPAC ITY AND INVENTO RY AS OF MARCH 3 1 , 1 9 8 8 ( Mi l l ions o f Barre l s ) *

Capac it y Mo tor Gas o l i ne Kero-Je t Fue l D i s t i l l a t e Fue l O i l Re s idua l F ue l O i l Tota l

Mi l itar y 1988 19 83

§ Gove rninent 1988 1983

Total 1988 1983

5 6

8 11 29 9

6 11 23 8

17

16

57

48

1 5 5 1

3

3

1 2

4 5 10 3

3 5 7 3

12

7

6

22

18

1 10 24 3

1 11 18 2

6

38

32

1 5 9 1 16

*

4 7

5

Cj[

Inventor y Motor G a s o l ine Ke ro-Jet Fue l D i s t i l l ate Fue l O i l Re s idua l Fue l O i l To tal

*

§ CJ[

Ac tua l March 3 1 ,

*

2 2

Cj[

1 9 8 8 data f rom De f e n s e Fue l Supp l y Center .

NPC e s t imate . Le s s than 0 . 5 mi l l ion barre l s .

- 71 -

Re s ident i a l S e c tor S to r age for r e s ide n t i a l h e a t i ng . fue l inc lude s tankag e for s ing l e - f ami l y home s and mu l t i - fami l y dwe l l ings of up to four un i t s . S torage for l arge apartme nt bu i ld ings i s part of the comme rc i a l s ec tor . A s o f 1 9 8 3 , the l a te s t ava i l ab l e data , the 1 3 mi l l ion o i l ­ heated un i t s accounted for 1 5 pe rcent o f the tota l o c c up i e d U . S . hou s i ng s tock , accord ing to the Bureau o f the C e n s u s . O f the s e , 9 . 5 mi l l ion un i t s f a l l under the de f i n i t ion for the r e s ident i a l sector : o i l -h e a te d s in g l e - fami ly home s numb e r e d 7 . 9 mi l l i o n , and there were approx ima te ly 1 . 6 mi l l ion un i t s i n mu l t i - fam i l y s truc tur e s o f up t o four un i t s ( garden apartme nt s , two - fam i l y hou s e s , e tc . ) . The s in g l e - fami ly home s and sma l l mu l t i - fam i l y s tructu r e s a r e gene r a l l y h e a t e d with No . 2 o i l , n o t t h e r e s i du a l fue l o i l tha t wou l d b e u s e d i n the l arger apar tment bu i l d in g s d i s cu s s ed i n the s ec t ion o n the c ommerc i a l s ector . I n add i t io n , k e ro s i n e h e a t e d 3 2 7 , 0 0 0 s i n g l e - fam i l y hou s e s a n d sma l l mu l t i - f am i l y s truc­ tur e s . A further group o f r e s ident i a l hou s ing un i t s , pe rhap s a s many a s 3 mi l l i o n according t o DOE data , u s e d fue l o i l or ke ro s ine a s a s e c o ndary fue l . The share o f o i l-heated home s pe aked i n the 1 9 6 0 s . O i l h e at i s now u s ed pr ima r i l y in the Northe a s t , the o n l y r e g io n whe r e i t cont i nue s t o c apture a s i gni f ic a nt share o f the new home marke t . More th an ha l f o f the s i n g l e - f ami ly home s h e a t e d w i th fue l o i l and mo re than 8 0 percent o f the sma l l mu l t i - fam i l y un i t s h e a te d wi th fue l o i l are located in t h e Northe a s t . By c o n tr a s t , the kero s ine-heated un i t s are concentrated i n the South . The s i z e o f fue l t anks i n the re s ident i a l s ec tor var i e s from 5 5 -ga l l on drums mounted on outdoor s tand s to 2 , 0 0 0 - ga l l on under­ ground t anks . Mo s t home s , however , have tank s rang ing i n capa­ c i ty from 2 5 0 ga l l on s ( 2 7 5 g a l lons is a s t andard t ank s i z e for a s i ngle fami l y home ) to 8 0 0 ga l lons . I n the NPC ' s 1 9 8 4 repor t , r e s iden t i a l d i s t i l l at e i nvento r i e s for March 3 1 , 1 9 8 3 , we re e s t ima ted at 5 5 mi l l ion b a r re l s , or 5 5 percent o f the e x i s t i ng tank c apac ity o f 1 0 0 mi l l i o n b a r re l s . Th e e ar l i e r e s t ima te inc luded an ave r age t a nk s i z e o f 3 6 0 g a l ­ lon s . The e s t ima te s f o r March 3 1 , 1 9 8 8 , shown on T ab l e 3 6 , re f l e c t a s omewh a t l arger t ank s i z e ( 3 8 0 ga l l on s ) , w i th a h ighe r ut i l i z at ion ( 6 3 pe rcent ) b u t a sma l ler number o f o i l-he a te d un i t s and o i l s torage t anks . Tra n s portat ion S e c tor The tran s po r t a t i on te r t i ary s torage s e c tor i n c lude s f i xe d s torage f o r r a i lroads , bu s e s , truc k s , a i r c r a f t , mar ine u s e , tax i ­ c ab f l e e t s , and ren t a l c a r s . Add i t iona l ly , the d a t a pre s ented cove r on-board s tor age for the fue l consume d i n the s e veh i c l e s and private automob i l e s . F o r th i s s tudy , the p a y l o ad s torage

- 72 -

TABLE 3 6 RE S I DENT IAL SECTOR E S T I MATED S TORAGE CAPAC I TY AND I NVENTORY AS OF MARCH 3 1 , 1 9 8 8 ( M i l l ions o f Barre l s ) C apac i ty 1988 1983 100

D i s t i l l a te Fue l O i l / Kero s ine

S ourc e :

79

I nve ntory 1988 1983 55

50

NPC e s t ima te .

TABLE 3 7 T RANSPORTAT I ON S E C TOR E S T I MATED S TORAGE CAPAC I TY AND INVENTORY AS OF MARCH 3 1 , 1 9 8 8 (Mi l l io n s o f B a rre l s ) C a12 ac i ty 19 88 1983

I n ve n to r y 1988 1983

Subs ector Rai lroad Avi ation Mar ine Mar ine P l e a sure C r a f t Motor Veh i c l e F l e e t * Total

12 10 11 6 96

9.6 10 . 6 12 . 3 6.0 105 . 8

7 6 5 2 42

5.0 5.8 6.2 4.5 65 .6

134

144 . 3

61

87 . 1

75 10 44 5

82.3 10 . 6 44 . 2 7.2

30 6 23 2

52.3 5.8 25 . 4 3.6

134

144 . 3

61

87 . 1

Produc t Ga s o l in e Ke ro -Je t Fue l D ie s e l / Ke ro s ine Re s idua l Fue l O i l Tot a l *

Inc lud e s f i x e d and on -board s torage for bus e s , pr ivate veh i c l e s , t a x i c ab s , r e n t a l c a r s , and truck s .

- 73 -

c ap ac i ty o f veh i c l e s th a t transport petro l eum , s u c h a s tank truc k s , t ank c a r s , and barge s , is exc l uded bec au s e the s e are tr anspo r t a t i o n med i a and do not cons t i tute s torage for e nd-u s e by the t r an s po r t a t ion s e c tor . T ab le 3 7 s ummar i z e s s tor age c apac i t y and invento r i e s for e ach c omponent of the transportat ion s ec tor . A c omp ar i s o n w i th o f the 1 9 8 4 report s hows that the tran s po r t a t ion s e c to r ' s fue l s to rage c ap ac i ty and inve ntory h ave incre a s ed by about 7 - 8 percent . O n l y the r a i lroad indu s try showe d a d ec l i ne , but th i s wa s mo r e than o f f s e t b y i nc re a s e s acro s s the mo t o r veh i c l e f l e e t . I n par t i cu l a r , on-board s torage in c a r s and truck s , wh i c h was e s t ima ted to be 9 6 mi l l ion barre l s i n the 1 9 8 4 s tudy , i n c re a s ed to 1 0 6 mi l l i o n barre l s i n 1 9 8 8 . The incre a s e i s p r ima r i l y the re s u l t of a l ar g e r numb er of veh i c l e s , p ar t i c u l a r l y l i gh t truck s . The i nc re a s e i n s torage and i nventory c apac i ty o f the mo tor veh i c l e f l e e t roughl y par a l l e l s GNP growth dur i ng the 1 9 8 3 - 1 9 8 8 t ime frame .

- 74 -

Appendices

APPENDIX A STUDY REQUEST LETTER AND DESCRIPTION OF THE NATIONAL PETROLEUM COUNCIL

The Secretary of Energy Washington, DC 20585

Fe bru a ry 2 0 , 1 98 7

M r . R a l p h E . Ba i l ey C h a i rma n Nat i o n a l Pet r o l e u m C o u n c i l 1 6 2 5 K S t reet , N . W . Wa s h i n gt o n , D . C . 20006 D e a r M r . B a i l ey : T h e Nat i on a l Pe t ro l eum Cou n c i l h a s p r e p a red n u me r o u s s t u d i e s i n t he p a st o n t he n at i o n • s pet ro l eum i n ve n t o ry , s t o r a ge , a n d t ra n s po rt at i o n sy s t em s . T h e C ou n c i l • s l a s t compr e h e n s i v e s t udy o n t h i s s u bj e c t was c om p l et ed i n 1 97 9 . T h e p r i n c i p a l obj e c t i v e s o f t h at s t udy we re t o a n a l yze cu r rent i n v e nt o r i e s , e s t i ma t e mi n i m u m o p e r at i n g i n v e n t o ry l e v e l s , det e rm i ne t he t ot a l s t o r a ge c a p a c i ty o f t h e p r i ma ry pet ro l e u m d i s t r i b u t i on sy stem , a n d p r o v i d e de t a i l e d i n fo rmat i on on t he n a t i o n • s t ra n s po rt a t i on sy s t em fo r o i l a n d n at u ra l g a s . I n 1 984 , t h e C ou n c i l i s s ued a r e p o rt u p d at i n g a n d e x p a n d i n g t he i n v e n t o r i e s a n d s t o r a ge c a p a c i ty p o rt i o n s of t he 1 9 79 study . Th e s e s t u d i e s a re t he mo st c u r re n t , c omp r e h e n s i v e t re a tme n t o f pet ro l e um s t o r a g e a n d t ra n s po rt at i on t h a t a re av a i l a b l e fo r refe re n c e , wi t h s ome d a t a b e i n g nea r l y a d e c a de o l d a n d t he most rece n t f r om e a r l y 1 98 3 . S i n c e the re l ea s e of t h e s e s t u d i e s , t h e re h a v e been maj o r c h a n g e s i n t he p rod u ct i on a n d t r a n s po rt a t i o n o f c rude o i l a n d n a t u r a l ga s , r e f i n e ry o p e r at i o n s , pet r o l e u m p r o d u c t s d i st r i bu t i o n n etwo r k s , a n d t h e ma r k e t s t h ey s e rve . A c c o rd i n g l y , I am r e q u e s t i n g t h e C ou n c i l to u n de rt a k e a com p r e h e n s i ve n ew s t u dy on pet r o l eum i n v e n t o ry , s t o r a ge , a n d t ra n s po rt a t i on ca p a c i t i e s u pd at i n g t h e C ou n c i l 1 s ea r l i e r s t u d i e s a s n e c e s s a ry . Emp h a s i s s ho u l d be g i ven to t h e ree x am i n a t i on o f m i n i mum operat i n g i n v e n t o ry l e v e l s , t he l oc at i on of s t o r a g e f a c i l i t i e s a n d a v a i l a b i l i ty of i n v e n t o r i e s i n re l at i on t o l o c a l d em a n d , a n d t he ca p a b i l i t i e s of d i s t r i b u t i on netwo r k s to mo v e p ro d u c t s f r om re f i n i n g cen te rs t o t h e i r p o i n t o f c o n sumpt i on p a rt i c u l a r l y d u r i n g p e r i o d s o f s t re s s . F o r t h e pu r p o s e o f t h i s s t u dy , I de s i g n a t e D r . H . A . Me r k l e i n , Admi n i st r a t o r , E n e rgy I n fo rmat i on Admi n i s t r at i on , t o r e p r e s e n t me a n d to p r o v i d e t h e n e c e s s a ry c o o rd i n at i on betwe e n t h e De p a rtme n t o f E n e rgy a n d t he C o u n c i l .

You r s t ru l y ,

��

J o h n S . H e r r i n gt o n

A- 1

DESCRI PTION OF THE NATIONAL PETROLEUM COUNC I L

I n May 1 9 4 6 , th e Pr e s id e n t s ta te d tha t he had be e n i mp r e s s e d by the contr i b u t ion made th r ough gov e r nme n t/ i n d u s t r y coope r a t ion to the succ e s s of the Wor ld Wa r II pe t r o le u m p r og r am . He f e l t tha t th is c lo s e r e la t ionsh ip shou ld be cont inue d and s u gg e s te d tha t the Sec r e ta r y of the I n te r ior e s ta b l i s h an indu s t r y o r g an i z a t ion to p r ov i de adv i c e on o i l and g as ma t t e r s . Pu r s u a n t to th i s r e que s t , I n te r ior Sec r e ta r y J . A . K r u g e s ta b l i s hed th e Na t iona l Pe t r o leum Cou nc i l { N PC ) on Ju n e 1 8 , 1 9 4 6 . I n Oc tobe r 1 9 7 7 , t he D e p a r tme n t o f Ene r g y wa s e s ta b l i s he d a n d t h e Cou nc i l ' s f u nc t io n s we r e t r an s f e r r e d to t he new depa r tme n t . The so le pu r pose o f the NPC i s to adv i s e , i n fo r m , and ma k e r ecommendat ions t o t he Sec r e ta r y o f Ene r g y o n any ma t te r , r e que s te d by h im , r e la t i ng to pe t r o leum or th e pe t r o le u m i n d u s tr y . Ma t te r s that t he S ec r e t a r y wou ld l i ke to have c on s i de r ed by t h e Cou nc i l ar e s ubmi t te d a s a r e que s t i n th e for m o f a le tte r ou t l i n i ng the n a tu r e and scope o f t he s t udy . The Cou nc i l r e s e r ve s the r i gh t t o dec ide wh e th e r i t w i l l con s ide r any ma t te r r e fe r r e d to i t . Examp l e s o f r e c e nt ma j o r s tud i e s unde r t a k e n by the N PC a t the r e que s t of the Sec r e ta r y i nc lude : •

Re f i ne r y F l e x i b i l i ty

{1980)

•

Unc onv e n t iona l Gas Sou r c e s

•

Eme r gency P r e p a r e d ne s s for I n te r r up t io n o f Pe t r o le u m Impor t s i n to t he Un 1 ted S ta te s { 1 9 8 1 )

{1980)

•

u.s .

•

Env i r onme n ta l Con se r v a t ion -- The O i l & Ga s Ind u s t r i e s

•

Th i r d Wor ld Pe t r o leum Dev e lopme n t : A S t a teme n t o f Pr inc i p le s { 1982)

•

Pe t r o leum Inv e n to r i e s and S to r ag e Capac i t y

•

Enhanc ed O i l Rec ov e r y

•

The S t r a te g i c Pe t r o leum Re se r ve

•

u.s .

•

Fac tor s Af f ec t i ng u . s . O i l & Ga s Ou t loo k

•

I n te g r a t i ng R&D Ef for t s

Ar c t i c O i l & Gas

{1981) {1982)

{1983 , 1984)

{1984)

Pe t r o leum Re fi n i ng

{1984)

{1986 ) {1987)

{1988 } .

The N PC doe s not conc e r n i ts e l f w i th t r ade pr ac t i ce s , no r doe s i t eng ag e i n any o f the u s u a l tr ade a s soc i a t ion ac t iv i t i e s . The Cou nc i l is s u b j e c t to the p r ov i s ions of the Fe de r a l Adv i so r y Comm i t te e Ac t o f 1 9 7 2 . Membe r s o f th e Na t iona l Pe t r o leum Cou nc i l a r e appo i n te d by the S ec r e t a r y of Ene r gy and r epr e s e nt a l l s e g me n ts of pe t r o l e um i n te r e s t s . The N PC i s headed by a Cha i r man and a Vi c e Cha i r man , who a r e e l ec ted by the Cou nc i l . The Cou nc i l i s s uppo r ted e nt i r e ly by vo l u n ta r y con t r i b u t ions f r om i t s membe r s .

A- 2

NAT I ONAL PETRO LEUM COUNC I L

MEMBERSHI P 1989

ADAMS , Wi l l i am L . Cha i r man and Ch i e f Exec u t ive Of f i c e r Un i on Pac i f ic Re sou r ce s Company

BOWEN , W . J . Cha i r man o f t h e Boa r d Tr an sco Ene r g y Comp any

ALLEN , Jac k M . Cha i r man o f the Boa r d Alpar Re sou r c e s , I nc .

BRINK LEY , Dona ld R . Pr e s i d e n t and Ch ie f Exec u t ive Of f i c e r Co lon ial P ipe l i n e Company

AMES , Eug e ne L . , Jr . P r e s ide n t Venu s O i l Company

BURGUI ERES , Ph i l i p Cha i r ma n , Pr e s i de n t and Ch ie f Exec u t i v e Of f i c e r Came r on I r on Wo r k s , Inc .

AND ERSON , Robe r t 0 . Pr e s i de n t Hondo O i l & Ga s Company

BURK E , Fr an k M . , Jr . Cha i r man and Ch ie f Exec u t i v e Of f i c e r Bu r ke , May bo r n Company , Ltd .

ANG ELO , Er ne s t , Jr . Pe t r o leum Eng i ne e r Mid land , Te xas

CALDER , B r u c e Pr e s ide n t B r u c e Ca lde r , I nc .

BAI LEY , Ra lph E . Cha i r man o f the Boa r d and Ch ie f Exec u t i ve Of f i c e r Un i ted Me r id i an Co r po r a t ion

CARL , W i l l i am E . Pr e s ide n t C a r l Oi l & Ga s Co .

BAI RD , D . Euan Cha i r man , P r e s i de n t and Ch ie f Exec u t ive O f f i c e r Sch lumbe r g e r L im i ted

CARVER , John A . , Jr . Co l l eg e o f Law Un iv e r s i ty of De n v e r

BARNES , Jame s E . Pr e s i de n t and Ch ie f Exec u t i ve O f f i c e r MAPCO I nc .

CASH , R . D . Cha i r man , Pr e s i d e n t and Ch i e f Execu t ive O f f i c e r Que s ta r Cor po r a t ion

BASS , S i d R . Pr e s i de n t B a s s Br o th e r s En te r p r i s e s , I nc .

CHAND LER , Co l l i s P . , J r . P r e s id e n t Chand l e r & As soc i a te s , I nc .

B LACK BU RN , Char l e s L . Cha i r man , Pr e s i de n t and Ch i e f Execu t ive O f f i c e r Ma xu s Ene r gy Cor por a t ion

CHENAULT , Jame s E . , J r . Vi c e Cha i r man o f the Boa r d Lone S ta r S te e l Company

A- 3

C HR I SMAN , Ne i l D . Sen ior Vi ce Pr e s i d e n t Mor g an Gu a r a n ty Tr u st Company of New Yor k

DORN , Dav i d F . Pr e s ident For e s t O i l Cor por a t ion EMI SON , Jame s W . Pr e s ide n t We s te r n Pe t r o leum Company

CONK LI N , Danny H . P a r tner Ph i lcon Dev e lopme n t Co . C OOK , Lod wr i c k M . Cha i r man o f the Boa r d and Ch i e f E x e cu t ive O f f i c e r At lan t i c Rich f i e ld Company

ERICK SON , Rona ld A . Cha i r man o f the Exe c u t iv e Comm i t te e Er i c k so n Pe t r o le u m Cor po r a t ion

CO PELAND , Mar k G . Par tne r Cope land , Landye , Benne t t and Wo l f

EVANS , F r e d H . P r e s i de n t Equ i t y O i l Company FARRELL , J . M i chae l P a r tne r Man a t t , Phe lp s , Ro t h e n be r g & Ev ans

COPU LO S , Mi l ton P r e s i de n t Na t iona l De f e n s e Cou nc i l Fou nd a t i on

F I SHER , Wi l l i am L . D i r ec to r B u r e au o f Econom i c Geo log y Un iv e r s i ty o f Te xas a t Au s t i n

COU RSON , Ha r o ld D . Pr e s i dent Cou r son Oil & Ga s , I nc . COX , Edw i n L . Cha ir man Cox O i l & Gas , I nc .

GARY , Jame s F . I n te r na t iona l B u s i ne s s and Ene r g y Adv i s o r Hono lu l u , Hawa i i

C RU IK SHANK , Thoma s H . P r e s i de n t and Ch ie f Exec u t ive Of f i c e r Ha l l i b u r ton Comp any

G LANV I LLE , Jame s W . Gene r a l Par tne r La z a r d Fr e r e s & Co .

DERR , Kenne th T . C ha i r man of the Boa rd and Ch i e f Exec u t i ve Of f i c e r Chev r on Cor po r a t i on

G LASSER , Jame s J . Cha i r man and Pr e s i d e n t GATX Cor por a t ion

D I ETLER , Cor t land t S . Cha i r man and Ch ie f Exec u t ive Of f i c e r As soc i a ted Na tu r a l Ga s Cor por a t ion

GON ZALE Z , R i c h a r d J . Ene r gy Ec onom i c Con s u l tan t Au s t i n , Texa s GOTTWALD , F . D . , Jr . Cha i r man o f t h e Boa r d , Ch ie f Exec u t ive Of f i c e r and Cha i r man o f t he E xe c u t ive Comm i t te e Ethyl Co r po r a t ion

DONAHUE , Al i ce C . I n te r na t iona l Pr e s i de n t Gene r a l Fede r a t i on o f Wome n • s Club s

A- 4

GUNN , Ro be r t D . Cha i r man o f the Boa r d Gunn O i l Company

HES S , Leon Cha i r man of the Boa r d and Ch i e f Execu t ive O f f i c e r Ame r ada He s s Co r por a t ion

HALBOU TY , M i c he l T . Cha i r man o f th e Boa rd and Ch i e f Exec u t ive O f f i c e r Miche l T . Ha l bou ty Ene r g y Co .

HOBBS , Ma r c ia Wi l son Commu n i t y Le ade r Los Ang e le s , Ca l i for n i a

HALL , John R . Cha i r man and Ch ie f Exec u t i ve O f f i c e r Ash l and O i l , I nc .

HOWSON , Ro be r t E . Cha i r man o f the Boa r d and Ch i e f Exec u t ive Of f i c e r Mc Der mo t t I n te r na t ional I nc .

HALL , Rona ld E . Pr e s i d e n t and Ch i e f Exec u t i ve O f f i c e r C I TGO Pe t r o l eum Co r po r a t ion

BU FF I N G TON , Roy M . Cha i r man o f t h e Boa r d and Ch i e f Exec u t i v e Of f i c e r Roy M . Bu f f ing ton , I n c .

HAMI LTON , Fr e de r ic C . Cha i r man , Ch i e f Execu t ive O f f i c e r and P r e s id e n t Ham i l ton O i l Co r po r a t ion HAMM E R , Ar mand Cha i r man of the Boa r d and Ch ie f Exec u t ive O f f i c e r Occ i de n ta l Pe t r o l e um Co r po r a t i on HAUN , Joh n D . Cha i r man o f the Boa r d Bar low & Hau n , I nc .

HUNSUCKER , Ro be r t D . Cha i r man , Pr e s i d e n t and Ch ie f Exec u t ive Of f i c e r Panh and le Ea s te r n Co r po r a t ion HUNT , Ray L . Cha i r man o f t h e Boa r d Hunt O i l Company JOHNSON , A . C l a r k Cha i r man and Ch i e f Exec u t ive Of f i c e r Un i on Texas Pe t r o l e um Cor por a t io n

HAUPTFUHRER , Robe r t P . Cha i r man and Ch ie f Exec u t i ve Of f i c e r S u n Explo r a t i on and Prod uc t ion Company

JONES , A . V . , J r . Par tner Jone s Company JON ES , Jon R"" x P a r tne r Jone s Company

HEFNER , Raymond H . , J r . Cha i r man and Ch i e f Exec u t ive Of f i c e r Bonr ay Ene r gy Co r po r a t ion

KEPLINGER , H . F . Pr e s ide n t and Cha i r man of the Boa r d Kep l i ng e r Ho ld i ng s , Ltd .

HEMM INGHAU S , Rog e r R . Cha i r man and Ch i e f Exec u t i ve Of f i c e r D i amond Shamr oc k R&M , I nc . HEND RIX , De nn is R . Pr e s i de nt and Ch ie f Exec u t ive Of f i c e r Te xas Ea s te r n Co r po r a t ion

KETELS EN , Jame s L . Cha i r man and Ch i e f Exec u t i v e O f f i c e r Tenneco I nc .

A- 5

K INN EAR , Jame s W . P r e s i d e n t and Ch i e f Exec u t ive Of f i c e r Te xaco I n c .

MAGU I RE , Ca r y M . Pr e s i de n t Mag u i r e O i l Company MAY ER , Fr e d e r i c k R . Cha i r man o f the Boa r d Ca za Dr i l l ing & Exp lor a t ion Compan i e s

KOC H , Cha r le s G . Cha i r man and Ch ie f Exec u t ive Off i c e r Koch Indu s tr i e s , I nc .

ME ID INGER , Judy Cha i r man of the Boa r d Kon i ag , I nc .

KUEHN , Ron a ld L . , Jr . Cha i r man , P r e s i de nt and Ch ie f Exec u t ive Of f i c e r Sonat Inc .

M I LLER , C . Joh n P a r tner Mi lle r Ene r g y Comp any

LAY , Kenne th L . Cha i r man o f the Boa rd and Ch ie f Exec u t i ve Of f i c e r En r on Co r p .

M I SBRENER , Jo seph M . Pr e s i de n t O i l , Chem i c a l & Atom i c Wo r k e r s I n te r n a t i on a l Un ion , AFL-C IO

LI CHTBLAU , Joh n H . Pr e s ident Pe t r o leum Indu s t r y Re s e a r c h Fou nda t i on , I nc .

M I TCHELL , Geo r g e P . Cha i r ma n , Ch i e f E x e c u t ive O f f i c e r and Pr e s ide n t M i tc he l l Ene r gy and Dev e lopme n t Cor por a t ion

LI EDTK E , J . Hug h Cha i r man o f the Boa r d Penn zo i l Company

MOFFETT , Jame s R . Cha i r man o f the Boa r d and Ch i e f Execu t ive O f f i c e r Fr e e por t -McMoRan Inc .

McC LEMENTS , Robe r t , Jr . Cha i r man o f th e Boa r d and Ch i e f Execu t ive O f f i c e r S un Company , I nc .

MORROW , R i c h a r d M . Cha i r man o f the Boa r d Amoco Co r po r a t ion

Mac DONALD , Pe ter Cha i r man The Nav a j o Tr i b a l Cou nc i l Mc FARLAND , Lee C . Cha i r man o f the Boa rd Mc Far l and Ene r gy , I nc .

MUNRO , Joh n Thoma s Pr e s i d e n t Munr o Pe t r o le u m & Te r m i n a l Co r po r a t ion

McNU TT , Jac k W . Pr e s i de n t and Ch ie f Exec u t ive Off i c e r Mu r p hy O i l Co r po r a t i on

MURPHY , Joh n J . Cha i r man , P r e s i d e n t and Ch ie f Exec u t ive Of f i c e r Dr e s s e r Indu s t r ie s , I n c .

Mc PHERSON , Fr an k A . Cha i r man and Ch ie f Exec u t ive Off i c e r K e r r -Mc Gee Co r po r a t ion

MURRAY , Allen E . Cha i r man o f the Boa rd , Pr e s ide n t and Ch i e f E xe c u t ive O f f i c e r Mob i l Co r por a t ion

A- 6

NI CAND RO S , Con s ta n t i n e S . P r e s i d e n t and Ch ie f Exec u t ive Off i c e r Conoco I nc .

RAWL , Lawr e nc e G . Cha i r man o f t h e Boa r d and Ch ie f Exec u t i ve Of f i c e r E xxon Co r po r a t ion

NO BLE , S amue l R . Cha i r man o f the Boa r d No ble Af f i l i a te s

REED , Ro be r t G . I I I Cha i r man o f the Boa r d , Pr e s i d e n t a n d Ch ie f Exec u t ive Of f i c e r Pac i f ic Re sou r ce s , I n c .

O ' CONNOR , Raymond J . Vi c e Pr e s ide n t C i t iban k , N . A .

RICHARD SON , Fr an k H . Pr e s ide n t and Ch ie f Exec u t ive Of f i c e r She l l O i l Comp a ny

PACK ER , Wi ll i am B . , Sr . Cha i r man of the Boa r d Seav iew Pe t r o leum Company PALMER , C . R . Cha i r man o f th e Boa r d , Pr e s ide n t and Ch i e f Execu t i ve O f f i c e r Rowa n Compan i e s , I nc . PARKER , Robe r t L . Cha i r man o f the Boa rd and Ch ie f Execu t ive O f f i c e r Par k e r Dr i ll i ng Company

RO SENBERG , He n r y A . , Jr . Cha i r man o f the Boa r d and Ch i e f Exec u t ive Of f i c e r C r own Ce n t r a l Pe t r o l e um Cor por a t ion RO SS , Jame s H . P r e s i d e n t and Ch ie f Exec u t ive Of f i c e r B P Ame r i ca I nc .

PERRY , Kenne th W . Vi ce Cha i r man o f the Boa r d Amer i c an Pe t r o f i n a , I nc o r po r a ted

S I LAS , C . J . Cha i r man o f the Boa rd and Ch i e f E xe c u t ive O f f i c e r Ph i l l i p s Pe t r o leum Company

PETTY , Trav is H . Vice Cha i r man Bur l i ng ton Re so u r c e s Inc .

S IMMONS , Don a ld M . P r e s i de n t S immon s Roy a l t y Company

P ICKENS , T . Boone , Jr . Gene r a l Par tne r Me sa L i m i ted P a r tn e r sh ip

S LAWSON , Dona ld C . Cha i r ma n o f t h e Boa r d and Pr e s i d e n t S l aw so n Compan i e s

P I TTS , L . Fr a n k Owner P i t t s Ene r gy Group

SMI TH , C l a i r S . , Jr . Sm i t h En te r p r i s e s Sh r evepo r t , Lou i s i an a

P LANK , Raymond Cha i r man and Ch ie f Exec u t i ve Of f i c e r Apache Co r po r a t i on

SM I TH , We ldon H . Cha i r ma n o f t h e Boa r d B i g 6 D r i l l i ng Company

PRU ET , Che s ley R . Pr e s i de n t P r u e t Dr i l l i ng Company

SMI TH , W i l l i am T . Cha i r man Wo lve r i ne Exp lor a t io n Company

A- 7

SOREN SEN , Ar lo G . Pre s ident M . H . Wh i t t i e r Cor por a t ion

WEST , Ro be r t V . , J r . Cha i r man o f t h e Boa r d Te so r o Pe t r o le u m Co r po r a t ion

STEG EME I ER , R i c h a r d J . P r e s i de n t and Ch i e f Exec u t ive Off i c e r Unocal Co r po r a t i on

W I LLIAMS , Jo s eph H . Cha i r man o f t h e Boa r d and Ch i e f Exec u t ive O f f i c e r The Wi l l i ams Compan i e s , Inc .

ST EWARD , H . Le i g h to n Cha i r man , P r e s i de nt and Ch i e f Exec u t ive Of f i c e r The Lou i s i ana Land and Exp lor a t io n Company

W I SCHER , I r e ne S . Pr e s ide n t and Ch i e f Exec u t ive Of f i c e r Panhand le P r oduc i ng Comp any WOOD S , Da l ton J . Pres ident Da lwood Co r po r a t io n

SWALES , W i l l i am E . Vi c e Cha i r man - Ene r gy U SX Co r po r a t ion TRU E , H . A . , J r . P a r tner Tr ue Oil Company

WOODS , Jame s D . P r e s id e n t and Ch i e f Exec u t i v e Of f i c e r B a k e r Hu g he s I nc o r po r a te d

VETTER , Edwa rd 0 . P r e s ide n t Edwa r d 0 . Ve t te r & As soc i a te s , I nc .

ZARROW , He nr y Pr e s ident Soone r P i pe & S upp ly Cor po r a t ion

WARD , L . 0 . Owner - P r e s i de n t Wa r d Pe t r o leum Cor por a t ion

ZEPPA , Kea t i ng V . Cha i r man De ltaUS Cor por a t ion

A- 8

APPENDIX B

STUDY GROUP ROSTERS

NAT I ONAL PETROLEUM COUNC I L COMM I TTEE ON PETRO LEUM STORAGE & TRAN S PORTATI O N

C HAI RMAN

GOVE RNMEN T COC HAI RMAN

Wi l l i am E . Swa l e s V i c e Cha i r man - Ene r g y U SX Cor por a t ion

H . A . Me r k le i n Admi n i s t r a tor En e r gy I n fo r ma t ion Adm i n i s t r a t ion u . s . Dep a r tme n t of Ene r g y

EX OFF I C IO

EX OFF I C IO

Edw in L . Cox Cha i r man Na t iona l Pe t r o leum Cou nc i l

Lodwr ic k M . Coo k Vi ce Cha i r man Na t iona l Pe t r o leum Co u nc i l SECRETARY

Ma r s ha ll w . N i ch o l s Exec u t ive D i r ec tor Na t iona l Pe t r o leum Cou nc i l

*

*

w.

J . Bowe n Cha ir man o f the Boa r d T r an sco Ene r gy Comp any

*

Ke nne th L . Lay Cha i r man o f the Boa r d and Ch i e f Exec u t ive Of f i c e r En r on Co r p .

Rona ld A . Er i c k son Cha i r man o f the Exec u t i ve Comm i t te e Er i c k son Pe t r o l eum Co r po r at i on

Joh n H . L i ch tb lau Pr e s i d e n t Pe t r o leum Indu s t r y Re se a r c h Fou nda t i on , Inc .

Joh n R . Ha ll Cha i r man and Ch ie f Exec u t ive Of f i c e r Ash l and O i l , I n c .

Ro be r t Mc Cl eme n t s , J r . Cha i r man o f the Boa r d and Ch i e f Exec u t i v e Of f i c e r Sun Company , I nc .

Rona ld E . Ha ll Pr e s i d e n t and Ch i e f Exec u t i v e Of f i c e r C I TGO Pe t r o l e um Cor po r a t i on

Richa r d M . Mor r ow Cha i r man o f the Boa r d Amoc o Co r po r a t ion

B- 1

COMM I TTEE ON PET RO LEUM STORAGE & TRAN S PORTAT I O N c . J . S i la s Cha i r man o f t he Boa rd and Ch i e f Execu t ive O f f i c e r Ph i l l i p s Pe t r o leum Company

Al l e n E . Mu r r ay Cha i r man o f the Boa r d , Pr e s ide n t and Ch i e f Execu t ive O f f i c e r Mo b i l Cor por a t io n Robe r t G . Re ed I I I Cha i r man o f the Boa r d , Pr e s i dent and Ch ie f Exec u t ive Of f i c e r Pac i f i c Re sou r ce s , Inc .

R i c ha r d J . S te g e me i e r Pr e s ide n t and Ch i e f Exec u t ive Of f i c e r Unocal Co r po r a t ion

Jo s e ph H . Wi l l i ams Cha i r man o f the Boa r d and Ch ie f Exec u t ive Of f i c e r The Wi l l i ams Compan i e s , I nc .

B- 2

NAT IONAL PETROLEUM COUNC I L C OORD I NAT I NG SUB C OMM I TTEE O F THE C OMM I TTEE ON P ETROLEUM S TORAGE & TRAN S PO RTAT I ON

CHA I RMAN

GOVERNMENT C OCHA I RMAN

R. N . Yamm i n e Pres ident Em r o Ma r k e t i n g C omp a n y

J i mm i e L . Pe t e r s e n , D i r e c to r O f f ice o f O i l and Gas E n e r g y I n fo r ma t i o n Adm i n i s t r a t i on u . s . D e p a r tme n t o f E n e r g y

AS S I S TANT TO TH E CHAI RMAN

S EC RE TARY

c . M . Pa lme r , M a n a g e r C r ud e O i l S c h e d ul i n g Ma r a th o n P e t r o l e um Comp a n y

John H . Guy , I V De p u t y E x e c u t i v e D i r e c t o r Na t i o n a l P e t r o l e um C o u n c i l

*

Ro n a l d J . B e r t u s Vi c e P r e s i d e n t S u pply a n d T r a n s po r t a t i o n S h e l l Re f i n i n g a n d Ma r k e t i n g Comp a ny

*

*

D . R . H a yw a r d Vice Pres iden t u . s . S upp l y Ma r k e t i n g & Re f i n i n g D i v i s ion - u . s . Mo b i l O i l C o r po r a t i o n

Ron a l d J . B u r n s Pres ident I n te r s t a t e P i p e l i n e s G a s P i pe l i n e G r o u p Enron Corp .

Ro be r t B . K e i fe r , J r . G r oup V i c e P r e s i d e n t S upply a n d T r a n s po r t a t i on A s h l a n d P e t r o l e um Comp a ny

S t e ph e n L . C r op pe r , P r e s id e n t W i l l i am s P i pe L i n e Comp a n y

Rod g e r W . M u r t a ug h Vice Pr e s ident Ope r a t i o n s P la n n i n g a nd Tr an spo r t a t i o n Amo c o O i l Comp a n y

John P . De sB a r r e s , P r e s i d e n t S an t a F e P a c i f i c P i p e l i n e s , I n c . Br uce D . F ro l ich V i c e P r e s id e n t S u pply & D i s t r i b u t i o n Ch e v r o n U . S . A . I n c .

Ro be r t P . Ne u s c h e l D i r e c t o r , Tr a n spo r t a t i o n Ce n t e r No r th we s t e r n U n i v e r s i ty

B- 3

COORD I NATI NG SUBCOMMITTEE

W i l l i am M . O l le r E xe c u t i ve V i c e P r e s ident Tex a s E a s te r n P r o d u c t s P i pel i n e C omp any

J . E . S h am a s P r e s i d en t Te x a c o T r a d i n g and T r a n s po r t a t i o n I n c .

L . E . Scott V i c e P r e s i d en t C r ude S u pply and T r a n s po r t a t i o n U n o c a l Ref i n i n g a n d Ma r ket i n g D i v i s ion Un o c a l C o r po r a t i o n

Ray G . S te i ner V i c e P r e s i d en t S u pp l y and T r a n s po r t a t i o n Ph i l l i p s 6 6 C omp any

\

B- 4

NAT I ONAL PETROLEUM COUNC I L I NVEN TOR I E S AND S TORAGE TAS K G ROUP O F THE C OMM I TTEE ON P E TROLEUM S TO RAGE & TRAN S P O RTA T I ON

CHAI RMAN

G OVERNME N T C OCHA I RMAN

Br uce D . Frol i c h Vice Pres ident S u pp l y a n d D i s t r i b u t i o n Ch e v r o n U . S . A . I n c .

J am e s M . D i e h l , C h i e f F ue l s An a l y s i s B r a n c h P e t r o l e um S up p l y D i v i s i o n En e r g y I n fo r ma t i o n Adm i n i s t r a t i o n u . s . D e p a r tme n t o f En e r g y

A S S I S TANT TO THE C HA I RMAN

S ECRETARY

J o s eph c . Lod g e Ma n a g e r - - P l a n n i ng We s t e r n Re g i on Supp ly a n d D i s t r i bu t i o n Ch e v r o n U . S . A . I n c . *

B e n j am i n A . O l i v e r , J r . C omm i t t e e C oo r d i n a t o r N a t i o n a l P e t r o l e um Co u n c i l

*

*

Ja y H . B e r n s t e i n E x e c u t i v e V i c e P r e s id e n t No r th v i l l e I n d u s t r i e s Co r po r a t i o n

Joh n A . H am i l t o n Vice Pres ident S upply a n d Wh o l e s a l e D i s t r i b u t i o n Ag w a y Pe t r o l e um Co r po r a t i o n

K e n n e th A . B e t t s Man a g e r , Ma r k e t i n g Re s e a r ch Te x a s E a s t e r n P r od u c t s P ip e l i n e Comp a n y

E t h e l Ho r nb e c k , D i r e c t o r Econom i c s & S t a t i s t i c s Pe t r o l e um Ma r k e t e r s A s s o c i a t i o n o f Ame r i c a

Do n a l d M . C r a n n , M a n ag e r Bus i ne s s S tud i e s U . S . Ma r k e t i n g & Re f i n i n g P la n n i n g Mob i l O i l Co r po r a t i o n

Gary R . Kaneb V i c e Pr e s id e n t C a t amo u n t P e t r o l e um Co r po r a t i o n Ed wa r d N . K r ap e l s , P r e s i d e n t En e r g y S e c u r i ty An a l y s i s

Ke nn e t h A . Do y l e E x e c ut i v e D i r e c t o r Soc i e ty o f I n d epe nd e n t Ga s o l i n e Ma r k e t e r s o f Ame r ic a

Robe r t H . Ma t h e r s , J r . D i r e ctor o f P lann i ng and Ma r k e t i n g GATX Te r m i n a l s C o r p o r a t i o n

La w r e n c e J . Go ld s t e i n Exe c u t i v e V i c e P r e s i d e n t Pe t r o l e um I n d u s t r y Re s e a r c h Fo und a t i o n , I n c .

Howa r d A . M u e l l e r , J r . Te c h n i c a l Ma n a g e r F u e l s a n d Ope r a t i o n s P l a n n i ng Plann i n g and E v a l u a t ion D i v i s ion E le c t r i c Powe r Re s e a r c h I n s t i t u t e

B- 5

I NVENTORIES AND STORAGE TASK GROUP

D.

M.

P r e n ow i t z ,

Ind us t r y Sh e l l

H umb e r t o Va i n i e r i ,

M an a g e r

I n fo r ma t i o n

&

Execut ive

An a l y s i s

BP

O i l Comp any

Ame r i c a

Ph i l i p K . Jo h n P r o k op , I n d epend e n t

V i s i t ing

Pr e s id e n t L i qu id

Th e

Te r m i n a l s

D i r ec tor

Of f ic e Inc .

Ve r l e g e r ,

Jr .

F e l low

I n s t i tu t e

of

Internat ional

Eco nom i c s

A s so c i a t i o n

S PEC I AL AS S I S TANTS Jo n a t h a n A .

Col in M .

N.

C h an i s

En e r g y An a l ys t N e w Yo r k Me r c a n t i l e

E x c h a ng e

K i e r n an

Sen ior

K i r k e nd a l l

Ro b e r t L e v i n , Re s e a r c h

of

S e c u r i t y An a l y s i s

D.

Shage s

Pe t r o l e um Re s e r v e s U . S . De p a r tme n t o f

Ch e r y l

Ene r gy

Dav i d

Econom i s t

Paul a E . McCo l lo c h ,

Data

O f f i c e O f E n e r g y Eme r g e n c i e s En e r g y Eme r g e n c y P l an s and

u.s.

of

Ene r g y

Re s e a r c h Re s e a r c h

We i r

S y s t em s

and

S uppo r t B r a n c h

P e t r o l e um Ma r k e t i ng E n e r g y I n fo r ma t i o n

I n teg r a t ion D e p a r tme n t

T e am

Tr e n c h of

Pe t r o l e um I nd u s t r y Fo und a t i o n , I n c .

D ep a r tme n t E x c h a ng e

J.

D i r e c to r

D i r e c to r

N e w Yo r k Me r c a n t i le L.

P lann i ng

P l an n i n g a n d F i n a n c i a l Ma n ag eme n t

Ma t h e ma t i c a l

D e p a r tme n t

En e r g y

D i r e c to r ,

S t a t i s t ic i an En e r g y I n fo r ma t i o n Ad m i n i s t r a t i o n U.S.

Me l l e n

An a l y s t

J o hn

S t a f f E c o n om i c S p e c i a l i s t S h e l l O i l Comp a n y Nancy J .

Fo s t e r

Sen ior

D i v i s ion

Adm i n i s t r a t i o n U.S.

Ene r gy

B- 6

D ep a r tme n t

of

Ene r g y

APPENDIX C PRIMARY DISTRIBUTION SYSTEM SURVEY METHODOLOGY

AP PEND I X C PRIMARY D I S TRIBUTION SYSTEM SURVEY METHODOLOGY

OBJECT IVE The N a t ion a l P e t r o l eum Counc i l ' s ( NPC ) " 1 9 8 8 S u rvey o f Petro l eum I nve ntor i e s and S to rage C apac i t i e s i n the U n i t e d S t a te s " wa s de s i gned to determine : •

How much o f the U . S . petro l eum i nve ntory i s requ ired for norma l ope r at i on of the p r imary p e t ro l eum d i s tr ibu­ tion sys tem and is the re fore no t ava i l ab l e for de l ivery to c o n s ume r s

•

The tota l pr imary s torage c apac i ty and tankage u t i l i z a t i on

•

The impact ( i f any ) o f pe tro l eum future s , o p t i on s , and c a sh forward mark e t s on inve ntory manageme n t and s e l e c t e d o ther oper a t i ng dec i s ions

•

Th e imp a c t ( i f any ) th at the e x i s te n c e o f the S t r a t e g i c P e t ro leum Re s e rve ( S P R ) has on t h e l eve l o f inventor i e s h e l d i n the pr ivate s e c tor

•

The e f fe c t ivene s s o f the Departme n t o f E n e r gy ' s p l a n for u s e o f the S P R in s tre s s s i tu a t i o n s

•

To prov ide b a s e data for ove r a l l s to rage and d i s tr ibut ion s y s tem s t re s s analy s e s .

( DOE )

SCOPE OF THE SURVEY Data for c rude o i l and certa in re fined produc t s ( motor g a s o ­ l i ne , k e ro s i ne - type j e t fue l , d i s t i l l a te fue l o i l , a n d r e s i du a l fue l o i l ) we re reque s ted . To better de f i ne the s e a s o n a l change i n i nventor i e s and to re flec t s e a sona l s h i f t s i n tank uti l i z a t ion , two repo r t i n g d a t e s , September 3 0 , 1 9 8 7 , and March 3 1 , 1 9 8 8 , we re cho s e n for the r e ­ f i n e d produc ts - - d a t e s t h a t provided the NPC w i th a c on s i s tent ser i e s for h i s to r i c a l compar i s on s . Only one repo r t ing d a t e , March 3 1 , 1 9 8 8 , wa s s e l ec ted for c rud e o i l b e c au s e o f i t s re l a t ive lack o f s e a sona l i ty . The s urvey covered the 5 0 s ta te s , the D i s t r i c t o f C o l umb i a , and a l l for e i gn tr ade z on e s , but e x c l uded a l l U . S . te r r i t or i e s and po s s e s s ions .

C-1

I n format i on o n petro l eum future s , opt i o n s , c a s h f o rward market s , and the S P R wa s reque s ted in order to provide the NPC with the nece s s a ry data to make qua l i f i e d j udgment s o n the imp a c t o f the s e e l eme n t s o n indu s try ' s phy s i c a l i nve ntory l eve l . The r e l evant que s t ionn a i r e s i n the s urvey c o n form with E ne rgy I n forma t i on Admin i s tr a t ion ( E IA ) product d e f i n i t io n s , w i th the e xc e p t i o n o f th at for mo tor g a s o l i ne . For mo tor g a s o l i ne , r e s ponde n t s to the survey we re a s ked to aggr e g a t e f i n i shed l eaded g a s o l ine , f i n i shed un l e aded g a s o l ine , and mo tor g a s o l i n e b l e nd i n g c ompone n t s . ( S e e pro duc t de f i n i t ions i n App e nd i x M . ) DESCRI P T I ON OF QUE S T I ONNAIRE S The inventory i n forma tion wa s reque s te d by P e tro l eum Adm i n ­ i s trat ion f o r D e f e n s e D i s tr i c t ( PADD ) , w i th PADD I s ubd ivided i nto three p a r t s : New E ng l and ( I X ) , Centr a l At l an t i c ( I Y ) , and Lowe r At l an t i c ( I Z ) s t a t e s . The e s t imate s o f the r e s ponde n t s ' min imum and max imum ope r a t i ng invento r i e s and r e l a ted que s t i on s we r e requ e s ted b y broad ge ogr aph i c region , i . e . , PAD D s I - I V aggregated a n d PADD V . The que s t ionna i r e s addre s s ing s a l i e nt i nv e n to ry and s tor age s t a t i s ti c s we r e s im i l ar to tho s e u s ed in the 1 9 8 3 NPC s urvey , w i th the fo l lowing except ions : •

K e ro s ine wa s e l iminated because i t s vo l ume was con­ s idered i n s i gn i f icant .

•

N aphtha- j e t fue l wa s e l im i nated on the adv i c e o f the DOE th a t th e in format i on cont a i ned i n the 1 9 8 3 s u rvey wa s s t i l l adequate for i t s purpo s e s .

•

Th e d i f fe r e n t i a t ion betwe en environmen t a l l y r e s t r i c ted id l e t ankage and other i d l e t ank age was e l im i n a t ed due to the inh e r ent d i f f i c u l ty i n many s i tua t i on s to p i n ­ po int the r e a s on for tankage t o be i d l e .

•

" Ch ange s in s tock leve l due to s p a r e r e f i n ing c apac i ty " was e l imin ated due to the s i gn i f i c an t e r o s ion o f s pare c apac i ty b e twee n the two s urve y s .

The que s t i onna i r e s on the S P R and the petro l e um futur e s and other forward marke t s we re s i gn i f i c an t l y revampe d and expanded from the 1 9 8 3 surve y s . For example , the future s que s t ionn a i r e wa s expanded t o take account o f the marke t s ' i n c re a s ed s oph i s t i ­ c at i on , part i c ipation , and accep tance . Tho s e ho ld ing pr imary inve ntory we re a s ked to : •

Subm i t i nventory i n forma t i o n on crude o i l and the re f ined produc t s ( i nc lud ing de t a i l ed i n format ion on unava i l a b l e i nventor ie s both i n tankage [ e . g . , tank bo ttom s ] and out s ide of t ankage [ e . g . , p ipe l i n e f i l l ] )

C- 2

•

E s t imate the i r min imum and max imum ope r a t ing inven­ tor i e s

•

Repor t the amoun t by wh ich the i r invento r i e s exce eded e s t imated min imum ope rat ing inve n tor i e s and wh a t por­ t i on of that amount wa s s e a s o n a l inventory , i nve ntory he ld i n ant ic ipation of p l anned maintenance , and o th e r ope r a t i n g i nventory

•

P rovide the fo l lowing data on t ankage : S he l l c apac ity o f tank age i n op e r a t i o n T h e de s ign capac i ty o f tankage th at wa s i d l e o n March 3 1 , 1 9 8 8 - - f o r r e a s o n s o ther t h a n pro­ gramme d ma i n tenance with p l ans for immed i a te r e turn to s e rvice -- but that cou ld be ava i l a b l e f o r s e rvice with in 9 0 d a y s T ankage under c on s truc t i on .

P r imary inventory r e s ponde n t s who an a l y z e indus t r y i nventory leve l s we re a s ked to provide e s t imate s o f m i n imum and max imum operat ing inve nto r i e s for crude o i l and the s urveye d p e t r o l e um produc ts for PADDs I - IV , PADD V , and the t o t a l U n i te d S ta te s . The S trateg i c P e t ro l eum Re s e rve Que s t i onn a i re reque s ted spec i f ic data on the r e s pondent c ompany and i t s geograph i c a r e a of ope ration , th e impac t o f t h e SPR o n t h e r e s ponde n t ' s l e ve l o f inventory , a n d t h e r e s pondent ' s views on t h e DOE ' s S tr a te g i c Petro l eum Re s e rve Drawdown P l an . The P e t ro l eum Future s and O ther Forward Mark e t s Que s t i on­ na ire re que s ted data on the r e s pondent ' s par t i c ipa t ion i n the s e mark e t s and the impac t o f the s e ma rke t s on the re spondent ' s phy s i c a l l eve l o f i nventory . RE SPONDENTS TO THE SURVEY The s urvey wa s s en t to re f ine r s , bu l k termina l ope r ator s , produc t p i pe l ine ope rato r s , and ho lde r s o f crude o i l s to c k s who we re requ i red to f i l e E IA Forms 8 1 0 , 8 1 1 , 8 1 2 , and 8 1 3 a s o f Sep tember 1 9 8 7 and March 1 9 8 8 . Al though the E IA r e c e ive s d a t a from e a c h un i t o f a company , t h e N P C co l l ec te d i n forma t i o n on a company-wide ba s i s , a s k ing tha t each comp any c on s o l ida te i n to a s i ngle repo r t a l l o f the data that i t s un i t s repo r t e d s epa­ rate l y to the E IA . D I S TRIBUT I ON AND RECE I PT OF QUE S T I ONNAI RE S The que s t ionna i r e s we re ma i l ed b y the NP C o n March 1 7 , 1 9 8 8 , to the 3 8 1 compan i e s in the pr imary d i s tr ibut ion s y s tem . The indepe ndent pub l i c a c c ount ing f i rm of De l o i t t e H a s k i n s & S e l l s

C- 3

wa s contr acted by the NPC to rece ive and t abu l a t e the s urvey r e s po n s e s . D e l o i tte H a s k i n s & S e l l s tabu l a te d a l l r e s po n s e s rece ived through D e c embe r 2 2 , 1 9 8 8 , and tran smi t t e d the aggre ­ I n order to gated re s u l t s to the NPC o n February 1 4 , 1 9 8 9 . improve the l e ve l of survey part ic ipat ion , an i n t e n s e " non­ r e s po n s e fo l l ow-up " s y s tem was emp l oyed , with a l l n o n- r e s pondent pr imary and s e co nd ary s urvey rec i p i e nt s encouraged to c omp l e te I n keeping with i t s contr act wi th the NPC , D e l o i tte the s urvey . Ha s k i n s & S e l l s did no t r e l e a s e any individu a l c omp any data to the NPC , the DOE , o r any other organ i z at i on , and has d e s tr oyed a l l the comp l e t e d indiv idua l comp any que s t io nn a i r e s . A s e r i e s o f e d i t check s wa s emp loye d to e n s ure t h a t appro ­ p r i ate que s t ionn a i re l i ne i tems were comp l e ted , que s t i o nn a i r e a r i thme t i c a l integr ity w a s maintaine d , a n d que s t i o nn a i re r e ­ spon s e s we r e r e a s onab l e . I f a r e s pond ing company ' s data f a i led the ed i t c h e c k s , De lo i tte H a s k i n s & S e l l s c ont ac ted the c omp any to d i s cu s s the data and made change s whe r e appropr i a t e . In s i tu a t i o n s whe r e re spon s e s to que s t ionna i r e s were incomp l e te or obvi ou s ly in­ correct and the r e spondent fai led to p rovide D e l o i t te H a s k i n s & S e l l s w i th the appropr i a te i n formation , the que s t i o nn a i re r e spon s e was not inc luded i n the survey r e su l t s . I n add i t i o n , data previou s ly s ubm i tted to the E IA by the NP C r e s ponden t s on tota l i nven to r i e s were p rov ided by the E IA to D e l o i tt e H a s k i n s & Se l l s v i a the NPC i n o rd e r to s e rve a s a check on the r e a s on ­ ab lene s s o f the i nventory d a t a s ubmi tted on t h e s urvey . RES ULTS OF THE SURVEY The NPC evaluated the l eve l s of re spon s e to d e t e rm i n e whe ther they we r e adequate f o r u s e i n formu l a t ing conc l u s i o n s The Counc i l conc luded that the b a s e d upon t h e s urvey r e s u l t s . cove rage wa s s u f f ic i e n t ly h i gh to pe rm i t a n a l y s i s o f the re s u l t s a s r e a s on ab l y repre s e nt a t ive o f the manne r i n wh i c h i nventory and tank c apac i ty i s managed by the pr imary d i s tr ibut i o n s y s t em . There fore , r e s pon s e s to the NPC for key i nventory and t a nkage i tems we r e ad j u s ted upward by d ividing by the vo l ume t r i c percent­ age cover age , s o that the individua l l i ne i tems were repre s enta­ For examp l e , the s um o f the motor t ive of the E IA un iver s e . ga s o l ine r e s pon s e s for the i nd ividua l company i nventory a s o f To ad j us t t o the March 3 1 , 1 9 8 8 , was 2 0 3 , 1 1 7 thou s and barre l s . unive r s e , one d iv i de s 1 8 5 , 5 1 2 thou s and barre l s by 8 7 . 8 p e r c e n t ( the leve l o f p a r t i c i p a t i o n in t h e N P C s tudy a s b e n chmarke d aga i n s t coun t e rpart E I A dat a ) , which y i e ld s 2 3 1 , 2 5 8 thou s and barre l s . For c rude o i l , howeve r , c e r t a i n mod i f i c a t i o n s to E IA data on c rude o i l l e a s e s tocks and A l a s kan c rude o i l i n t r an s i t by wate r we r e made pr ior to the adj u s tment i n order to e n s u r e a Ta b l e C - 1 cons i s tency with L i ne I tem 1 in Que s t ionna i r e s 1 - 5 . shows the inventor ie s reported to the NPC , inve ntor i e s reported to the E IA , and the percentage r e s po n s e to the NPC s urvey .

C- 4

TABLE C- 1 NPC SURVEY RESPON S E S AS A P ERCENTAGE OF INVENTORY REPORTED TO THE E IA

NP C

( Thous and s o f Barr e l s ) PADDs I-IV

PADD v

Total u.s.

E IA

( Thou sand s o f Barre ls ) PADD s I - IV

To t a l u. s.

PADD v

PADD s I - IV

Per centage PADD To t a l v u.s. --

92.3 99 . 6 84 . 1 74 . 7

81.4 87 . 1 73 . 6 69 . 2

S e p t emb er 3 0 , 1 9 8 7 () I

(J1

I

Mo t o r Gas o l ine Ke ro-J e t Fue l D i s t i llat e Fue l O i l Re s idua l Fue l O i l

1 82 , 990 37 , 45 1 9 7 , 61 1 2 6 , 44 1

2 5 , 60 9 5 , 28 0 7 , 908 6 , 235

208 , 59 9 42 , 73 1 1 05 , 5 1 9 32 , 676

198 , 19 2 37 , 620 1 16 , 0 1 1 3 5 , 40 2

3 1 , 456 6 , 06 4 1 0 , 75 1 9 , 015

229 , 648 43 , 68 4 126 , 762 44 , 4 1 7

90 . 8 97 . 8 83 . 2 73 . 6

March 3 1 , 1 9 8 8 Crude O i l Mo t o r Gas o l ine Ke ro-J e t Fue l D i s t i l l a t e Fue l O i l Res idual Fue l O i l

2 3 3 , 88 9 1 80 , 6 5 0 3 2 , 88 4 6 8 , 275 25 , 226

49 , 1 8 8 2 2 , 46 7 5 , 58 2 7 , 375 6 , 668

283 , 07 7 203 , 1 1 7 3 8 , 46 6 7 5 , 65 0 3 1 , 89 4

263 , 44 3 202 , 58 2 33 , 06 1 80 ' 137 35 , 205

57 , 9 4 1 2 8 , 676 6 , 487 9 , 175 8 , 85 2

3 2 1 , 384 2 3 1 , 25 8 39 , 548 89,312 44 , 0 5 7

88 . 8 89 . 2 99 . 5 85 . 2 71 . 7

84 . 9 78 . 4 86 . 0 80 . 4 75 . 3

88 . 1 87 . 8 97 . 3 84 . 7 72 . 4

PROCEDURE S U S ED IN ANALY Z ING THE SURVE Y DATA The NPC e s t imate s o f min imum ope r at i ng i nventory , d i s cu s s ed in Chap t e r Two , we r e deve l oped through an i n t e r a c t ive dec i s i on ­ I n order to arr ive at a con s en s u s , i n d i v i du a l mak ing proce s s . j udgme n t s we r e d i s c u s s ed with the a i d o f ope r a t ing e xpe r i e n c e a nd r e l evant s ta t i s t i c a l data . The s t a t i s t i c a l d a t a u s e d wer e : ( 1) the sum o f the i nd ividua l company min imum ope r a t ing invento r i e s a s repor ted in t h e 1 9 8 8 NPC survey , ( 2 ) the i ndu s t ry-wide e s t i ­ mate s o f m i n imum ope r a t ing inventory leve l s a s reported i n the 1 1 9 8 8 NPC s urvey ; and ( 3 ) h i s to r i c a l i nventory d a t a . The NPC survey data are reported i n Append ix E ; the h i s to r i c a l i nve nto ry data are shown gr aph i c a l ly in Append ix J . The Counc i l ' s conc lu s ions regard ing the imp a c t o n p r ivate pr imary i nve ntor i e s o f the SPR and the petro l eum future s mark e t s we re deve loped from the s um o f the r e s po n s e s to t h e N P C s u rvey .

1

The s e e s t ima t e s we re u s ed for gene r a l r e f e r e n c e o n l y , a s only a few e s t imate s we re reported .

C- 6

APPENDIX D NPC 1 988 SURVEY OF U.S. PETROLEUM INVENTORIES AND STORAGE CAPACITIES (PRIMARY DISTRIBUTION SYSTEM)

e

Petroleum Inventories and Storage capacities

•

'l'he Strategic Petroleum Reserve

•

Petroleum Futures and Other Forward Markets

Code Number*

____

NATIONAL PETROLEU M COU N CI L 1 988 SU RVEY OF

U . S. P ETR O L E U M I NV E NTO R I ES A N D STO RAG E CA PAC ITI ES ( P R I MARY D I STRI B UTI O N SYST E M) Reporting Company : -----Address: ----

_____

Zip Cod e:

___

Person in reporting company to be contacted if questions arise:

Phone:

(

__

)

_____________

Please check for each questionnaire that you have provided data: __ Questionnaire No. 1

__ Questionnaire No. 4

__ Questionnaire No. 2

-- Questionnaire No. 5 -- Questionnaire No. 6

__

Questionnaire No. 3

Please submit your response to this survey by May 1 6, 1 988, to : Deloitte Haskins & Sells Suite 800 1 1 01 1 5th Street, N .W. Washington, D.C. 20005 ATTN : N PC Survey Team If you have questions regarding this survey, please call Mr. Benjamin A. Oliver, Jr. at the National Petroleum Cou ncil office, (202) 393 -61 00.

*This entry, and other N P C Code spaces on subseq uent pages, will be e ntered by the accounting firm for data tabulation purposes.

D-1

INTRODUCTION At the request of the U .S. Department of Energy (DOE) , the N ational Petroleum Council has agreed to update its 1 984 report on petroleum inventories and storage capacities in the United States. The study has two primary objectives: 1) To determine how much of the U.S. petroleum inventory reported monthly to the Department of Energy is required for normal operation of the petroleum d istribution system itse lf and is therefo re not available fo r de livery to consumers. 2) To determine the total primary storage capacity and that portion required for

normal industry operations. The e nclosed questionnaires are designed to provide the N ational Petroleum Council with the information it requires to respond to the DOE's request. These questionnaires request information on primary inventories and storage capacities relating to crude oil and the principal refined products. Most of the inventory data being requested have already been reported to the DOE by your company. These data will provide a measure of the overall response to the survey as well as assisting you in remaining within the scope of the instructions for the questionnaires. These questionnaires are also contained on the enclosed PC diskette. You r cooperation by providing your responses on the diskette will eliminate the risk of transcription errors and will speed the processing of the surveys. The National Petroleum Council has retained the services of the certified public accounting firm of Deloitte Haskins & Sells to collect and aggregate the data reported in this survey. Individual company data will not be released to industry or government representatives. Deloitte Haskins & Sells will provide data to the N ational Petroleum Council only in an aggregated form, and then only when sufficient responses have been obtained to preclude disclosure of individual company data. The original data forms will be dest royed at the completion of the study. A statement fro m Deloitte Haskins & Sells regarding its data collection and processing methodology is enclosed with this mailing.

D-2

G EN ERAL INSTRUCTIONS 1 . Reporting of Data

a. Report all figures in thousands of 42-gallon barrels. b. Provide data in each cell in the columns representing the geographic areas in which you r company has inventory and storage ( PADD, Region, U.S. Total) . Enter zero where appropri­ ate. In areas in which your company has no inventory and storage, leave the entire column blank. c. Report on a company-wide basis; i.e. , submit only one response for your company's primary operations. (See enclosed list of locations for which you submit monthly reports to the DOE.) d. Report information in a manner consistent with you r Petroleum Supply Reporting System ( PSRS) reports filed with the DOE on current forms EIA-8 1 0 (Monthly Refinery Report) , EIA-81 1 (Monthly Bu lk Terminal Report) , EIA-81 2 (Monthly Product Pipeline Report) , and/or EIA-8 1 3 (Monthly Crude Oil Report) . That is, -

Report on a custody basis regardless of ownership of the inventories or facilities.

-

In the case of jointly owned tankage or pipelines, data should be provided by the operator.

-

Report inventories less basic sediment and water (BS&W) corrected to 60 F.

e. Definitions -- The definitions for crude oil and petroleum products that are used in the survey are consistent with those of the DOE's Petroleu m Supply Reporting Syste m, except for the defi nitio n of motor gasoline, for which respo ndents to this survey should aggregate finished leaded gasoline (Product Code 1 32 in PSRS -- includes leaded gasohol) , finished unleaded gasoline ( Product Code 1 33 in PSRS -- I ncludes unleaded gasohol) , and motor gasoline blending co mponents ( Product Code 1 34 i n PSRS - - excludes oxygenates [alcohols, ethers, MTBE], butanes, and pentanes plus) . f. Crude oil data -- Report as of March 31 , 1 988. Only one reporting date for crude oil has been chosen because crude oil inventories are not seasonal. g . Refined product data -- Report refined product stocks only for locations that were reported to the DOE on September 30, 1 987, and March 3 1 , 1 988, in you regular m onth ly reports to the DOE as described under (d) above. Two reporting dates for the principal products have been chosen to better define the seasonal changes in inventories, and to reflect seasonal shifts in tank utilization. Report for the following principal products : -

Motor gasoline, including blending components

-

Kerosine-type jet fuel

-

Distillate fuel oil, including No. 4 fuel oil

-

Residual fuel oil

D-3

h . The enclosed diskette contains programs which permit the survey to be completed on-line rather than by hand on paper. We request that, if possible, you utilize the on-line entry. All that is required is an IBM compatible microcomputer with the MS DOS operating system. Because the responses to the survey will be entered on the enclosed disk, no other diskettes are required. Setup

Insert the enclosed diskette in the A drive of your microcompute r. Bring up the A prompt. A: Enter: 2. Report by Petroleum Administration for Defense District (PAD D)

a. Data for Puerto Rico, the U.S. Virgin Islands, and Guam should not be reported , except for Alaskan crude oil in transit by water to the above locations (see line item instructions for Line 1 5) . b . I nformation will b e collected o n a PADD basis, with PADD I subdivided into three areas for all refined products. PADD I is not subdivided for crude oil. Respondents should use the table below to determine the PADD classification for each state in which they have operations. c. Data for crude oil are also reported on a Total U .S. basis as well as by PADD to provide for reporting of Alaskan crude oil in transit by water. d . Respo ndents with operations in the New England, Central Atlantic, and Lower Atlantic states should submit their data as PADD IX, PADD IV, and PADD IZ, respectively. P A PD I

PAPP II

PA PD Ill

New Eng land (PADD IX)

Illinois Indiana Iowa Kansas Ke ntucky Michigan Minnesota Missouri Nebraska North Dakota Ohio Oklahoma South Dakota Tennessee Wisconsin

Alabama Arkansas Louisiana M ississippi New M exico Texas

Connecticut M aine Massachusetts New Hampshire Rhode Island Vermont Ce ntral Atlantic (PADD IV)

Delaware District of Columbia Maryland New Jersey New York Pennsylvania Lower Atlantic (PAD D IZ)

Florida Georgia North Carolina South Carolina Virginia West Virginia

PAPD I� Colorado Idaho Montana Utah Wyoming PAPD � Alaska Arizona California Hawaii Nevada Orego n Washington

D-4

3. Do not report data In the shaded areas of the Questionnaires. 4. Completing Questionnaires 1 ·5

Specific line item instructions are provided for these questionnaires, beginning on Page 5. 5. Completing Questionnaire 6

It is possible that the sum of the companies' assessments of their own minimu m and maximum operating inventories (Lines 2 and 21 on Questionnaires 1 -5) will not be a true measure of the entire petroleu m industry's minimum or maximum operating inventory. Questionnaire 6 is designed to capture your best estimate of these industry-wide values. If your company analyzes industry levels, provide your estimate of the minimum and maximum operating inventories of the U.S. petroleum industry. Enter estimates for PADDs I-IV, PADD V, and Total U .S. , if available. If you r company does not have some of the estimates requested in this questionnaire, leave those sections blank. 6 . Other I n st ructions

a. Disregard those questionnaires in the survey that are not applicable to you r company's operations, but return the survey intact. b. Complete the cover page, leaving the code line blank, and send it along with the completed survey (on computer disk or hard copy) by May 1 6, 1 988, to: Deloitte Haskins & Sells Su ite 800 1 1 01 1 5th Street, N .W. Washington, D.C. 20005 ATIN : NPC Survey Team c. Any questions regarding this questionnaire should be addressed to: Benjamin A. Oliver, Jr. Committee Coordinator National Petroleum Council 1 625 K Street, N.W. Washington, D.C. 20006 (202) 393-61 00

D- 5

LINE ITEM INSTRUCTIONS Questionnaires 1 5 -

Line 1 . Total Inventory Reported to the Department of Energy

For crude oil, aggregate by PADD the inventories you report on Forms EIA-81 0 and EIA-81 3 as of March 31 , 1 988, except Alaskan crude oil in transit by water (Product Code 092 on Form EIA-81 3), which should not be included in this line entry. For refined products, aggregate by PADD (sub-PADD in PADD I) the inventories you report on Forms EIA-81 0, 81 1 , and 81 2 as of March 31 , 1 988, and September 30 , 1 987. Do not include data for U.S. territories and possessions. Line 2. Minimum Operating Inventory

Data related to minimum operating inventory should be reported using your best estimates. These estimates should be on a custody basis and, therefore, consistent with the number you report as actual I nventory on Line 1 . Do not include Alaskan crude oil in transit by water in you r minimum operating inventory estimates. Data relating to minimum operating inventory are to be reported on a "system basis" for each product ; that is, only in columns labeled Total PADDs I - IV, PADD V, and Total U .S. (in the case of crude oil) , as specified on each questionnaire. Runouts and shortages are likely to occur if inventory falls below the minimum operating level. This inventory is not available for consumer use because it is either "unavailable" or "required working" inventory. "Unavailable" inventory includes: -

Pipeline fill (Line 7) Refinery lines and operating equipment fill (Line 8) Oil in transit by water from domestic sources, excluding Alaskan crude oil (Line 9) Tank bottoms (Line 1 1 ) Plant fuel and pipeline prime mover fuel (Line 1 2) Lease stocks (Line 1 3) Alaskan crude oil in transit (Line 1 5)

"Required working" inventory includes stocks necessary to : - Facilitate blending to meet product specifications - Support the normal ope rating cycle of shipments/rece ipts (e.g. , pipeline tenders or barge/tanker cargoes) - Provide a contingency to handle unavoidable but recurring e mergencies (e.g . , pipeline failure , extreme weather conditions that affect waterborne movements) . Line 3. Difference (Line1 Minus Line 2) or Total Inventory Minus Minimum Operating Inventory

A positive differe nce would indicate that you had oil in storage above that needed to meet minimu m operating requirements. A negative difference wou ld indicate that you were below the minimu m level, and, hence, incurring operating problems. This difference may be zero, indicating that actual inventory was the amount needed to meet minimum operating needs. Positive differences should be accounted for on Lines 4, 5, and 6, below.

D- 6

Line 4. Seasonal Inventory

The amount on Line 3 that is seasonal inventory; that is, inventory that is not immediately needed to support current demand levels, but is maintained in anticipation of higher (seasonal) demand levels that cannot be met with then-current manufacturing or transportation capabilities. Seasonal inventories need not be stored in swing tankage. Line 5. In Anticipation of Planned Maintenance

The various functions performed within the supply system extensively utilize sophisticated mechanical equipme nt . Such equipment must be refu rbished regu larly. Acco rd ingly, companies generally plan for and manage stock levels in order to e nsu re continued supply to meet demand while equipment is u nder maintenance. Respondents shou ld enter the amount of any stocks so dedicated as of the reporting dates for the various products. Line 6. Other Operating Inventory

The balance of the excess on Line 3 -- not covered by Lines 4 and 5 -- that is statistically "su rplus" to your needs but that is held in order to meet specific operating directives, recent changes in the variables implicit in the build-up of Line 2 that have not as yet been allowed for in Line 2, and/or a true "surplus" at this particular point in time. Line 7. Pipeline Fill

I nventory located between the shipping and receiving tanks on a pipeline system. Line 8. Refinery Lines and Operating Equipment Fill

I nventory within the refinery lines and operating equipment (excluding tanks) that is required for the refinery processing system to function normally. Line 9. In Transit by Water from Domestic Sources (Excluding Crude Oil from Alaska), Including Domestlclzed Foreign Oils In Transit

Include all stocks reported on Line 1 that were in transit by water to bulk terminals and refineries, excluding crude oil in transit by water from Alaska reported on Form EIA-8 1 3 . I nclude stocks of domestic origin, and stocks of foreign origin that have entered through U . S . Customs -- i.e., domesticized foreign oils. I n-transit inventory should only be reported in the same amou nts and on the same basis as reported to the DOE on Line 1 . Line 1 0. Subtotal : Unavailable Inventory Outside of Tankage

This line is the sum of the data on Lines 7, 8, and 9. Line 1 1 . Tank Bottoms

Inventory that falls below the normal suction line of the tank. For floating roof tanks, the amount required to keep the legs of the roof from touching the tank bottom. Line 1 2. Plant Fuel and Pipeline Prime Mover Fuel

Stocks set aside as plant fuel or pipeline prime mover fuel. Line 1 3. Lease Stocks (Complete on Questionnaire 1 Only)

I nclude all lease stocks reported on Line 1 ( Product Code 057 on Form EIA-8 1 3). D- 7

Line 1 4. Total

This line is the sum of the data on Lines 1 0, 1 1 , 1 2, and 1 3. Line 1 5. Alaskan Crude Oll ln Transl� by Water (Complete on Questionnaire 1 On ly)

I nclude all stocks of Alaskan crude oil in transit by water that you reported to the DOE on Form EIA-81 3 (Product Code 092) as of March 3 1 , 1 988. These stocks are not to be included in Lines 1 , 2, and 21 (see line item instructions for Lines 1 , 2, and 21 ) .

Although Form EIA-8 1 3 requests this information on a U.S. basis only, please report on this line not only the amount reported to EIA for the Total U .S., but also you r best estimate of the intended destination, differentiating between PADDs I - IV and PAD D V. Please include in your estimate for PADDs I - IV the volume of Alaskan crude oil in transit to Puerto Rico and the Virgin Islands, and in you r estimate for PADD V the volume in transit to Guam. Line 1 6. Shell Capacity of Tankage In Operation

The design capacity of operating tanks located at refineries, bulk terminals, pipeline tank farms, and producer leases. Include capacity of swing tankage; ensure that swing tankage is included in only one product or crude oil category for each date. Tankage that was idle -- for reasons other than programmed maintenance with plans for immediate return to service -- on Septem­ ber 30, 1 987, and/or March 31 , 1 988 (in the case of refined products) or March 31 , 1 988 (in the case of crude oil) should not be reported on this line . Line 1 7. Tank Tops and Safety Allowance

The portion of the shell capacity at the top of the tank that is not utilized for oil storage. This includes the safety allowance that is needed to protect personnel and property from damage that could result from thermal expansion and/or overfilling the tanks. Line 1 8. Subtotal : Net Available Shell Capacity

This line is the difference between Lines 1 6 and 1 7. Line 1 9. Unavailable Inventory Outside of Tankage

Repeat the data that were reported on Line 1 0. Do not include the data reported on Line 1 5, which will be handled separately by the NPC. Line 20. Total Operating System Capacity

This line is the sum of Lines 1 8 and 1 9. Line 21 . Maximum Operating Inventory

Report your best estimates of your maximum operating inventory. These estimates shou ld be on a custody basis and, therefore , consistent with the number you report as actual I nventory on Line 1 . Do not include Alaskan crude oil in transit by water in your maximum operating inventory estimates. Report maximum operating inventory on a "system basis" for each product; that is, only in columns labeled Total PADDs I - IV, PADD V, and Total U.S. (in the case of crude oil) , as specified on each questionnaire. If inventory were to go above this level, there would not be enough empty space in the system to allow it to keep operating without a slowdown or interruption in the system. Space above this level is not available for storage because it is needed to maintain a workable operating system. D -8

The maximum operating inventory represents the maximum quantity that could be stored in the assigned tankage and in other parts of the system such as pipelines, refinery lines, or in transit (unavailable inventory outside of tankage, Line 1 0) while still maintaining a workable operating system. Line 22. Shell Capacit y of Idle Tankage

The design capacity of tankage that was idle on March 3 1 , 1 988, for reasons other than programmed maintenance with plans for immediate return to service (included in Line 1 6) . Line 22 tankage would be available for service within 90 days. Capacity should be reported in the same service as at the time of idling unless plans call for dedication to other service. Line 23. Tankage Under Construction

The design shell capacity of tankage under construction (ground has been broken and the construction contract signed or major equ ipment ordered.)

D- 9

SCHEMATIC OF TERMS DESCRIBING PETROLEUM INVENTORIES AND STORAGE CAPACITIES REQUESTED IN NPC QUESTIONNAIRES 1 -6

!=-�t �e �

_

(NL)

--

0 I I-' 0

� 0,) c :.J >a: 0 IzUJ >

� (9z

i=

� x

­

a:

1-z UJ > z (9z

0

:==F

-+-

(NL) *

�

o;ne""" (Line 3)

( N L) *

1--- -- -(NL)

:::::>

� z

__

--- ---

i=

0 �

U NAVAILABLE SPAC E : __

�

Total PADDs I-IV

Total U.S.

Total PADD I

PADD II

PADD Ill

21 , 1 90

2,877

1 0,898

437

35,402

9,015

44,4 1 7

1 2,877

2,996

9,841

727

26,441

6,235

32,676

60.8

1 04.1

90.3

1 66.4

74.7

69.2

73.6

2. Minimum operating inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 0 , 1 35

2,995

13,130

1 7,848

3. Difference (Line 1 minus 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 6,306

3,240

1 9,546

26,569

5 , 1 63

1 79

5,342

7,261

1 1 , 1 43

3,061

1 4,204

1 9,308

INVENTORY AND STORAGE CAPACITY

PADD IX

PADD IY

PADD IZ

PADD IV

PADD V

Adjusted NPC Total

NPC Total

A. RESIDUAL FUEL OIL INVENTORY

1. Total inventory reported to the Department of Energy . . . . . . . . a. Total inventory reported to NPC . . . . . . . . . . . . . . . . . . . . . . .

1,119

1 0,733

1 ,025

b. Percentage of line one . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . .

44,4 1 7 . . .

If greater than zero, estimate what volume was:

4. Seasonal inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. In anticipation of planned maintenance . . . . . . . . . . . . . . . . 6. Other operating inventory

. . . . . . . . . . . . . . . . • . . . . . . . . . .

Memo Item: Unavailable inventory 7. Pipeline fill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

t:x:l I co

.

.

.

.

.

.

.

153

239

392

. . .

8. Refinery lines and operating equipment fill . . . . . . . . . . . . .

.

.

.

.

.

.

.

201

90

291

. . .

9. Oil in transit by water from domestic sources (ex. Alaska) .

.

.

.

.

.

.

.

1 16

116

. . .

10. Subtotal: Unavailable inventory outside of tankage (Lines 7, 8, and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18

78

5

1 01

1 48

1 93

28

470

329

799

1 ,086

1 1 . Tank bottoms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

.

.

.

.

.

.

.

3,777

741

4,518

. . .

1 2. Plant fuel and pipeline prime mover fuel . . . . . . . . . . . . . . .

.

.

.

.

.

.

.

318

1 23

441

. . .

1 87

1 ,701

304

2,1 92

737

1 ,530

1 06

4,565

1 ,1 93

5,758

7,827

1 6. Shell capacity of tankage in operation . . . . . . . . . . . . . . . . . . . .

2,690

28,5 1 7

4,747

35,954

7,697

28,396

1 ,402

73,449

1 0,486

83,935

1 1 4,094

1 7. Tank tops and safety allowance . . . . . . . . . . . . . . . . . . . . . . . . . .

90

1 ,900

202

2,1 92

547

1 ,467

83

4,289

603

4,892

6,650

1 8. Subtotal: Net available shell capacity (Line 16 minus 17) . . . . .

2,600

26,617

4,545

33,762

7,1 50

26,929

1 ,3 1 9

69,160

9,883

79,043

1 07,444

13. Lease stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4. Total (Lines 10, 11, 12, and 13)

. . . . . . . . . . • • . . . . . . . . . . .

15. Alaskan crude oil in transit by water . . . . . . . . . . . . . . . . . . B. STORAGE CAPACITY ASSIGNED TO RESIDUAL FUEL OIL

1 9. Unavailable inventory outside of tankage (from Line 10 above) 20. Total operating system capacity (Lines 18 and 19) . . . . . . . . . . .

18

78

5

1 01

1 48

1 93

28

470

329

799

1 ,086

2,61 8

26,695

4,550

33,863

7,298

27,1 22

1 ,347

69,630

10,212

79,842

1 08,530

58,696

8,897

67,593

91 ,880

21 . Maximum operating inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . C. IDLE BUT USABLE CAPACITY/NEW CAPACITY

22. Shell capacity of idle tankage . . . . . . . . . . . . . . . . . . . . . . . . . . .

0

0

0

0

0

0

0

0

0

0

0

23. Tankage under construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0

0

0

0

0

0

0

0

0

0

0

-

• •

Data excluded to protect confidentiality

" Not applicable

-

-

· -

-

· -

-

NATIONAL PETROLEUM COUNCIL 1 988 SU RVEY OF PETROLEUM INVENTORIES AND STORAGE CAPACITI ES IN THE U N ITED STATES RESIDUAL FUEL O I L A s o f March 31 , 1 988 CThousands o f Barrels>

PADD IX

INVENTORY AND STORAGE CAPACITY

PADD IY

PADD IZ

Total PADD I

PADD I I

PADD I l l

17,653

2,871

1 4,320

10,799

2,934

1 0,847

61 .2

1 02.2

75.7

Total U.S.

Total PADDs I-IV

PADD V

NPC Total

361

35,205

8,852

44,057

646

25,226

6,668

31 ,894

1 78.9

71 .7

75.3

72.4

PADD IV

Adjusted NPC Total

A. RESIDUAL FUEL OIL INVENTORY

1 . Total inventory reported to the Department of Energy . . . . . . a. Total inventory reported to NPC . . . . . . . . . . . . . . . . . . . . . . .

1 ,044

7,905

1 ,850

b. Percentage of line one . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Minimum operating inventory 3. Difference (Line 1 minus 2)

. . . . . . . . . . . . . . • . . . . . . . . . . . . .

. . . . . .

.

. . . . . . . . . . . . . . . . . . .

.

. .

...

44,057 ...

12,889

2,991

1 5,880

21 ,936

12,337

3,677

1 6,014

22,1 21

1 ,648

365

2,013

2,781

1 0,689

3,31 2

14,001

1 9,340

1 30

263

393

1 98

96

294

If greater than zero, estimate what volume was: �

4. Seasonal inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. I n anticipation of planned maintenance . . . . . . . . . . . . . . . . 6. Other operating inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . Memo Item: Unavailable inventory M I

1.0

7. Pipeline fill 8.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Refinery lines and operating equipment fill . . . . . . . . . . . . .

9. Oil in transit by water from domestic sou rces (ex. Alaska) . 10. Subtotal: Unavailable inventory outside of tankage (Lines 7, 8, and 9) . . . . . . . . . . . . .

. .

. . . . . .

. .

. . . . . . .

.

. .

1 1 . Tank bottoms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 . Plant fuel and pipeline prime mover fuel . . . . . . . . . . . . . . .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

12

69

5

86

1 62

1 92

28

.

.

.

.

.

.

.

.

.

.

.

.

.

.

1 87

1 ,779

31 1

2,277

780

1 ,488

1 23

140

1 40

... . .. ...

468

359

827

3,827

712

4,539

373

151

524

4,668

1 ,222

5,890

8 , 1 36

1 1 7, 1 69

1 ,1 42 ...

...

.

1 3. Lease stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. Total (Lines 10, 1 1 , 12, and 13) . . . . . . . . . . . . . . . . . . . . . . .

..

1 5. Alaskan crude oil in transit by water . . . . . . . . . . . . . . . . . . B. STORAGE CAPACITY ASSIGNED TO RESIDUAL FUEL OIL

1 6. Shell capacity of tankage in operation . . . . . . . . . . . . . . . . . . . .

2,926

28,003

5,727

36,656

7,889

28,1 52

1 ,402

74,099

1 0,723

84,822

1 7. Tank tops and safety allowance . . . . . . . . . . . . . . . . . . . . . . . . . .

99

1 ,770

280

2,149

576

1 ,491

83

4,299

632

4,931

6,8 1 1

1 8. Subtotal: Net available shell capacity (Line 16 minus 17) . . . . .

2,827

26,233

5,447

34,507

7,313

26,661

1 ,3 1 9

69,800

1 0,091

79,891

1 1 0,358

1 9. Unavailable inventory outside of tankage (from Line 10 above) 20. Total operating system capacity (Lines 18 and 19) . . . . . . . . . . .

12

69

5

86

1 62

1 92

28

468

359

827

1 , 1 42

2,839

26,302

5,452

34,593

7,475

26,853

1 ,347

70,268

1 0,450

80,71 8

1 1 1 ,500

59,461

8,655

68, 1 1 6

94,093

5,264

7,271

0

0

21 . Maximum operating inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . C. IDLE BUT USABLE CAPACITY/NEW CAPACITY

22. Shell capacity of idle tankage . . . . . . . . . . . . . . . . . . . . . . . . . . .

526

954

20

1 ,500

1 35

23. Tankage under construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0

0

0

0

0

-

• Data excluded to protect confidentiality " * Not applicable

3,098

0

4,733

531

0

0

0

0

----

-L___

:

APPENDIX F THE IMPACT OF PETROLEUM FUTURES MARKETS ON INVENTORY LEVELS

APP END I X F THE IMPACT OF PETROLEUM FUTURES MARKETS ON INVENTORY LEVELS

En ergy future s have grown drama t i c a l l y i n bo th u s age and im­ po rtance s i nce the 1 9 8 4 Nationa l P e tro leum Counc i l ( NPC ) report on inve ntor ie s and s torage c apac i ty . Future s mark e t s have provided a me ans for ind ividua l s and bu s i ne s s e s to coun t e r p r i c e vo l a t i l i ty b y tran s ferr ing p r i c e r i sk . C rude o i l future s , introduced i n 1 9 8 3 , have matured in the pa s t f ive y e a r s ; c rude o i l opt i o n s and heat ing o i l op tions began trad ing i n 1 9 8 6 and 1 9 8 7 , r e s p e c t i ve ly . I n add i t i on , futur e s mark e t s have provided both the indus try and the pub l i c w i th p r i c e d i s covery and p r i c e t r a n s parency . P r i c e d i s c overy i s the proc e s s through wh i c h v a l u e i s d e t e rmined via the co l l e c t ive c ompe t i t ive interac t ion of many i nd i v i du a l buye r s and s e l l e r s . P r i c e trans parency provide s the p r i c e o f each tran s ac t i on qu i c k l y , with wide d i s s emin a t i on through many pub l i c i n format ion channe l s . The wor ld ' s l ar ge s t market for trad ing e n e r gy future s and opt ions is the New York Me r c anti l e Ex change ( NYME X ) wh e r e future s contrac ts for c rude o i l , heat ing o i l , un l e aded g a s o l i n e , and propane , and opt ions contrac t s for crud e oi l and h e a t i n g o i l are o f fered and traded . The I n tern a t i ona l P e t ro l eum Exchange o f London trade s future s in crude oi l and g a s o i l , a s we l l a s opt i o n s in g a s o i l . Ene rgy futur e s tr ad i ng on NYMEX began i n 1 9 7 8 wi th the intro duc ­ tion o f heat ing o i l futur e s . G a s o l ine future s we r e i n t rodu c e d in 1 9 8 1 and crude o i l future s be gan trading in 1 9 8 3 . C rude o i l op­ tions were i n i t i a ted in November 1 9 8 6 and h e a t i n g o i l op t io n s s tarted trad ing in June 1 9 8 7 . I n add i t ion to the s e forma l trad ing marke t s , the re i s a c t i ve trad ing in i n forma l energy forward market s s uch a s the " B r e n t Cargo , " a n d " Duba i C a rgo " marke t s f o r c rude o i l , and t h e " Ru s s i an Ga s o i l , " " L i t t l ebrook Lottery , " and " Bo s ton B ingo " mark e t s for petro leum produc t s . The re are s i gn i fi c ant d i f fe r e nc e s b e twe e n the s truc tu re o f the forma l future s ve r s u s t h e i n forma l forward marke t s . Future s mark e t s are sub j e c t to s ub s t an t i a l r e gu l a t i on and ove r s ight . I n the U n i ted S t a te s , the Commod i t i e s Future s T rad ing Commi s s ion i s th e fed e r a l r e gu l a t i n g agency . F o rward ma rk e t s operate o u t s ide of the s e regu l a tory s tr i c tur e s . Also , future s mark e t s are requ i re d to fu l f i l l the p r i c e d i s c overy and pr ice transparency ro l e s di s cu s s e d above . By the n a tu r e o f the i r activity , forward marke t s can contr ibute to th i s , but t h e y are no t l e ga l l y requ i r e d to do so . Howeve r , many med i a s e rv i c e s do report the i r impre s s ions and knowledge o f th i s i n forma t ion as it become s ava i l ab l e to them .

F- 1

THEORY AND FUNDAMENTALS OF FUTURE S / OP T I ONS MARKETS Futur e s and future s op t i o n s marke t s e x i s t pr imar i ly for the purpo s e of p r i c e - r i s k t r an s fer , or hedging . Th i s is a c c omp l i s h e d by t h e buy i n g a n d s e l l i ng o f future s a n d opt i o n s c o n t r ac t s . Typ i c a l l y , hedge r s s h i f t ac tua l or a n t i c ipated c a s h-ma r k e t pr i c e ­ r i s k e xpo s ur e t o s p e c u l a t ive trader s , who make c a p i ta l ava i lab l e t o ab sorb th i s r i s k , or to o t h e r cash-mark e t p a r t i c ipant s i n future s a n d o p t i o n s marke t s who wi sh to ho l d oppo s i n g c a s h -mark e t r i s k expo s ur e s . Specu l a t i o n , typ i ca l ly the a t tempt to buy l ow and s e l l h i gh without i nvo lveme nt i n phy s i c a l mark e t s , a l s o mo t iv a t e s the trad ing of future s and option s . I n c a s h , future s , a nd op t ions marke t s , p r i c e i s a f unc t i o n C a s h market pr i c e s are a func t ion o f o f s upp ly a n d demand . s upp l y and demand for the phy s i c a l commod ity . Future s and op tions pr i c e s are a func t ion of supp l y and demand for future s I n a typ i c a l marke t , howeve r , futur e s and and opt ion s contrac t s . phy s i c a l mark e t p r i c e s c onverge , at l e a s t a t the c l o s i n g o f futur e s tr ad ing for a p a r t i c u l ar contract mon th . Future s repre s e nt a l e ga l l y b i nd i ng contrac t to mak e o r take de l ivery of the c ommod i ty spe c i f i ed in the c ontrac t , and to honor all terms and ob l i g a t i o n s accepted when a po s i t i on i s i n i t i a t ed . The term s o f a l l futur e s contrac t s , except p r i c e , are d e t e rm i n ed by the ru l e s o f the c ommod i ty exchange w i th , i n th e Un i te d S ta te s , t h e approval o f t h e Commodity Future s Tr a d i n g Comm i s s i on . Th e s e terms inc lude contrac t un i t , qu a l i ty s p e c i f i c a t io n s , and de l ivery l o c a t i o n . For petro l eum fu ture s , the c o n t r a c t un i t i s the s ame for mo s t contr a c t s , 1 , 0 0 0 barre l s , e x c e p t for the ga s o i l c ontrac t o n the I n te rn a t iona l Petro leum E xchange o f London , whe r e the ga s o i l contrac t un i t i s 1 0 0 metr ic tons ( app roxima te ly 7 4 6 Qua l i ty s p e c i f i c a tions and de l ive r y po i n t s for each barre l s ) . produ c t vary amon g th e exchange s . Future s c a n b e bought or s o ld ; in the c a s e o f the forme r , i f the contract i s he l d to matur i ty , then the ho lder i s requ i red to accept d e l ivery of the c ommod i ty spec i f i e d i n the c o n tr a c t ac cord ing t o a l l o f t h e terms de l ineated i n t h e future s c o n t r ac t . Shou l d one s e l l a futur e s contract and h o l d i t to matur i ty , then one become s ob l i ga ted to make de l ivery of the c ommod i ty s p e c i f i e d a c c o r d i n g to a l l o f t h e terms a n d cond i t i o n s o f the c o n t r a c t . In Futur e s contrac t s , howeve r , typ i c a l ly do not go to de l ivery . fac t , the vo lume o f o i l tr aded in future s marke t s f a r e x c e e d s vo lume s traded i n phy s i c a l markets . Opt ions are contrac t s repre s enting the r i ght , no t the ob l i ­ gation , to make or take de l ive ry o f the under l y i ng future . Both futur e s and opt i o n s can be h e l d to matur i ty or exerc i s ed , at wh ich t ime all c ontrac tua l te rms and cond i t i ons mu s t be honored .

F-2

INFO RMAT ION FLOWS AND P R I CE D I S COVERY F rom the many tran s ac t i o n s in the marke t , i n s tantaneous ( i . e . , up- to - the - s econd ) i n format ion on f a c t o r s that de t e rmi ne a commod i ty va lue - - current and expected pr i c e s , c o s t o f s torage , hand l ing , tran s port a t i on , and a ho s t o f o ther e l eme n t s - - e n t e r s the future s a n d o p t i o n s marke t . Th i s i n fo rma t ion immed i a t e l y i s re f l e c ted i n pr i c e s . Th i s i s the " p r i c e d i s cove r y " a sp e c t o f future s trading . Future s and opt i ons p r ic e s , i n turn , in fo rm the mark e t o f commod i ty va lue s , imp l ied s to r age c o s t s and i n t e r e s t r a te s , and uncertainty abou t future p r i c e s . HEDG ING ALTE RNAT IVE S Hedg ing wi th futur e s and op t i ons pre s e n t s a l t e r n a t i ve s for managing th e r i s k - reward trade -o f f th at a r i s e s from p r i c e and vo lat i l i ty e xpo s ur e . B road ly speak i ng , a h edge i s the a s sumpt i o n o f a future s or op t i on s mark e t expo sure oppo s i te an a c t u a l o r ant i c ipated c a sh ­ mark e t e xpos ure . U s ing futur e s or opt i o n s , t h e f i rm c a n reduce its c a sh-mark e t expo sure to price change s and vo l a t i l i ty change s to a min imum acceptab l e leve l , or e l imin ate i t a lmo s t e nt i re ly . A hedge c an be d e s igned with a l arger corpo r a t e ph i l o s ophy , fo r i n s tance , to ach i eve a de s ired re turn , or w i th a tran s ac t i on­ by- tran s ac t ion focu s to m i n imi z e the f i rm ' s expo s ur e to r i s k on e ach tran s ac t ion . PETROLEUM INDUS TRY ACTIVI TY Mo s t o i l comp an i e s act ive in the future s marke t operate a s hedg e r s t o reduce the i r bu s i ne s s r i sk , rath e r th a n a s s pe c u ­ lato r s for f in anc i a l ga i n . Tab l e s F - 1 , F - 2 , a n d F - 3 pre s en t the po s i t i ons for g a s o l i ne , No . 2 fue l o i l , and c rude o i l h e l d by spe c u l a tor s and hedge r s on NYMEX a s o f March 1 9 8 8 . To better under s t and the extent o f i nvo l veme n t i n the p e tro­ leum futu r e s market by d i f ferent s e gme n t s of the o i l indu s tr y , the NPC s urveyed pr imary d i s tr ibution s y s tem c omp an i e s and b u l k plant ope r ator s i n t h e s econdary d i s t r ibution s y s tem . Mo s t compan i e s s ta ted tha t the future s o r forward mark e t s d i d n o t a f fe c t the i r inven tory l eve l s . The r e s u l t s o f the s urvey are shown in Tab l e F - 4 . Tab l e F - 5 s hows the vo l ume o f contr a c t s traded on NYMEX and the ac tua l vo lume s d e l ivered . The very sma l l p e r c e n t ag e o f phy s i c a l de l ive r i e s s uppo r t s the content i on that the future s and forward mark e t s do not have a s igni f i c ant bear ing on p e tro l e um inventor i e s .

F- 3

TABLE F- 1 NYMEX REGULAR UNLEADED GAS OLINE POS IT IONS AS OF MARCH 1 9 8 8

Op en Int e r e s t Long Numb er Numb er of of Contrac t s F irms

*

Shor t Numb er Numb er of of Contrac t s F irms

Rep o r t ab le § He dgers Re f ine r s Re s e l le r s End -Users T o t a l Hedg e r s S p e culators To t a l Rep ortab l e Non-ReE o r t ab le

*

15 31 3

9 , 86 3 16 , 278 7 , 562

18 29 8

29 , 566

49

33 , 703

55

3 , 468

10

2 , 02 1

8

33 , 034

,r

T o t a l Op en Int eres t

5 ,413 2 1 , 59 2 2 , 56 1

13 ' 1 6 1 **

46 , 09 6

35 ' 7 24 10, 372 4 6 , 09 6

Numb er o f c ont rac t s out s tanding at the end o f the t r a d ing month o f

March . § Firms or ind ividu a l s hold ing 2 5 contra c t s ( 1 , 0 0 0 b arre l s p er contract ) o r more . ,!

Firms o r ind ividual s ho lding f ewer than 25 contrac t s . E s t imat e d by NYMEX t o be 60 p e rcent s p e culator s , 4 0 p e r c ent hedg er s . Only b roker s have ac c e s s t o th is inf o rmat ion . **

The to t a l marke t exp o sure is l e s s s ince many c omp anie s h o ld b o th l o ng and short p o s i t ions . S ourc e :

New York Mer c ant ile Exchange (NYMEX) R e s earch Department .

F- 4

TABLE F- 2 NYMEX NO . 2 FUEL OIL P O S I T ION S AS O F MARCH 1 9 88

Open Int e r e s t Long Numb er Numb er of of Firms Contrac ts

*

Sho r t Numb er Numb e r of of F irms Contrac t s

Rep ortab l e § Hedge r s Re f iners Re s e l l e r s End-Us e r s To tal Hedg e r s S p e culators To tal Reportab l e Non-Rep o r t ab l e

,I

To tal Open Int e r e s t

*

**

1 , 634 1 6 , 53 5 1 , 69 9

6 16 4

8 , 908 1 1 , 340 2 , 90 6

15 23 6

19 , 918

26

22 , 969

43

I , 772

7

5 , 80 8

11

2 1 , 69 0

33

28 , 7 7 7

54

22 , 56 1

15 , 239

4 4 , 20 1

44 , 20 1

Numb er o f cont rac t s out s t and ing at th e end o f the t rad ing month o f

March . § Firms or individua l s ho ld ing 2 5 c ont rac t s ( 1 , 0 0 0 b a rr e l s p e r contrac t ) or more . ,[

Es t ima t e d by Firms or ind ividua ls holding f ewer than 2 5 contrac t s . Only b roke r s have NYMEX to b e 60 pe rcent speculators , 4 0 p e r c ent hedgers . ac c e s s to this inf o rma t i on . **

The t o t a l marke t expo sure is l e s s s ince many c ompan i e s ho ld b o th l ong and short p o s i t ions . Sourc e :

New York Me r cant i l e Exchange (NYMEX ) Re s e arch Depar tment .

F-5

TABLE F-3 NYMEX CRUDE OIL POS IT ION S AS O F MARCH 1 9 8 8

02en Int e r e s t Lon8 Numb er Number of of C ontrac t s F irms

*

Sho r t Numb er Numb er of of Contrac t s F irms

Rep o r t ab le § Hedgers Re f iners Re s e l l e r s End-Users To t a l Hedgers Speculat ors To t a l Rep o r t ab l e Non-ReE o r t ab le �� T o t a l Open In te r e s t

*

**

3 7 , 23 0 95 , 9 25 6 , 049

30 33 6

44 , 1 1 0 72 , 117 3 , 08 7

34 42 3

1 39 , 204

69

1 19 , 3 1 4

79

1 3 , 94 3

15

29 , 688

29

153 , 147

1 4 9 , 00 2

53 , 4 2 1

57 , 5 66

206 , 5 68

206 , 5 68

Numb e r o f contrac t s out s t and ing at th e end o f the t r ad ing month o f

Mar ch . § Firms or ind ividual s ho ld ing 2 5 contrac t s ( 1 , 0 0 0 b ar r e l s p e r contrac t ) or more . �� Firms or ind ividual s ho ld ing f ewer than 2 5 contrac t s . E s t imat e d by NYMEX to be 6 0 p e rcent s p e culat o r s , 4 0 p e r c ent hedge r s . Only b roke r s have acc e s s to this inf o rma t ion . **

Th e t o t a l market expo sure is l e s s since many c omp anie s ho ld b o th long and short p o s i t ions . Sour c e :

New York Mercant ile Exchange (NYMEX) Re s e arch Depar tment .

F- 6

TABLE

F- 4

PETROLEUM FUTURES AND OTHER FORWARD MARKETS

1.

Has

there

i nventory future s

g e n e r a l l y been l eve l s

and

due

to

a change

i n your phy s i c a l

the pre s e n c e

o f t h e p e t r o l e um

forward marke t s ?

Number o f Re s ponde n t s No change : 355 Gene r a l l y h i gher ,

by 38% :

3

Genera l l y l owe r , by 3 6 % : 10 May be h i ghe r o r l owe r , depe n d i n g on marke t by p l u s o r m i n u s

1 0 % o r les s :

b y p l u s o r m i nu s

10-25% :

by p l u s o r m i n u s more 2.

3.

12

than

25% :

Approx ima t e the l eve l of invento r i e s ( wh e th e r o r not i n c u s tody , a s noted t h e U . S . m a r k e t o n March 3 1 , 1 9 8 8 :

11 ( i n b ar re l s ) owned a nd c omm i t te d t o

above )

Total

Ave r age

Crude O i l

3 53 , 641 , 1 93

6 , 800, 792

P roduc t

417, 035, 006

2 , 55 8 , 49 7

Appr ox imate the pe rcentage o f the Ma rc h 3 1 , 1 9 8 8 , invento r i e s reported i n Que s t i o n 2 b a c k e d by hedge s ( in b a r re l s ) :

a.

Total Amount

P e r c e n tage H edged 12 .3

206 , 255 , 29 0

25 , 453 , 512

149 , 45 7 , 777

9 , 22 2 , 63 8

6 . 2

Total

355 , 713 , 067

34 , 676 , 150

9 . 7

T yp i c a l percentage o f your ( i n b ar r e l s ) :

invento r i e s

Total Amou n t Crude O i l Product Tot a l

206 , 255, 290 149 , 457, 777 355 , 71 3 , 067

Wh i c h o f the fo l l owing mark e t s h a s ( check a l l t h a t a pp l y ) : P e t r o l eum

fu ture s

P e t r o l e um o p t i o n s Cash

fo rward

(NYMEX ,

Wh i c h o i l

IPE ,

( NYME X ) :

( Br e n t

or

oil :

by h e dge s

Amount H e dge d

P e rc e n t a g e H edged

2 7 , 153 , 49 6 1 2 , 827 , 419

13 . 2

39 , 980 , 915

your

e tc . ) :

8 . 6 11. 2

f i rm p a r t i c i p a t e d

in

67

c rude o i l s ,

for No .

c ommod i t i e s have you

No . 2 o i l / g a s o i l : 61 Motor g a s o l i n e : 51 C rude

b ac k e d

.3 2

Dub a i

s uc h a s " Bo s ton B in go " g a s o i l marke t ) : 20 5.

Amo un t H e dged

Crude O i l P roduc t

b.

4 .

36

e c o nomi c s :

13

43

F -7

2

oil ,

t r aded

in

produc t marke t s the

f o rward Ru s s i a n

the s e marke t s ?

TABLE F-5 NYMEX DELIVERIES OF CRUDE OIL AND HEATING OIL JANUARY-SEPTEMBER 1988 ( Thousands of Barrels per Day ) Del iveries Alternative Contract Month

Standard Del i veries

De l ivery Procedures

as % o f

Exchange

Trading

for

Phys ical s

Total

Del iveries

Vo lume

(No .

Contracts )

Cumulativ e Trading Volume

Crude Oil Jan .

3 18

98

43 , 234

4 3 , 850

1 , 3 7 1 , 506

Feb .

0 . 03

849

1

4 1 , 092

4 1 , 942

1 , 5 2 0 , 630

Mar .

946

0 . 08

0

Apr .

5 0 , 83 2

5 1 , 7 78

925

3

1 , 675 , 361

52 , 6 08

5 3 , 836

0 . 08

1 , 5 1 9 , 084

0 . 08

May

753

297

5 5 , 784

56 , 8 14

1 , 66 3 , 9 8 7

570

0. 07

Jun .

591

51, 622

5 2 , 783

1 , 3 93 , 5 25

0 . 08

Jul .

Aug.

660

521

624

Sep .

3

5 0 , 909

51, 572

357

13

4 7 , 02 8

1 , 3 88 , 4 4 7

4 7 , 39 8

0. 05

1 , 749 , 649

0. 02

4 6 , 648

4 7 , 790

1 , 2 45 , 3 3 8

0. 10

Heating Oil Jan .

1 , 23 1

504

2 0 , 768

2 2 , 503

53 1 , 05 5

0 . 33

Feb .

490

1 , 804

1 8 , 297

1 8 , 591

314

561, 541

0. 41

1 5 , 513

18, 182

459 , 74 2

1 3 , 9 70

0. 15

1 4 , 594

3 80 , 5 5 9

0 . 16

Mar .

355

Apr .

3 09

315

May

1 77

377

8,621

9 , 07 5

33 7 , 805

0. 13

10 , 1 76

298, 859

0. 19

7 , 634

264 , 736

0. 33

Jun .

396

159

9,621

Jul .

577

299

6 , 758

Aug .

570

268

6 , 748

9 , 584

3 2 9 , 744

0. 2 5

Sep .

367

264

6 , 359

6 , 990

341, 122

0 . 18

Source :

New York Mercantile Exchange

(NYMEX)

F -8

Research Department .

APPENDIX G THE STRATEGIC PETROLEUM RESERVE

APPEND I X G THE S TRATEG I C PETROLEUM RE S E RVE

Th e S t ra t e g i c P e t r o l eum Re s e rve P rogram wa s c r e a te d by the Energy P o l icy and Co n s e rvat i on Ac t ( P . L . 9 4 - 1 6 3 ) , e n a c t e d on Decembe r 2 2 , 1 9 7 5 . In the a f termath of the 1 9 7 3 - 1 9 7 4 Arab o i l embargo , Congr e s s dec l ared i t to be u . s . po l i c y that a r e s e rve o f · up to one b i l l i on b ar r e l s o f crude o i l and / or p e t r o l eum produc t s b e e s tab l i shed t o r e duce the impa c t o f d i s rup t i on s i n pe tro l eum suppl i e s or to c arry ou t the ob l ig a t i o n s o f the Un i ted S t ate s unde r the I n terna t i on a l Ene rgy P rogr am . The S trategic P e t ro l eum Re s e rve ( SP R ) may not b e d r awn down un le s s the Pre s ident determi ne s th at a n a t i o n a l e n e r gy s upp l y shortage e x i s t s that i s , o r i s l i k e l y t o be , o f s ig n i f i c an t s cope and dur at ion 1 i s o f an eme rgency nature 1 may c au s e ma j or adver s e impact on nat iona l s a fety and the nationa l economy 1 and r e s u l t s , or i s l ike ly to r e s u l t , from an interrup t i on i n impo r t e d petro­ leum supp l i e s , s abo tage , or an act of God . The Energy P o l i c y and Con s e rvation Ac t r e qu i red s ubmi s s ion to the Congre s s of an SPR p l an to d e t a i l the p ropo s a l s for de ­ s i gn ing , con s tr u c t i ng , and f i l l ing the Re s e rve . The S P R P l an , submi tted on Febru ary 1 6 , 1 9 7 7 , and e f f e c t ive on Apr i l 1 8 , 1 9 7 7 , d i s cu s s e s the deve l opme nt and imp l ementat ion o f the Re s erve . The s chedu l e for f i l l ing the Re s e rve wa s ac c e l e r a t e d by S P R P l an Amendment No . 1 , s ubmi tted t o t h e Congre s s o n May 2 5 , 1 9 7 7 . Amendme nt No . 2 to the S P R P l an , s ubmi tted May 1 8 , 1 9 7 8 , author­ i z ed an i nc re a s e i n the SPR s i z e from 5 0 0 mi l l i on b a r r e l s to one b i l l ion barre l s of s tored o i l and det a i led p l a n s f o r government s torage o f 7 5 0 mi l l ion barre l s . On October 3 1 , 1 9 7 9 , the D i s ­ tribu t i on P l an for the SPR , P l an Amendment No . 3 , wa s s ubmi tted to Congre s s . Th i s amendment wa s replaced on D e c embe r 1 , 1 9 8 2 , when a new " Dr awdown " ( D i s tr ibution ) P l an ( Amendme nt No . 4 ) f or the u s e o f the S P R wa s tran smi t ted to Congre s s . Th i s p l a n , re­ qu ired under the Energy Eme rgency P r eparedne s s Ac t of 1 9 8 2 and now in e f fec t , provide s for pr ima ry use of marke t p ro c e dure s for the drawdown , s a l e , and d i s tr ibution of crude o i l from the S P R . The S P R fac i l i ty deve l opme nt program i s curr e n t l y de s i gned to provide a cumu l at ive s torage c apac i ty of 7 5 0 m i l l ion bar re l s and a f i n a l drawdown / d i s tr ibut ion c apab i l i ty o f 4 . 5 mi l l i on barre l s per day ( MMB / D ) •

Over the l a s t 1 2 ye a r s , the S P R h a s a c qu i re d a nd deve l oped s ix underground c rude o i l s torage fac i l i t i e s i n s a l t dome s a l ong the gul f coa s t s of Te xas and Lou i s iana and a gove r nmen t - owne d mar ine termi n a l on t h e Mi s s i s s ippi Rive r at S t . J ame s , Loui s i ana . The s ix s torage s i t e s are Bayou Choc taw , Wee k s I s l an d , We s t Hackberry , and S u lphur Mine s i n Lou i s i ana , and B ryan Mound and

G- 1

B i g H i l l i n Texas . The s e s ix s torage s i t e s are o r gan i z ed i n to thr e e d i s tr ibut ion s y s tems ( known a s the S e away , Te xoma , and C ap l i n e Group s for the c omme r c i a l p ipe l ine s y s tems they d r aw on ) and are c o nn e c te d by Department o f Energy ( DOE ) p ipe l i ne s to comme r c i a l c rude o i l p ipe l i ne network s and mar i ne t e rm i n a l fac i l i t ie s f o r dr awdown / d i s t r ibut ion . T ab l e G- 1 provid e s a s umm a ry o f S P R i nve ntor i e s , capac i t i e s , and dr awdown capabi l i t i e s a s of March 3 1 ,

s torage 1 9 8 8 , and

TABLE G- 1 STRATEGIC PETROLEUM RES ERVE INVENTORY , CAPAC ITY , AND DRAWDOWN CAPAB ILITY 1 9 8 8 AND PROJECTED 1 9 9 2 (Mi l l ions o f Barre ls )

S t o cks (bb l )

SPR S i t e s

March 3 1 , 1 9 8 8 Drawdown S torage Rat e * C apacity (bb l ) ( B /D )

Proj e c t ed 1 9 9 2 S t o rage Drawdown S t o cks Cap a c ity Rate (bb l ) (bb l ) ( B /D )

Seaway Group 204

226

1 . 10

226

226

1 . 10

1 87

189

1 . 40

2 19

2 19

1 . 40

26

26

0

0

0 . 00

1 60

1 60

0 . 93

Bayou Choc t aw

52

56

0 . 48

72

72

0 . 48

Weeks Is land

72

73

0 . 59

73

73

0 . 59

570

3 .57

750

750

4.5

Bryan Mound Texoma Group Wes t Hackb e rry Sulphur Min e s

§

B i g Hill,! Cap line Group

Pip e l in e s & Tanks To t a l S y s t em

* §

4 545

D i s t r ibut ion system c onstraint s limit current drawdown capab i lity . Sulphur Mine s t o b e decommi s s ioned by 1 9 9 2 .

,!Big Hill s i t e curren t ly und er deve lopment . Source :

U . s . Department o f Energy - P e t ro leum Re s e rv e s O f f ic e .

G- 2

tho s e pro j e c t e d f o r 1 9 9 2 under c u r r e n t deve l opme n t p l a n s . The c u r r e n t p l ans provide f o r the f u t u r e ( 1 9 9 2 ) d e c omm i s s i o n i n g o f the S u lphur M i n e s 2 6 -mi l l i o n - b a r r e l s to r a g e f a c i l i ty w i th r e ­ pl acement c ap ac i t y through t h e expa ns i o n o f two o t h e r s to ra g e s i t e s , B i g H i l l and B ayou Choc taw . F i gure G- 1 p r o v i d e s a s chema t i c v i ew o f the c u r r e n t a n d p l anned S P R d i s tr ib u t i o n s y s t em . I n l a te 1 9 8 4 , the S P R i n i t i a ted a d i s t r i b u t i o n enha n c em e n t program t o e n s u r e that the S P R d i s tr ib u t i o n c ap ab i l i t y w i l l ade­ qua t e l y s upport the S PR dr awdown p e r fo rman c e . Th i s p r o g r am wa s prompted by a ma j or de c l i n e in fore i gn c rude o i l demands by the Midwe s t re f i n e r s , r e s u l t i ng i n the c o nve r s io n t o n a t u r a l g a s tran smi s s i on o f two ma j o r i n t e r s t a t e p i pe l i ne s t o wh i c h t h e S P R was c o nne c te d ( S e away a n d Te xoma ) . The d i s tr ib u t i o n e nh a n c e me n t prog ram h a s b e e n d e s i gned to i n c re a s e t h e S P R ' s d i s t r ibut i o n c apab i l i t y from i t s 1 9 8 6 l e ve l o f 2 . 3 MMB / D t o 4 . 5 MMB / D , a n d t o provide waterborne a c c e s s t o a t l e a s t two ma r i ne t e rm i n a l s w i t h i n each s to r age group . A s o f March 3 1 , 1 9 8 8 , S P R i nventory w a s 5 4 5 m i l l i on b a r r e l s o f crude o i l i n s to r a ge , a n i n c r e a s e o f 2 3 3 m i l l i o n b a r r e l s over the Ma rch 3 1 , 1 9 8 3 level of 3 1 2 mi l l i o n b a r r e l s as r e p o r t e d in the p r e v i o u s N a t i o n a l P e t r o l e um Counc i l ( NP C ) s tudy . SPR s to r a g e capa c i ty i n c re a s ed 2 5 9 m i l l i o n barre l s dur i n g the s ame pe r io d , t o 5 8 0 mi l l i o n bar r e l s on M a r c h 3 1 , 1 9 8 8 , f r om 3 2 1 m i l l i o n b a r re l s o n March 3 1 , 1 9 8 3 . The s y s t em ' s dr awdown and d i s tr i but i on c apa­ bi l i t i e s h ave a l s o been imp roved s i n c e the p r e v i ou s NPC r e p o r t ; curre n t l y , S P R i nv e n to r i e s c a n be drawn down a t t h e r a t e o f 3 . 5 MMB / D and d i s t r i b u t e d a t a r a t e o f 3 . 0 MMB / D c ompa r e d to a dr aw­ down / d i s tr i bu t i o n r a t e o f 1 . 7 MMB / D i n 1 9 8 3 . The d i f f e r e n c e betwe en dr awdown r a te s and d i s t r ibu t i o n r a t e s c u r r e n t ly i s d u e t o l im i t a t i o n s on p i p e l i ne throughpu t . The s e l im i t a t i o n s w i l l be overcome by 1 9 9 2 .

QUE S T I ONNAI RE ON THE S T RAT E G I C P E T ROLEUM RE S E RVE The NPC s e n t i t s que s t io n n a 1 r e on the S t r a t e g i c P e t r o l e um Res e r ve to the 3 8 1 c ompan i e s in the p r ima ry d i s t r ib u t i o n s y s t em and r e c e ived 99 re s po n s e s ( s e e Appe n d i x D f o r a c opy o f the que s t i o nn a i r e ) . E a c h re spondent s a id tha t t h e e x i s t e n c e o f the S P R has no t redu c ed the amou nt o f o i l it rou t i n e l y ho l d s i n i n ­ ventory . I n add i t i o n t o th i s c e n tr a l c o n c l u s i o n , the que s t i o n­ naire r e qu e s ted c e r t a i n o th e r i n forma t i o n , and th e r e s po n s e s prov ide add i t i o n a l i n s i gh t into how the c omp an i e s v i ew the S P R program . ---

The que s t i onna i r e r e qu e s ted a c h a r a c te r i z a t i on o f the r e ­ sponde nt : l a rge re f i n e r , sma l l re f i n e r , marke t e r , t e rm i n a l ope r a to r , p i pe l i n e . A lmo s t h a l f o f the re s po nd e n t s were r e f i n e r s - - 1 6 o f the 9 9 w e r e r e f i n e r s w i th mor e t h a n 1 7 5 , 0 0 0 B / D c a p a ­ c i ty , a n d 3 2 we r e re f i n e r s w i t h 1 7 5 , 0 0 0 B / D c a p a c i ty o r l e s s . One-qu a r t e r o f the r e s ponde n t s we re p e t ro l eum produ c t s m a rk e te r s .

G- 3

CAPLI N E G R O U P CAPLINE (CC) PIPELIN E

480

480

WEEKS

MID-WEST REFINERIES

ST. JAMES,

ISLAN D

700

800

400

437

200

200

(IL, I N , M I ,OH,WI,)

LA

TERMINAL (lBD)

590

590

BAYOU CHOCTAW

LOCAP TERMINAL (ST. JAMES,

LA)

PVT PI PELIN ES

SOUTHERN LOU ISIANA REFINERIES

Figure G- 1 . Current and Planned Strategic Petroleum ReseiVe Distribution System for the Seaway , Texoma, and Capline Groups.

SOU RCE:

Department of Energy, SPR Annual Report, February 1 5, 1 988, p. 1 8. G- 4

Conce rn ing que s t ion 4 a , " Do you agree w i th SPR s tocks du r i ng a n energy eme rgency ? " , n e a r l y respondents agreed , wh i l e 2 0 d i s agreed w i th the had no op inion . N i n e ty pe rcent o f the re f i n e r s s trategy .

e a r l y drawdown o f two - th i rd s o f the s tr a tegy and 1 6 agreed w i th the

Que s t ion 4b a s ked , " I s your company l i ke l y to p a r t i c ipate in an auc t ion for S P R o i l ? " Ove r hal f of a l l r e s po nd e n t s ( 5 2 of 9 9 ) answered "No , " and another f ive o f fered no o p i n i o n . The compan i e s th at i nd i c a ted th at they wou l d not p a r t i c i pa t e we re for the mo s t part non-re f i ne r s , repre s e n t ing abou t 8 0 pe r c e n t o f the nonre finer r e s pond e n t s ( 4 1 of 5 2 ) . In contr a s t , n e a r l y a l l o f the l arge r e f i n e r s and two - th i rds o f the sma l l r e f i n e r s an swered that they wou ld l ike l y take part i n an S P R auc t i on . Put anothe r way , 8 6 percent o f the r e s pondents l ik e l y to p ar t i c i pate in an auc t i on are re f i ne r s . Que s t ion 4 c , " I s you r company fami l i ar with and do they have an op inion o f the DOE Dr awdown P l an ? " s hows that g e n e r a l l y r e ­ f iner s a r e fami l i a r w i t h t h e p l an a n d o t h e r type s o f compan i e s are un fami l i ar w i th it . The que s t i on a s ked for fu r th e r comme n t s from tho s e fami l i ar w i th t h e p l a n , wh ich are reproduc e d i n the fo l lowing pages . Th e comme nt s , a s s ubm i t te d by 3 3 r e s pondent s , we re provided to the N a t i o n a l P e t ro l eum Counc i l by D e l o i t t e Ha s k i n s & S e l l s , withou t attr ibu t i on . As can be s e e n , many o f the re finers c ommented th at purcha s e s o f S P R o i l s ho u l d i n s ome way be re s tr i c te d to U . S . re f i n e r s . The re s pon s e s to the s u rvey are shown i n T ab l e G - 2 , fo l l owed by th e comment s to que s tion 4 c . TABLE G-2 RE SULTS OF STRATEGIC PETROLEUM RES ERVE SURVEY 1.

Wh ich o f the f o l lowing cat egories b e s t c a t e g o r i z e your c ompan i e s operat ion? Numb e r

Perc en t

Re f iner with mor e than 1 7 5 , 00 0 B /D c ap a c i t y

16

16 . 2

Re f iner with 1 7 5 , 0 00 B /D capacity or l e s s

32

32 . 3

Petroleum produ c t s marke t e r

25

25 . 3

Pub l ic warehous e t e rminal op erat or

10

10. 1

Pipeline

8

8.1

Other

8

8. 1

99

1 00%

Total

G- 5

TABLE G-2 ( Cont inued )

2.

What is the d is t r ibut ion o f your company ' s crude o i l c on sump t ion b y PADD ? Rep or ted Barr e l s from Que s t ionna ire 1 - C rude O il PADD PADD PADD PADD PADD

I II III IV V

1 3 , 489 53 ,031 130 , 242 1 0 , 844 4 1 , 590

No C rude O i l Con sump t ion

3.

4 5 . 2%

Ha s the exi s t ence o f the SPR reduc ed the amount o f o i l you rout inely hold in inventory ? 1 0 0% o f re spondent s reported n o chang e .

4a .

Do you ag r e e with the early drawdown o f SPR s t o cks dur ing an emergency ? Ab s t ain

Yes

No

Re f iner with mo re than 1 7 5 , 00 0 B /D capac ity

14

1

Re f iner with 1 7 5 , 0 0 0 B /D capac ity or l e s s

28

4

P e t r o l eum produ c t s marke t e r

12

7

6

Pub lic warehou s e t e rminal operator

3

4

3

Pipe l ine

4

1

3

Other

2

3

3

63

20

16

To t a l

G- 6

1

TABLE G- 2 ( Cont inu e d )

4b .

Is your company l ike ly t o par t i c ipa t e in an auc t ion f o r S PR o i l ? Ye s

Ab s t a in

Re finer with mo re than 1 7 5 , 00 0 B /D capac i t y

15

Re f iner with 1 7 5 , 0 0 0 B /D capac ity o r l e s s

21

11

Pe t r o l eum produc t s marke t e r

4

20

1

Pub l i c warehou s e t e rminal op erator

1

8

1

7

1

1

6

1

42

52

5

Pip e l ine Other To tal

4c .

No

1

I s your company fami l iar with and do they hav e an o p in ion on the DOE Drawdown Plan? Ab s t ain

Yes

No

Re finer with mor e than 1 7 5 , 00 0 B /D cap a c i t y

14

1

Re f ine r with 1 7 5 , 0 0 0 B /D c ap a c i ty o r l e s s

15

17

2

22

1

Pub l ic war ehou s e t erminal op erator

9

1

Pipe line

7

1

1

6

1

32

62

5

P e t r o l eum p roduc t s marke t e r

Other To t a l

G- 7

1

COMMENT S ON THE S P R RELEASE P ROGRAM 1.

The dec i s ion t o open s a l e s to a l l i n t e r e s ted b idder s pro­ vide s an o pportun i ty for non-re f i n e r s to acqu i r e and ho l d S P R c rude , awa i t ing t h e inev i t ab l e r i s e i n p r i c e be fore B idde r s on S P R o i l shou ld b e requ i red to demon ­ re s e l l ing . s trate work ing inte r e s t owne r s h ip in ope r a t ing re f i ne r i e s pr ior to the a c c eptance o f b i d s . Open s a le s w i l l o n l y s e rve to a l low i n t e rmed i ar ie s to ach i eve p ro f i t a t the expe n s e o f the u l t ima te c o n s umer . [ C ategor i e s that be s t f i t th i s c ompany ' s ope r a t i o n : r e f in e r wi th 1 7 5 , 0 0 0 B / D c ap ac ity or le s s ; p e t ro l e um produc t s mark e t e r ; p ipe l ine . ]

2.

S uppo r t s an S P R owned and contro l l ed by the feder a l govern­ men t , as we l l a s the early dr awdown po l i c y of the current admin i s t r a t i o n . Suppo r t s an S P R targe t o f 7 5 0 mi l l ion barre l s to b e com­ p l e t e d by 1 9 9 5 u s ing gene r a l funds . Spec i f i c a l ly , f i l l ing the S P R to 7 5 0 mi l l ion barre l s by 1 9 9 5 prov i d e s a f i n i t e c apac i ty a n d a d a t e c e r t a i n whe n i t mu s t b e f i l l ed . [ C ategory that be s t f i t s th i s company ' s ope r a t ion : w i th mo r e t h a n 1 7 5 , 0 0 0 B / D c apac i ty . ]

3.

a.

I n a s eve r e s upply c r i s i s , u . s . r e f i n e r s s h ou l d h ave f i r s t p r i o r i ty to purch a s e SPR c rude o i l .

b.

The re s hou ld be a l imitat ion on the quan t i ty o f S P R c rude o i l a n i nd ividua l buyer c an pur cha s e i n a month .

[ Ca te gory that be s t f i t s th i s company ' s ope r a t ion : wi th 1 7 5 , 0 0 0 B / D c ap ac ity or l e s s . ] 4.

re finer

r e f iner

The Department o f Ene rgy reque s ted pub l i c i nput a s the S P R The c orpor at ion ' s D rawdown P l an wa s be ing deve l oped . c omment s c a n be s ummar i z ed a s fo l l ows : a.

E l ig i b l e b i dde r s from S P R o i l shou ld b e l imi ted to bona Only a d ome s t i c re f i n e r c a n f i de dome s t i c re f i ne r s . re f ine S P R crude into a produc t a n d de l ive r i t to t h e pub l i c f a s t e nough t o m i t i gate the e f fe c t s o f an o i l d i s rup t i on . A l s o , l imit ing e l i g ib l e b i dd e r s t o dome s ­ t i c re f i n e r s wi l l perm i t the s a l e s t e rm s t o b e s imp l i ­ f i ed .

b.

The S P R dr awdown s chedu l e shown at the top o f page 2 ( o f the NPC " 1 9 8 8 Survey o f The S t rate g i c P e t r o l eum I t c an be Re s e rve " ) i s unre a l i s t i c a l ly opt imi s t i c . expec ted that reach ing th e po l i t i c a l c on s e n s u s n e ce s s ary t o dec l are a n eme rgenc y wi l l t ake a l ong t ime . The two -pha s e sys tem d e s c r ibed b e l ow wou ld a l l eviate that prob lem .

G- 8

I n the f i r s t pha s e o f th e propo s ed s y s t em , S P R c r ude wou l d be cont inua l l y o f fered f o r s a l e a t a p remium above the current market p r i c e for c omp a r ab l e crude . In gen e r a l , the re wou ld be l i t t l e mark e t for the h i ghe r-pr iced SPR c rude in t ime s o f adequ a t e supp ly . As s upp ly b e c ame t igh t a s a re s u l t o f an a n t i c ipated o i l d i s rup t i o n , s ome buye r s m i ght fee l i t prud e n t to pay the prem ium for S P R crude in o rde r to a s s ure the i r s upp ly . As S P R c rude s a l e s r o s e above s ome prede t e rmined leve l , th i s wou ld tr i gger pha s e two , the auc t i on s y s tem out­ l i ned i n the c urrent S P R S a l e s Regu l a t i o n s . Th i s propo s e d s y s tem exped i te s S P R d rawdown by tr ig­ gering the auction through mark e t force s rather than po l i t i c a l dec i s ions . By t r i gge r i n g the auc t i o n e ar l i e r , c o n s ume r s wi l l s u f fer fewe r c o n s e qu e nc e s o f a n o i l d i s rupt i on . [ C ategor i e s that be s t f i t th i s company ' s ope r a t i o n : re f i n e r with more th an 1 7 5 , 0 0 0 B / D c apac i ty ; pe tro l eum produc t s marketer ; p i pe l i n e . ] 5.

Wh i l e we ope r a t e a re f inery loca ted i n PADD I I I , our c rude supp ly o r i gi nate s i n southe a s t Utah and nor thwe s t New Me xico . We do not fee l that the SPR Dr awdown P l an wi l l h ave a s ign i f i c ant impact on our ope r a t i o n . [ C ategor i e s that b e s t f i t thi s company ' s ope r a t i on : with 1 7 5 , 0 0 0 B / D c apac ity or le s s . ]

6.

S y s tem s hou ld be te s ted pe r i od i c a l l y to ve r i fy dr awdown capab i l i t i e s -- appropr i a te to te s t s y s t em . [ C ategory that be s t f i t s th i s company ' s ope r a t ion :

7.

o ther . ]

Norma l l y pe s s imi s t i c about gove rnme nt re gu l ated s uppl y programs . Th i s ha s been worked on and may wo rk . Wo u l d h ave pre ferred b i dde r s to be l imi ted to re f i n e r s but " f ree marke t " should preva i l . S t i l l concerned about l o g i s t i c s sys tem . [ C ategory that be s t f i t s th i s company ' s ope r a t ion : with mo re th an 1 7 5 , 0 0 0 B / D c apac i ty . ]

8.

r e f iner

r e f i ner

Al though not yet adequate ly te s ted , we agree that the com­ pe t i t ive market me chani sm shou ld e f f e c t i ve l y d i s tr ibute S PR o i l to re f i ne r s qu i ck l y , wi thout con s tr a i n t , and o n an economic b a s i s wh ich wi l l bene f i t the u l t imate c o n s umer . However , we b e l i eve that :

G- 9

a.

S P R s tock s shou ld b e a l l ocated by c ompe t i t i ve auc t i on only to dome s t i c r e f iners and w i thout the s ma l l re­ f i ne r s b i as wh i ch accompanied contro l s under the now­ exp i red Emergency P e t ro l eum A l l o c a t ion Ac t ( 1 9 7 3 - 8 1 ) . A p r i c e - au c t ion sys tem wi l l a l l ow c rude o i l to move to the geograph i c areas where i t wi l l b e mo s t h igh l y valued and wi l l s e rve a s a n i n c e n t i ve to con s e rvat ion .

b.

Re c e i p t s from the s a l e o f S P R s tock s shou l d b e u s e d a t a l a te r date to purcha s e o i l to r e f i l l t h e S P R . Pur­ cha s e s shou ld b e made whe n o i l supp l i e s are p l e n t i fu l i n order to p revent upward pre s s ur e o n wor ld o i l pr i c e s .

[ C ategory tha t b e s t f i t s th i s company ' s opera t ion : w i th mo re th an 1 7 5 , 0 0 0 B / D capac i ty . ] 9.

The s upp ly avai l ab l e to j obbe r s and d i s tr ibut o r s a nd o th e r indepe ndent mark e t e r s i s c r i t i c a l b e c au s e t h e y s upp l y sma l l town s and rur a l are a s , more than 8 0 p e r c e n t o f h ome h e a t i ng o i l , and more than 7 5 percent o f a l l s e rv i c e s t at i o n s . [ C ategory that b e s t f i t s th i s company ' s oper a t i o n : warehou s e termi n a l operator . ]

10 .

re f iner

Th e pub l i c auc t ion shou ld be re s tr i c ted to end-u s e r re f in e r s E xpo r t o f S P R t h a t a r e l o c a t e d wi th i n the Un i ted S ta te s . crude o i l shou ld not be a l lowed . Tr ad e r s a n d s p ec u l a to r s shou ld n o t b e e l i g i b l e t o b i d . [ Category th a t b e s t f i t s th i s comp any ' s ope r a t i o n : wi th 1 7 5 , 00 0 B / D c apac i ty or l e s s . ]

12 .

pub l ic

Gener a l ly suppo r t the marke t-or i e nted c ompe t i t ive b i dd in g approach embod i e d i n t h e S P R D rawdown P l an , Ame n dme n t No . 4 , D e c ember 1 , 1 9 8 2 . Howeve r , we fe e l that purch a s e s s h o u l d be re s tr i c te d to u . s . re f i ne r s , the i r purch a s ing age nt s , and / o r t r ad i t iona l s upp l i e r s . Such re s t r i c t i o n s wou l d f ac i l i ta t e r ap i d d i s t r ibut ion o f produc t s der ived from SPR crud e o i l t o c on s ume r s at t h e t ime o f emer gency . Un l im i t e d a c c e s s c ou l d l e ad t o hoard ing o r specu l a t ion b y tho s e no t norma l ly en­ gaged i n crude o i l s upp ly ac tivi t i e s , m i ght cause de l a y s be c au s e o f l ack o f expert i s e i n arrang i ng de l ive r i e s , a n d could e xacerbate ma rket vo l at i l i ty b e c au s e o f a d d e d vo l ume , t iming , and p r i c e unc e r t a i nty a s soc i a t e d w i th r e s a l e o f S P R o i l c rude o i l . The r e i s a n e e d t o a s s ure t h a t t h e c rude o i l i s u s e d t o a l l eviate the emergency s upp ly c ond i t i o n s that e x i s t a s oppo s e d to b e i ng he ld for s p e cu l a t ive g a i n s . [ C a teg ory tha t b e s t f i t s th i s company ' s ope r a t ion : w i th mo re than 1 7 5 , 0 0 0 B / D capac ity . ]

11 .

r e f i ne r

re f i ne r

There shou ld b e s ome method to preve n t " concern s " th at wou ld pro f i t mo s t from a s hor tage from buy ing up o r b i dd ing to an exce s s ive l eve l tho s e s tocks int ended to ave rt a c r i s i s .

G- 1 0

[ C a tegory th at be s t f i t s th i s company ' s ope r a t i on : pe tro l e um produc t s marketer . ] 13 .

We have two c omment s : a.

The o i l s hou ld be only made ava i l a b l e to e l i g i b l e r e ­ O th er part ic ipant s wi l l c o n fu s e d i s tr ibu t ion fine r s . and l e ad to inc re a s e i n p r i c e s to the c o n s ume r .

b.

PADD V i s a t a d i s tr ibut ion d i s advantage for th i s : o i l . We wou l d l i ke to s e e an a l l o c a t i o n made ava i l a b l e to PADD V re f i n e r s .

[ C a t egory tha t be s t f i t s th i s c ompany ' s ope r a t i on : with 1 7 5 , 0 0 0 B / D c apac ity or l e s s . ] 14 .

A pr i c e - compe t i t ive s a l e s procedure , w i th awar d s go i n g to the h i ghe s t b i dde r s , is f i ne within the context of a t ru ly free and open marke t . We wou ld not s uppo r t th i s procedur e , howeve r , i n the event th at there were any re s tr i c t i o n s o r o ther i n f r i ngeme n t s o n t h e f r e e mark e t proc e s s , s uch a s fr ee z i ng the f i r s t purcha s e r re l at i o n s h i p o n dome s t i c c rude o i l s or the i n s t i tution o f crude o i l o r produ c t pr i c e contro l s . Imp l ementation o f a produ c t ' s a l l o c a t i o n s y s tem wou ld a l s o s e em to u s to requ i re s ome me thod o f a l l o c a t ing crude o i l , inc l ud ing a l l o c a t ion of SPR dr awdown . [Category that be s t f i t s th i s company ' s ope r a t i o n : with more than 1 7 5 , 0 0 0 B / D c apac ity . ]

15 .

;r e f iner

On Augu s t 1 4 , 1 9 8 7 , we provided comme n t s o n the propo s ed appe nd ix to the f i n a l ru l e for " The S a l e o f S t r a te g i c . Petro l eum Re s e rve ; S tandard S a l e s Provi s io n s . " Among our pr imary concerns are : the requ i reme n t to furn i s h wr i t ten c o n f i rma t i on of any verb a l correc t i o n s w i th i n two days ; the as s e s sment of l i qu idated damage s for f a i lure of the purc ha s e r to c omp l e t e de l ivery arrangeme n t s ; the r e duc t ion o f the t ime from s e ven days to f ive days f o r s c hedu l ing o f d e l ive r i e s ; the provid ing o f f i r s t pr i o r i ty to the h ighe s t pr i c e o f fe r s ; the requ i r ement that a pur c h a s e r mu s t accept c rude o i l re gard l e s s of charac te r i s t i c s ; and the r e qu i re ­ me nt that a purch a s e r i s de emed t o have r e c e ived a ma i l ed no t i c e on the s ec ond day a fter its d i s patch i n order to rep l e n i sh fund s within f ive bu s in e s s days and , thereby , to c omp ly wi th the payme nt and pe r formance guaran t e e . I n add i ­ t i on , we a r e conce rned that the p l an h a s n o provi s i on . to accommodate , on a pr ior ity ba s i s , de l iver i e s o f S P R o i l to o f f s e t de l iver i e s under the f a i r - shar ing program . [ C a tegory that be s t f i t s th i s company ' s o pe r a t i o n : with more t h a n 1 7 5 , 0 0 0 B / D c apac i ty . ]

16 .

r e f in er

re f iner

The un iver s e o f b i dder s s hou ld be l im i ted to dome s t i c re ­ f i ne r s ; otherwi s e fore ign countr i e s w i th l arge o i l produ c ­ t ions c o u l d purch a s e the c rude o i l t o k e e p t h e s upp l y

G-1 1

A l s o , any o i l go ing to our a l l i e s s h ou l d b e re s tr i c t e d . the b a s i s o f consump t ion . S i n c e sma l l e r c om­ prorated on pan i e s w i l l not have the f i nanc i a l r e s ourc e s t o c omp e t e ag a i n s t the ma j or s , w e wou ld l ik e t o s e e s ome a l l o c a t i o n s y s tem . [ Cat egory t h a t b e s t f i t s th i s c ompany ' s op e r a t ion : w i th 1 7 5 , 0 0 0 B / D c ap ac ity or le s s . ] 17 .

Dome s t i c re f i n e r s mu s t be given the f ir s t oppor tun i t y t o b id on S PR o i l . O n l y a f ter re f inery n e e d s are me t shou ld b a r ­ r e l s b e o f fered t o o ther intere s ted p a r t i e s . T h e D O E s h ou l d be mo s t concerned w i t h ma intain ing r e f in ing outpu t dur i ng a c r i s i s and not who b i d s at the h i ghe s t p r i c e for S P R c rude oi l . Und e r the pre s e nt p l an , i t ' s fe a s ib l e t h a t r e f i ne r s could b e paying i n f l ated p r i c e s for S P R c rude o i l that wa s purcha s e d through trade r s by for e i gn c omp an i e s w i th c amou­ f l aged U . S . ope r a t i o n s and l arge c a s h re s erve s . [ C ategory tha t b e s t f i t s th i s company ' s ope r at i o n : wi th 1 7 5 , 0 0 0 B / D c apac i ty o r l e s s . ]

18 .

r e f in e r

r e f in e r

The dr awdown program re l i e s on two a s sumpt ion s : p i pe l i ne moveme nt o f S P R c rude o i l to the r e f i n e r y and " backed out " c rude o i l to s upp l y re f i n e r s not part i c ipat ing ( or l o s ing ) at auc t ion , or tho s e phy s i c a l l y removed from ac c e p t i n g p ipe l ine c rude o i l . The va l id i ty o f the s e a s s umpt i o n s i s que s t ioned . I f a shor t f a l l i n i t i ate s the auc t i on me chan i sm , wi l l c rude o i l avai l ab i l i ty be indi s c r iminate o n a reg i o n a l b a s i s -- a s DOE hope s ? F a i lure t o i den t i fy re g i o n a l shor t f a l l s c o u l d re s u l t i n uneven c rude o i l d i s t r i bu t ion , w i th one r e g i o n s u f f e r i n g at the expen s e o f anothe r . A l s o not i n c luded i n DOE ' s c a l c u l a t i o n s i s t h e t ime nece s s ar y to move n o n ­ p ipe l i ne c rude o i l t o c e r t a i n de s t i na t i on s , p a r t i cu l a r ly tho s e s erved by mar i ne s ourc e s . The program shou l d be de s igned from a r e g iona l ava i lab i l i ty­ di s tr ibut ion s c e n a r i o not s o l e l y a p r i c e - d i s tr ibut i o n Comb i n i n g the s e me thod s e n sure s a b a l an c e d d i s ­ s c en a r i o . tr ibut i on s ch eme and e l imi nate s any mark e t d i s to r t i on s b a s e d o n a l ack o f c r ude o i l supp l y . [ C a tegor i e s th a t be s t f i t th i s company ' s ope r a t i on : re f i n e r w i t h 1 7 5 , 0 0 0 B / D c apac i ty or l e s s ; pe tro l e um produc t s mark eter . ]

19 .

We are a spec i a l ty produce r o f a s pha l t and f e e d s to c k s that cannot b e made from gene r a l crude o i l s . The c u r r e n t b i d s y s t em i s n o t c o n f ined t o bona f ide r e f i n e r s , a n d wi l l l ik e ly bec ome a ho s tage o f crude o i l trade r s and s pecu­ l ato r s . [ C ategory that be s t f i t s th i s company ' s ope r a t i o n : w i th 1 7 5 , 0 0 0 B / D c apac ity or l e s s . ] G- 1 2

r e f in e r

20 .

L imi t ing e l ig ib i l i ty to bid to bona f ide re f i ner s w i l l r e ­ du ce or e l iminate t h e po s s ib i l ity o f o t h e r part i e s man i pu­ l a t ing S P R supp l i e s ( for pro f i t e tc . ? ) whe n they do not h ave a d i r e c t need . Such man ipu l a t ion c ou ld d e l a y r e c e ipt o f f i n i shed produc t s to tho s e who are s u f fer ing i n a short fa l l s i tuat ion . [ C a tegory tha t be s t f i t s th i s c ompany ' s ope r a t i o n : with mo re than 1 7 5 , 0 0 0 B / D c apac ity . ]

21 .

Wou ld b id ; the l ike l ihood o f b e i n g ab l e to out-b i d a m a j or Th i s method o f d i s tr ib u t i o n company with c a sh is remo te . would f o r c e the c ompany to s h u t down and h o ld i t s pre s en t cu s tome r s hos tage to l arger re f i n ing c omp an i e s w i th f a r g r e a t e r acc e s s to c a s h , a s we l l a s i t s own produc t ion . Why not con s i der a percentage o f c rude o i l run o f the N a t i o n a l Total and a l l ow f o r exchange s or s a l e s ? [ C ategory that be s t f i t s th i s c ompany ' s ope r a t i o n : with 1 7 5 , 0 0 0 B / D c apac ity or l e s s . J

22 .

r e f iner

The petrochem i c a l indu s try needs acce s s to c rude o i l i n t ime s o f eme r gency t o " tr ade " w i th re f i n e r s to obt a i n feed­ s tocks to k e ep thi s c r i t i c a l i ndu s try ope r a t i n g . [ C a tegory tha t be s t f i t s th i s company ' s ope r a t ion :

24 .

re f iner

The c ompan i e s e l i g i b l e to b i d on the S P R o i l shou l d be c e r ­ t i f ie d re f i n e r s o r c ompanie s w i th c e r t i f i e d proce s s ing dea l s with c e r t i f i ed re f i n e r s ( a l l u . s . ) . No b roke r s , trade r s , he at i n g o i l re s e l l e r s , doctor s , den t i s t s , e t c . [ C ategory that be s t f i t s th i s c ompany ' s ope r a t i o n : with mo re than 1 7 5 , 0 0 0 B / D c apac ity . J

23 .

r e f iner

o ther . J

I n the event o f an emergency requ i r ing S P R s a l e s , a b i dd i n g proc e dure s e ems t o o ine f fec t i ve a n d r i sky . T h e t ime r e ­ qu ired t o c omp l ete t h e b i dd ing proc e s s a n d make de l ive r i e s i s exce s s ive and in the t ime o f c r i s e s wou l d po s s i b l y pro­ mo te furthe r pan i c . Cand id ate s for de l ivery shou l d be s creened i n advance and on f i le ( upda ted per i o d i c a l ly ) The government shou l d e s t ab l i sh the pr ice of o i l a t the t ime o f c r i s e s and begin d i s tr ibut ion imme d i a t e ly , ba s ed o n a pre­ e s t ab l i shed r a t i on ing program . •

[ C a tegor i e s that be s t f i t th i s c ompany ' s ope r a t io n : re f iner with 1 7 5 , 0 0 0 B / D c apac ity or le s s ; p e t ro l e um produc ts mark e t er ; pub l ic warehou s e term in a l oper a to r ; p i pe l ine ; other . J 25 .

We agree w i th e a r l y dr awdown , but re a s s e s sme n t depe nd ing on durat i o n of the emergency . We be l i eve t he dr awdown s hou ld be a s s igned t o re f i ne r s on a c apac i ty - and qu a l i ty-re l ated b a s i s and tha t re f i n e r s no t

G- 1 3

ob ta i n i n g o i l o n a b i d b a s i s wou l d be a l l owed to mee t the bid for th e i r e nt i t l ement . [ C at e go ry that b e s t f i t s th i s company ' s ope r a t ion : w i th 1 7 5 , 0 0 0 B / D c apac ity or l e s s . ] 26 .

The re shou ld be a f loor price on th e o i l s o ld . Th i s pr i c e shou ld b e the greater o f the ave rage purcha s e p r i c e o f th e o i l within the S t ra t e g i c P e tro l eum Re s e rve o r the aver age wor l d mark e t p r i c e on the day the emergency is d e c l ared . [ C ategory tha t b e s t f i t s th i s c ompa ny ' s op e r a t i o n :

27 .

o ther . ]

The S ec r e t ary o f E nergy or the succe s s o r to the autho r i ty o f th e S e c re tary o f Ene rgy over drawdown o f S P R o i l s hou l d e s ­ tab l i sh a floor p r i c e on th e o i l s o ld . Th i s p r i c e shou l d b e t h e g r e a t e r o f t h e ave r age purch a s e pr i c e o f t h e o i l w i t h i n the S trategic P e tro l eum Re s erve o r t h e ave rage c ompe t i t ive wor ld market p r i c e i n e f fec t dur ing the p e r iod o f the eme r ­ gency . [ C a tegory tha t b e s t f i t s th i s company ' s ope r a t ion :

28 .

r e f in e r

o th e r . ]

The bidding pro ce s s wi l l l e ad to panic r i s e s i n the c rude mark e t pr i ce s . I t wi l l not get the produc t s to the are a s o f the country whe r e shortage s may deve lop and i t wi l l t o t a l l y exc lude the ab i l ity o f the sma l l i ndepend e n t r e f i n e r s from par t i c ipa t ing a nd hence from s upp ly i n g the i r mark e t a r e a s . [ C ategor i e s that be s t f i t thi s company ' s ope r a t i on : r e f i ner wi th 1 7 5 , 0 0 0 B / D c apac i ty or l e s s ; pe tro l eum p roduc t s marke t e r ; p i pe l i n e . ]

29 .

I t i s po s s ib le i f not probab l e an I EA ( I n t e r na t i o n a l Ene rgy Age nc y ) eme rge ncy c ou ld be dec l ared dur ing a d rawdown of S P R I EA mandatory a l l o c a t ion wi l l l ike l y con f l ic t w i t h the oil . Dur ing an I EA emergency , free mark e t approach for S PR o i l . procedu r e s shou l d a l l ow for SPR c rude o i l to r e p l a c e c rude o i l or produ c t that a U . S . company d ive r t s to anothe r c oun­ try in order to s a t i s fy ob l i g a t i o n s of the Un i te d S tate s to othe r I EA n a t i o n s under the I nternat i o n a l E n e rgy P r ogr am ' s o i l - s upp l y- shar ing agreement . Th i s cou l d b e done by e i ther a sale o r a t im i ng exchange of S P R c rude o i l to the u . s . company g iving up the c ar go o f o i l to another I EA c ountry . Th e p r i nc i p l e behind such a po l icy wou ld b e to e n s u r e tha t no U . S . c ompany i s d i s advan taged b y c oope r a t i n g w i t h the U . S . gover nme n t a nd the I EA in mee t ing U . S . ob l ig a t i o n s in an l EA- tr igge re d petro leum- shar ing program . W i th the unde r s t and ing that the a forement i oned " fa i r s h ar ing " or compe n s at ion for compan i e s p a r t i c i p a t i n g i n the I EA program wou l d take p r i or i ty ove r any o th e r s e l l - o f f o f S P R c rude o i l , we support p r i c e - compe t i t i ve s a l e s a s the ba s ic me thod o f d i s t r ibu tion o f SPR c rude o i l . The b e s t intere s t s o f the U n i ted S ta te s are s e rved whe n the mark e t ­ p l a c e i s re l i ed upon t o the max imum extent po s s ib l e . The G- 1 4

prov1 s 1 on for the d i rected s a l e o f up to 1 0 pe r c e n t o f the SPR o i l by the DOE S e c re tary at marke t p r i c e s o f f e r s a me ans for d e a l ing with c r i t i c a l needs th at a r e not me t by the auc t i on for whatever r e a s on . We d i s agree th a t the l a rge s t po s s ib l e u n i ve r s e o f e l i g i b l e buyer s e n s ure s th e mo s t e f f i c ient d i s tr ib u t i o n o f S P R c rude oil . The p a r t i c ipation of fore ign i n t e r e s t s and s p e cu l ator s i n the auc t i on c ou ld deny or de l ay the e f f i c i e n t d i s tr ibu­ t ion of S P R o i l to u . s . consumer s and impede th e wo rk i ng s o f the marke tp l a c e . We be l ieve S P R o i l , except for that po r ­ tion wh i ch i s d i s c r e t i onary f o r d i s tr ibu t ion by t h e DOE S e c re t a ry unde r the SPR Dr awdown P l an , shou l d b e made ava i l ­ ab l e through c ompe t i t ive s a l e s to a u n i ve r s e o f buye r s wh i ch inc lude s o n l y u . s . re f i ne r s and / or the i r h i s to r i c a l purchas ing agen t s . [ Category tha t be s t f i t s th i s company ' s ope r a t i o n : with mor e than 1 7 5 , 0 0 0 B / D c apac ity . ] 30.

r e f i ner

Comme n t s perta in ing to the DOE Dr awdown P l an , Ame ndme nt No . 4 , Decembe r 1 , 1 9 8 2 : 1.

2.

We concur with the Gene r a l Ac c ou nt i n g O f f i c e ' s ( GAO ) rec ommendat i o n s to Congre s s a s found on page s v i i , vi i i , and 5 6 o f GAO Eva luat ion o f the Departme nt o f Ene r gy ' s P l an to S e l l O i l from the S tr a te g i c P e tro l eum Re s e rve , June 5 , 1 9 8 5 . We are p ar t i c u l a r l y i n favor of : 1.1

Re s tr i c t i ng c e r t a i n fore i gn purcha s e s o f S P R o i l .

1.2

Re s tr i c t i ng the purch a s e o f S P R o i l by broke r s and tr ade r s .

To enhance the deve l opme nt o f i n t r a - c ompany c o n t i ngency p l anning for r e a c t ing to a po tent i a l imp l eme n t a t i o n o f the S P R Dr awdown P l an , we recommend that the DOE : 2.1

E s tab l i s h a me chan i sm for a l e r t ing the p e t ro l eum indu s try when an S P R dr awdown i s b e i n g c on s ide re d . Add i t iona l l y , the e s tab l i shme n t and ma i ntenance o f a compute r i z ed l i s t o f pro spe c t ive , prequa l i f i e d b i dde r s wou ld b e o n e way t o exped i te no t i f i c a t i on s and contr ibute toward the re duc t i on o f the t ime de l a y betwe en " Dec l ar a t i on o f Emerge ncy " and " No t i f i c a t i o n of Award , " an ac t i o n we s tr o n g l y enc our a ge .

2.2

Re cogn i z e the re i s a need to c o n s t r u c t N ot i c e s o f S a l e t o perm i t b i d s for swe e t crude , o r sour c r ude o i l , i n pre fe rence to p e rh ap s r e qu i r ing a b i dd e r to quo te on both c rude o i l qua l i t i e s a s a qu a l i f i c a t ion for award .

G- 1 5

3.

2.3

E xpand the S P R Annua l / Quart e r ly Repor t , pub l i shed by the u . s . Departmen t of Ene rgy , A s s i s ta n t S e c re tary f o r F o s s i l Energy , O f f i c e o f P e t r o l eum Re s erve s , to show with in S P R s torage l o c a t i o n s , n o t o n l y the on-hand i nvento r i e s b roken down i nto swe e t and s ou r c rude o i l group i n g s ( Tab l e 6 , page 8 , SPR Annua l / Quarte r ly Repor t , F e b ru a r y 1 5 , 1 9 8 8 ) , but fu rther det a i l ing tho s e l o c a t io n i nvento r i e s b y SPR s pec i f i c a t i o n s ( i . e . , I , I I , I I I , IV , & V) . Then the vo lume s r e ported w i th i n e ach s pe c i f i c a t ion shou l d be c ro s s - r e f e r e n c e d t o the s p e c i f i c c ountry / c rude o i l n ame s and vo l ume s wh i ch c ompr i s e the re spect i ve S P R l o c a t i on inventory s p e c i f i c a t ion .

2.4

O f fe r for s a l e now , f ive -ga l l on s amp l e s repre­ s e n t a t ive of the va r i ou s SPR c rude s p e c i f i c a t i o n s wh ich wou ld be o f fe r ed f o r s a l e f rom t h e var ious S P R s torage locations dur ing a n eme rgency . Th i s wou l d p e rm i t pro spec t ive b idde r s t o a s s e s s fur ther the r e f i n ing y i e l d s th at we wou l d expec t to re ­ c e ive f rom the S P R , the re s u l t s o f wh i c h h ave a b e a r ing o n the u l t ima te pr i c e b id .

The D e c embe r 3 1 , 1 9 8 7 SPR crude i nven t o ry d a t a i n d i ­ c a t e t h a t 6 5 percent o f t h e 5 4 0 mi l l ion b a r r e l s i n s to r age i s s our c rude o i l . I n contr a s t , o n l y about 2 5 perc e n t o f our company ' s norma l d a i ly r e f i n ing run s are F rom our po int o f view , and probab ly sour c rude o i l . many of our u . s . dome s t ic r e f inery c ompe t i tor s , the S P R c rude o i l qua l i ty in inventory app e a r s t o be imba l an c e d . Thu s , we wou l d enc ourage future S P R c rude o i l buys I n add i t ion to c ap i t a l appropr i a t ion s we e t c rude o i l . out l ay s that wou ld be requ i r e d , pe rhap s s ome b a l anc ing ove r t ime cou ld be ach ieved , a l ong with o th e r te s t bene f i t s , through outr i gh t " s our te s t s a l e s , " app lying that revenue r e c e ived to o f f s e t par t i a l ly swe e t c rude oil cos ts . Otherwi s e , DOE ' s an t i c i p a te d demand for S P R c rude o i l may be optimi s t i c , becau s e U . S . r e f in i n g requ i r eme n t s f o r s our crude o i l are gene r a l ly l e s s a t th i s time , b e c au s e many re f i n e r s a r e no t e qu ipped to hand l e s igni f i c an t qu ant i t i e s o f s ou r c rude o i l . [ C a tegory that be s t f i t s th i s company ' s ope r a t i on : re f i ne r w i th mo re than 1 7 5 , 0 0 0 B / D c apac i ty . ]

31.

Fo l l owing are two s pe c i f i c comme n t s to e x c e rpt s from the S t r a te g i c P e t rol eum Re s e rve Drawdown P l an , Amendme n t No . 4 ( in quo te s ) , a s we l l a s a general S P R c omment i n i tem 3 . 1.

" The pr imary purpo s e o f the S P R s a le s and d i s tr ibu t i on pro c e s s w i l l be to provide add i t ion a l s upp l i e s o f petro leum t o dome s t i c ene rgy marke t s on a t ime ly b a s i s , to s ub s t i tute for s upp l ie s i nt e rd i c t e d due to a ma j o r fue l s upp l y d i s rup tion . The S P R o i l d i s t r ib u t i o n

G- 1 6

proc e s s i s intended pr imari l y to supp l ement n a t i o n a l petro l eum supp l i e s . " Comment : The DOE shou ld con s ider r e s tr i c t ing s a l e s to dome s t i c re f i ne r s , th e i r purch a s ing age n t s , and / o r t r a ­ d i t i o n a l supp l i e r s o f c rude o i l for d ome s t i c c o n s ump­ t i on . B i d s from l arge numb e r s o f unqua l i f ie d b idde r s o r s pecu l a t o r s wou ld tend t o ove r load the s y s tem and de l ay the t ime l y de l ivery of SPR o i l . 2.

" I n deve l op i ng the SPR d i s tr ibut ion s y s tem , s to r age s i te s have been l o c a ted i n a r e a s tha t are h igh l y ac c e s ­ s ib l e t o ma j or commerc i a l d i s tr ibut ion s y s tems , inc lud­ ing inte r s tate p ipe l i ne s and mar ine port and term i n a l fac i l i t ie s . The s e l o c a t i o n s permit S PR c rude o i l to be int roduced rap i d l y i nto the normal u .s. c rud e o i l d i s ­ t r ibut ion s y s tem , i f pe tro leum supp l i e s t o the U n i te d S t a te s a r e inte rrupted A s igni f i c ant po rt ion o f th i s · c rude o i l i s trans ferred i n l and through thre e ma j or inte r s tate p i pe l i n e s o r i g i n a t i n g i n t h e Gu l f Coa s t . The three pipe l ine s are the S e away and Texoma P i pe l i ne s , both terminat ing at C u s h i n g , O k l ahoma , and the Capl ine P i pe l ine , wh i ch term i n a te s a t P a toka , I l l i no i s . " •

.

•

Dur i ng the i n i t i a l s tage o f an eme rgency s upp l y d i s rup­ t i on , i t may be d i f f i c u l t to de termine i t s s i gn i f i ­ c ance , s c ope , and duration . I n fac t ther e c o u l d be many " fa l s e a l arms . " The ini t i a l pan i c r e s po n s e to s uch perce ived eme rgenc i e s cou l d , i n and of i t s e l f , c au s e unne c e s s ary adve r s e economic a f fe c t s o n the nat iona l e c onomy . B e c au s e of th i s and the above ­ me nt ioned t ime - l ag fac tor , i t wi l l be i ncumb e n t upon the SPR to have approx ima te ly 1 0 pe r c e n t , o r 7 5 mi l l ion barr e l s , of SPR o i l ava i l ab l e for immed i a te de l ive ry into connec t ing c rude o i l trunk l i ne c a r r i e r s . Knowl edge o f th i s i n s tant ava i l ab i l i ty wou l d tend to mi t i gate a pan i c re spon s e s uch as hoard ing and d i s rupt ive p r i c e run-ups . S i nce i t i s ant i c ipated tha t there c ou l d b e many wi th­ dr awa l s and recharg i ng o f th i s 1 0 pe r c e n t i n c r eme nt , i t wou ld have t o be part o f t h e s y s t em wh i c h i s de s i gned to h and l e repe t i t ive wi thdrawa l s from a s a l t c avi ty wi thout an adve r s e e f fec t on the cavi ty s truc tu r a l integr i ty . Th i s spec i a l S P R r e s e rve shou ld a l s o b e l o c a te d whe re i t i s unnec e s s ary t o d i s rupt the trading pa t tern of the ex i s t ing U . S . f l ag f l e e t , i . e . i t shou ld be d ir e c t l y c onne c ted to the dome s t i c p i p e l i n e s y s tem . I t i s s ugge s ted th at such a r e s e rve shou l d be l o c a t e d i n the C ap l ine are a , wh ich h a s acce s s to 5 mi l l i on barre l s per day of u .s. r e f inery c apac i t y and wh i c h wo u l d s a t i s fy o n e o f t h e ma j o r s tudy r e c ommendat i o n s f o r t h e D e c embe r 1 9 8 4 N a t i o n a l P e tro l eum C ounc i l s tudy on the S tr a t e g i c Pe tro leum Re s e rve , wh i c h r e c ommended a

G- 1 7

s h i ft o f a t l e a s t 1 0 0 mi l l ion barre l s o f r ema i n ing S P R f i l l to b e p l aced i n the C ap l in e / LOOP c omp l e x . [ C a tegory th at be s t f i t s th i s comp any ' s ope r a t i o n : r e f in e r w i th more than 1 7 5 , 0 0 0 B / D c apac i ty . ] 32 .

We b e l ieve the DOE shou ld cont inua l ly s tudy the 1 9 8 2 D r aw­ down P l an to e n s ur e that it is re spon s ive to the change s that h ave occurred i n the internat iona l c rud e o i l mark e t s in c e tha t t ime . The emergence o f the c rude o i l market and the dominant ro l e o f the New York Merc an t i l e E xchange s in c e 1 9 8 2 wi l l p u t a premium on r ap i d gove r nmen t re spo n s e to any fu ture c r i s i s . Speed wi l l be e s s e n t i a l . The d rawdown p l an s s hou ld b e exam i n ed p e r iod i c a l ly to e n s u r e adequ a t e s upp l i e s wi l l be made ava i l ab l e rapidly t o b lunt p r i c e s p ik e s tha t wi l l o therwi s e occur . [ C a te gory tha t be s t f i t s th i s company ' s ope r a t i o n : petro l eum produc t s marketer . ]

33 .

Our company i s not par t i cu l a r ly fam i l i ar w i th the d r awdown p l an . Genera l ly , we favor a qu ick r e s pon s e by the gove rn­ Any huge me n t to he lp mode r a t e any i n i t i a l p r i c e s urge . r i s e i n the pr i c e of o i l , such as from l ate 1 9 7 9 through e ar ly 1 9 8 0 , i s terr i f ic for the o i l indu s try in the s h o r t run , but d e t r ime nta l i n t h e l o n g run . T h e s i tu a t i o n i n 1 9 7 9 wa s de f i n i t e ly aggravated by pan i c or e x c e s s ive buy i n g , whether b e c au s e o f hoard ing or specu l at i n g on future i n c re a s e s . B e twe e n 1 9 7 9 to 1 9 8 1 , comme r c i a l o i l s to c k s ro s e 1 0 - 1 1 5 percent above what i s prob ab l y norma l l y c a r r i e d on ave r age . Today , one cou l d argue that commerc i a l invento r i e s a r e probab ly about 1 0 percent be low a " no rma l " l e ve l , mor e b e c au s e o f a perce ived ove r supply r a t h e r t h a n t h e e x i s tence o f s trategic r e s erve s . The ma i n r e a s o n t h a t our C ompany i s c arryi ng a l i t t l e l e s s than we have i n the p a s t i s a f e e l ing tha t o i l is r e ad i l y ava i l ab l e to be purch a s ed , and n o t s o much bec au s e t h e S P R e x i s t s . Howeve r , i n the eve n t o f a supp ly c r i s i s , the pre s ence o f the S P R wou ld de f i n i t e l y mode r a t e the d e s i r e to buy and c a rry exc e s s ive i nventory . One way to be s t u t i l i z e the pre s e nce o f the S P R wou l d b e to n o t re l e a s e o i l un t i l th e spot p r i c e had r i s e n b y $ 5 - 8 per b a r re l . The f ac t th a t the SPR is c l e ar l y " wa i t ing i n the wings " to r e l e a s e o i l , i f nece s s ar y , wou l d h e l p l e s s e n p a n i c buy i n g and thu s d ampe n a sh arp pr i c e r i s e , eve n w ithout h av i n g to re l e a s e o i l . Obviou s l y , th i s approach wou l d he i gh te n t h e imp a c t o f t h e S P R a s we l l a s avo i d the country ' s added c o s t o f beginning to re l e a s e o i l from the SPR i f the s uppo s e d c r i s i s tur n s out to b e a fa l s e a l arm . We are s upporte r s o f the SPR concept and wou l d l ike to s e e i t emp loyed a s e f fe c t ive ly a s po s s ib l e . [ C a t egor i e s tha t b e s t f i t th i s compa ny ' s ope r at i on : re finer w i th 1 7 5 , 0 0 0 B / D c ap ac ity or le s s ; pe tro l eum produc t s marke t e r ; pub l ic warehou s e term i n a l ope r ator . ]

G- 1 8

APPENDIX H CARIBBEAN STORAGE/TRANSSHIPMENT FACILITIES

APP END I X H CAR I BBEAN S TORAGE / TRAN S S H I PMENT FAC I L I T I E S

The ne twork o f fac i l i t i e s in the C a r i bbe an provide s an im­ portan t , though s ome t ime s forgo tten , l i nk in the u . s . p e t ro l eum supp ly ch a i n . N i ne fac i l i t i e s tog e th e r account for app r ox i ­ mate ly 1 3 3 mi l l ion barre l s o f s torage c ap ac i t y . O f th i s tota l , approx ima te l y 8 0 percent i s dedicated to the s to r age o f " d i r ty " product s , i . e . , c rude o i l and re s idu a l fu e l o i l . The f ac i l i t i e s thems e lve s and the i r e s t imated s torage c apac i t i e s a r e e nume r a te d in Tab l e H - 1 . The s e fac i l i t i e s per form s ever a l func t i on s . F ir s t , a s tran s s h i pment fac i l i t i e s , they s e rve a s imp l e l o g i s t i c a l func ­ t ion , rece iving o i l from tanke r s too l arge for u . s . po r t s and pump ing o i l to tanke r s s u i tab l e for u . s . trade . L o c a t e d c l o s e to the wor l d ' s l arge s t marke t , they add f l e x i b i l i ty and e f f i c iency to the s upp ly and d i s tr ibution of imported c rude o i l and re f i n e d

TABLE H - 1 E S T IMATED S TORAGE CAPAC I T I E S OF CAR I B B EAN FAC IL I T I E S ( M i l l ion s o f B a r re l s )

l!Jp c a t i o n

D i r ty

C ap a c i t y C l e an

Tota l

u.s .

30 15 15

10 10

40 25 15

Bahama s s . Riding Po i nt F r e e port

20 5 15

5

25 5 20

Bon a i re

10

Curacao

16

Terr i to r i e s St . Croix Puerto Rico

5

10 1

17 5

S t . Luc i a

5

S t . Eus tat i u s

2

1

3

26

7

33

109

24

133

Arub a

( id l e ) To t a l

H- 1

produc t s . A l s o , owing to the i r l o c a t i o n , the C a r i b b e a n f a c i l i ­ t i e s s e rve an impo r t a n t c omme r c i a l h e d g i n g r o l e i n t h e wor l d ' s o i l marke t . U s e d by both re f i n e r s and impo r t e r s a s we l l a s pro­ du c e r s , a l b e i t u s ua l l y a t d i f fe r e n t t ime s , the f ac i l i t i e s c an r e d u c e the r i s k o f ma j o r p r i c e f l u c t u a t i o n s o n l o n g - h a u l voy age s . F o r e x amp l e , C a r i bb e an t e rmi n a l s we re e x t e n s i ve l y u s e d by the Midd l e E a s t produc i n g c o unt r i e s in 1 9 8 6 to mi n im i z e the i r r i sk s i n " ne tb ack " c ru d e o i l s a l e s . The s e f ac i l i t i e s a l s o s e rve a c omme rc i a l s pe c u l a t i ve ro l e , a l l ow i n g t r ad e r s to t a k e advan t a ge o f p r i c e movemen t s .

H- 2

APPENDIX I ffiSTORICAL PERSPECTIVE ON REFINING CAPACITY UTILIZATION

AP PEND I X I H I S TORI CAL P ERSPECT IVE ON RE F IN ING CAPAC ITY UTI L I ZAT I ON

As s hown i n Tab l e I - 1 , re f i n i ng ope r a t ion s i n the U n i ted State s have continued to unde rgo s i gn i f i c an t ch ange s i nce the The number of operab l e 1 9 8 4 Nat iona l P e tro l eum Counc i l repor t . u . s . re fine r i e s and the i r to tal c rude o i l d i s t i l l a t ion c apac ity S i nce then , de s p i te the numbe r o f bottome d out i n 1 9 8 5 . re fine r i e s fa l l in g s l ight l y , total c rude o i l d i s t i l l a t ion c apac i ty has i n c re a s ed by 4 0 0 , 0 0 0 barre l s per day ma i n l y due to the react ivat ion o f the 3 0 0 , 0 0 0 b arre l per day Trans -Ame r i c a n Re f i nery Re f i n ing Co . re f inery i n Good Hope , Lou i s iana . ut i l i z a t i on r a t e s have been on the incre a s e s i nc e 1 9 8 3 and are now approaching a mo r e norma l range , from a h i s to r i c a l pe rspect ive , o f betwe en 8 5 and 9 0 percent . The Ene rgy I n forma t ion Admi n i s tr a t i on ' s ( E IA ) d e f i n i t ion o f ope rab l e c apac i ty inc l ude s c apac i ty th at h a s b e e n shut down but

TAB LE I - 1 OPERABLE U . S . REF IN ING CAPAC I TY TRENDS

Year

Numbe r o f Re f i ner ie s * at Year End

Crude O i l D i s t i l l at i on Capac i ty at Year End * ( MB / D ) §

Ave r age U t i l i z at ionCJ[ (%)

1982 1983 1984 1985 1986 1987

258 247 223 216 219 213

16.9 16. 1 15 . 7 15. 5 15 . 6 15.9

70 72 76 78 83 83

*

Annua l Energy I n formation Admi n i s tr a t i o n Re f i n e ry Capac i ty Survey s . §

Thou s ands o f barre l s pe r day .

CJ[

Ene rgy I n forma t i on Admi n i s trat ion , P e t r o l eum S upp l y Annua l , 1 9 8 2 - 1 9 8 7 .

I- 1

c an b e p l ac e d i n ope r a t i on within 30 days . The r e i s s ome c onc e rn th a t th i s de f i n i t i on ove r s tate s c apac i ty i n ac tua l u s e , and thereby under s ta t e s r e finery ut i l i z ation . A s a r e s u l t , the E IA pub l i s he s d a t a on i d le c apac i ty and ope r a t in g c apac i ty . The u . s . mon th l y u t i l i z at i on r a te s for 1 9 8 8 on both an oper ab l e a nd ope r a t i n g b a s i s a r e shown in T ab l e I - 2 . A s th e t ab l e i n d i c a te s , the r e h a s b e e n a s ub s tant i a l shr ink age i n the amount o f " sp a r e " re f i n in g c ap a c i t y in th e Un i ted S ta te s , with op e r a t ing re f i n ery ut i l i z a t i on r a t e s now i n the 9 0 percent r ange . Mor e importan t l y , indus try down s t r e am c onve r s i on c apa c i ty i s more fu l ly u t i l i z ed Down s t r e am conve r s ion c apac ity inc lude s vacuum d i s t i l l a­ now . t i on , therma l and c at a l y t i c c rack ing , c a t a l y t i c hydro c r a ck i ng and hydro t re a t i n g , and c ok i n g . Ope r a t ing prob l em s i n th i s re f in i ng sec tor can c au s e d i re c t and imme d i ate reduc t i ons i n l i gh t produ c t s upp l i e s . A s a re s u l t o f th i s t ighten i ng i n re f i n ing c apac i ty , product impo r t s now p l ay a mo re s igni f i c an t r o l e i n b a l anc ing the Un i t e d S t ate s ' s upp ly-demand p i c ture .

TABLE I - 2 U . S . REF INE RS ' MONTHLY UT I L I ZAT I ON RATE S , JANUARY- JUNE 1 9 8 8 G ro s s I nput s to S t i l l s { MB / D ) *

Month

13 , 172 12, 907 13 , 241 13 , 330 13 , 630 1 3 , 70 4 13 , 803 13 , 943 13 , 356 13 , 3 15 13 , 34 1 1 3 , 554

Jan . F eb . Mar . Apr . May June Ju l y Aug . Sept . Oct . Nov . Dec .

*

Operab l e C apac ity { MB / D ) *

Op e r a b l e Uti l i z a­ t ion { % )

15 , 911 15, 916 15 , 861 15, 861 15 , 88 3 15 , 929 15 , 952 15 , 958 15 , 965 15 , 946 15 , 909 1 5 , 919

82 . 8 81.1 83 . 5 84 . 0 85 . 8 86 .0 86. 5 87 . 4 83 . 7 83.5 83 . 9 85 . 1

Ope r a t i ng C apac i ty { MB / D ) * 15 , 018 14, 880 14 , 95 1 14, 921 14 , 93 8 14 , 843 14, 860 14, 908 15 , 141 15 , 114 15 , 086 14, 887

Operat i ng U ti l i z a ­ t i on { % ) 87 . 7 86 . 7 88 . 6 89 .3 91 . 2 92.3 92 . 9 93 . 5 88 . 2 88 . 1 88 . 4 91.0

Thou s ands o f barre l s per day .

S ou rc e : Ene rgy I n forma tion Admin i s tr a t ion , P e tro l eum S upp l y Mo nth ly , J anuary-June 1 9 8 8 .

I-2

APPENDIX J GRAPffiCAL REPRESENTATION OF DEMAND AND PRIMARY INVENTORY LEVELS,

1983 - 1988

1 4 .0

00

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1 983 Minimum Operating Inventory (285 M MB)

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Jan. 1 983

Jan. 1 984

J an . 1 985

Jan . 1 986

J an . 1 987

Jan . 1 98 8

200

J an . 1 98 9

Figure J- 1 . Crude Oil Demand and Stocks -- Total U.S. (Excluding SPR) .

8.0

r----..--,

LEGEND

260

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1 988 Minimum Operating Inventory (205 M MB)

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Jan . 1 983

Jan. 1 984

Jan. 1 985

Jan. 1 986

Jan. 1 987

Jan. 1 988

Jan. 1 989

Figure J-2. Motor Gasoline Demand and Stocks - - Total U . S .

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LEGEN D

DEMAND

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J an 83

J an 84

J an 85

J an 86

J an 87

J an 88

30 ,

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Jan. 1 98 9

Figure J-3 . Kerosine-Type Jet Fuel Demand an d Stocks -- Total U.S.

4.0 r-------�---. 1 75 LEGEN D

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2. o �������w.���w.� 2s Jan. 1 989 Jan. 1 983 Jan. 1 984 Jan. 1 985 Jan. 1 986 Jan. 1 987 Jan. 1 988 Figure J-4. Distillate Fuel Oil Demand and Stocks -- Total U.S.

J- 2

2.Q p-----�- 75 LEGEND

DEMAND

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§ 25

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Jan . 1 984

J an . 1 985

Jan . 1 986

J an . 1 987

J a n . 1 988

J an . 1 989

Figure J- 5. Residual Fuel Oil Demand and Stocks -- Total U.S.

Data sou rces for t h e figu res in Appendix J are : Energy I nformation Ad ministration, Volume 1 , 1 985, 1 986, 1 987; Petroleum Supply Monthly, Jan . - Dec. , 1 988.

J- 3

Petroleum Supply Annual,

APPENDIX K METHODOLOGIES FOR DETERMINING PETROLEUM INVENTORIES AND STORAGE CAPACITY IN THE SECONDARY PETROLEUM DISTRIBUTION SYSTEM

AP PEND I X K ME THODOLOG I E S FOR DETERMINING PETROLEUM INVENTO R I E S AND S TORAGE CAPAC I TY IN THE S ECONDARY PETROLEUM D I STRI BUT I ON S Y S TEM

INTRODUCT I ON The s ec ondary d i s tr ibution s y s tem i s c ompo s e d of two sec tor s : bu lk p l an t s and ret a i l motor fue l out l e t s . D i f fe re n t methodo log i e s we re u s e d t o e s t imate t h e s to r a ge capac i t y a n d i n ­ ventor i e s i n e a c h o f the s e s e c tor s . A s tr a t i f i e d r andom s amp l e o f bu lk p l an t ope rators wa s s urve yed t o d e t e rm i n e the i r s to r a ge capac i ty and inve ntor i e s a s o f March 3 1 , 1 9 8 8 , and inventory a s o f S eptember 3 0 , 1 9 8 7 . E s t ima te s for the tota l popu l at i on wer e pro j ec ted from the s e data . T h e s torage c apac i t y a n d inve ntor i e s a t r e ta i l mo tor fue l out l e t s we re e s t ima te d b a s ed o n pub l i shed Th e s e meth­ l i te rature and d i s cu s s i o n s wi th i ndus try exper t s . odo l o gi e s a re de s c r ibed b e l ow . BULK PLANTS The Nation a l Pe tro l eum Counc i l ' s 1 9 8 8 S urvey o f P etro l eum Inve nto r ie s and S to r a ge Capac ity in the S econdary D i s t r ibut i on S y s t em in the U n i t e d S t ate s wa s d e s igned to d e t e rmine : •

The to tal s to r age c apac i ty for s e l e c ted pe t r o l eum pr·o duc t s in bulk p l ants on Mar ch 3 1 , 1 9 8 8

•

The amount o f d i s t i l l a te s tor age th at wa s sw i tchab l e to mo tor g a s o l ine

•

The t o t a l l eve l o f i nventory o f s e l e c ted re f i n e d petro­ leum produ c t s i n bu lk p l an t s a s o f S ep tember 3 0 , 1 9 8 7 , and March 3 1 , 1 9 8 8

•

The impac t o f the petro leum futur e s mar k e t on i nven­ tor i e s and s to rage c apac i ty i n bu l k p l an t s .

Scope of the Survey The s urvey wa s u s ed to c o l l e c t s torage capac i ty and inve ntory d a ta for mo tor g a s o l ine , d i s t i l l a te fue l o i l , and r e s idua l fu e l o i l for March 3 1 , 1 9 8 8 , and i nventory data for Sep tember 3 0 , 1 9 8 7 . Tho s e d a te s were s e l e c te d to be con s i s te n t The s urvey c ov e r e d the 5 0 s t ate s with the pr imary s y s tem s urvey . and the D i s tr i c t o f C o l umb i a , but exc l uded a l l u . s . t e r r i tor i e s and po s s e s s ions . S torage o f motor fue l s at r e t a i l ou t l e t s wa s exc luded · from the s urvey .

K- 1

D e s c r ipt ion of the Que s t ionn a i re P a r t One , S to rage The que s t ionn a i r e con s i s t e d o f two par t s : P ar t One o f the and I nve n to r y 1 and P a r t Two , Pe tro l eum Future s . que s t ionna i r e a s ked o n l y thre e que s t i on s : •

Tota l f i xed s tor age c apac i ty by produc t

•

Amount o f d i s t i l l ate fue l o i l s torage c apac i t y switch­ ab l e to mo tor ga s o l ine s tor age w i thout mod i f i c a t i o n to t ankage c o s t ing over $ 1 , 0 0 0 per tank

•

I nventory by produc t a s o f S eptemb e r 3 0 , March 3 1 , 1 9 8 8 .

1 9 8 7 , and

The future s po r t i on o f the que s t ionna i re wa s i de n t i c a l to th at in the pr imary s y s tem survey . The i nventory and c apac ity in format ion wa s r e qu e s te d by Petro l eum Admi n i s tr a t i on for D e f e n s e D i s tr i c t ( PADD ) for c ompan ie s that ope r a t e i n mo re than one PAD D . A s urvey w i thout PADD d i v i s i o n s was s en t to comp an i e s th at ope r ate i n o n l y one PADD . As i n the p r imary s urvey , PADD I was d i vi de d into thr e e reg ion s : N ew E n g l and ( I X ) , C entra l A t l an t i c ( I Y ) , and Lowe r At l an t i c ( I Z ) s ta te s . The future s in forma t ion was r e que s te d comp any-wide . A c opy o f th e que s t io nn a i re i s found a t the end o f th i s append i x . The S urvey Popu l a t i o n Que s t ionna i re s we re s e n t t o 1 , 9 9 5 c ompan i e s . T h e p opu l a t i on inc luded the comp an i e s i n the pr imary d i s tr i bu t ion s y s tem a s we l l a s a s tr a t i f ied random s amp l i ng o f the no n-pr ima ry c ompan i e s . Th e non-pr imary popu l a t i on wa s de f i n e d to b e the 2 6 , 3 7 8 n ame s and addre s s e s f rom two s urvey s : the E IA- 8 6 3 " P e t r o leum P roduc t S a l e s I d e n t i f i c a t ion Survey " and the E I A- 8 2 1 "Annu a l Fue l O i l and Ker o s ene S a l e s Repor t . " The E IA- 8 6 3 s u rvey was ma i l e d i n January 1 9 8 6 to approx ima te ly 3 0 , 0 0 0 name s a n d addre s s e s o f c om­ p an i e s tha t we r e no t r e s ponde n t s on the E I A- 8 2 1 s urvey . The purpo s e o f the E I A- 8 6 3 s urvey was to deve l op a l i s t o f re s e l l e r s o f ga s o l ine and s e l le r s and r e s e l ler s o f d i s t i l l a t e and r e s idual fue l o i l based on 1 9 8 5 s a l e s data . The E I A- 8 2 1 s urvey is a n annua l s amp l e survey t h a t co l l ec t s i n forma t i o n on s a l e s o f kero­ s i ne , d i s t i l l a te fue l o i l , and re s idua l fue l o i l . For 1 9 8 5 , a que s t ion wa s added to c o l l e c t s a l e s o f motor g a s o l i n e . S trat i f ic a t ion D e s ign The 2 6 , 3 7 8 name s and addre s s e s for th i s s urvey wer e s tr a t i ­ f i ed f o r proce s s ing a n d e s t ima t i on b a s ed on t h e fo l l owing :

K- 2

•

C ompa n i e s th at operate in both the pr imary d i s tr ibut ion sys tem and the s e c ondary d i s tr ibut i o n s y s tem we re s eparated from f i rms that oper ate o n l y in the s e condary d i s tr ibu t i on s y s tem .

•

Compan i e s that were known to oper ate i n mo re than one PADD were s eparated from c ompan i e s th a t we re known to operate in on ly one PADD .

•

Comp an i e s that we re " l ar ge , " accord ing to ava i l ab l e data , we re s eparated from tho s e th a t wer e " sma l l . "

•

Compan i e s for wh ich no vo lume t r i c d a ta we re ava i l ab l e ( e . g . , nonre spondents t o the E IA- 8 6 3 ) we r e s e parated from the comp an i e s for wh ich vo lume tr i c d a t a we re ava i l ab l e .

The s tr a t a were E ach compa ny wa s a s s igned to a s tra tum . a s s igned proce s s ing cod e s , wh ich are summar i z e d i n T ab l e K- 1 . Al l comp an i e s tha t ope rate in more than one PADD , op e r a t e i n the pr imary s y s t em , or th at we re d e s ignated as " l ar ge , " r e c e ived a survey form . The o th e r s were ra ndomly s amp l ed . The e x t e n t o f fo l l ow-up o f the nonre s pondent s var ied by s tr a t a , depend ing upon the expected contr ibu t i o n to the ove r a l l PADD e s t ima te s and the expected var i a t i o n o f the s tor age c apac i ty w i th i n e ach g roup . A de s c r iption o f the makeup o f e a ch s tr a tum i s a s fo l l ows : Code P R :

P r i or i ty , P r imary

Th i s s tratum i s compr i s ed of compan i e s in the p r imary d i s ­ tr ibut i on sys tem th at we re thought t o have a very l arge s to ra ge capac i ty in the s e condary di s t r ibu t i on s y s tem . They rece ived exten s ive fo l l ow-up . Code A :

Mu l t i - PADD , P r imary

Thi s s tratum i s c ompr i s ed o f the compan i e s i n the pr imary d i s t r ibution s y s tem that operate in mo re than one PADD , except for tho se l a r ge enough to be a s s igned to s tr a tum P R . Code s B-H :

S i ngl e PADD , P r imary

The s e s tr a t a are compr i s ed o f a l l compan i e s in the p r imary di str ibut ion s y s t em th at ope r a te in a s ing l e PADD , except for those l arge enough to be a s s igned to s tr a tum P R . E a ch PADD wa s a s s igned a un ique proce s s ing code . Code J - K :

Mu l t i - PADD , No t P r ima ry

The s e two s tr a t a are comp r i sed o f a l l compan i e s th a t wer e not in the p r imary d i s tr ibut ion s y s t em , but wer e known to operate in mo re th an one PADD . The J code was a s s igned to th e " l arge " compan ie s and the K code was a s s igned to the " sma l l " c omp an ie s .

K- 3

TABLE K- 1 SUMMARY OF STRATIFICAT ION DESIGN

Pr oce s s Cod e s

PADD P r iority Mu lt i-PADD IX IY IZ II III IV

PR A B c D E F

G H

v

Mu lt i -PADD Mul t i-PADD

J K

IX IY IZ II III IV

L M N 0 p

Q R

v

Sl S2 Tl T2 u v

Wl W2 X Yl Y2

Numb e r in Survey

Re s p on s e Rat e ( P e r cent )

77 49 28 52 22 61 82 13 33

77 49 28 52 22 61 82 13 33

66 50 46 58 79 66 44 58 63

L arge Sma l l

1 03 53 1

103 53 1

52 55

Large Larg e Larg e Large Large Larg e Large

56 27 30 31 15 39 49

56 27 30 31 15 39 49

58 48 47 58 53 46 51

722 1 , 133 775 1 , 99 2 2 , 28 9 8 , 09 1 732 1 , 660 764 477 689

30 62 25 86 76 15 25 70 30 18 28

53 48 52 58 46 56 36 49 40 67 50

760

38

29

5 , 413

1 08

20

D e s cr ip t ion P r imary * Primary Pr imary Primary Pr imary P r imary Primary P r ima ry Primary

IX

Sma ll-samp l e

IY

Sma ll-samp le

IZ II III

Small-samp le Sma ll-samp le Small-sample

IV

Sma ll-samp le Small-samp le

v

ZA

Mi s c .

ZB

Mi sc .

*

Numb e r in Populat ion

Nonre sp ondent in b u s ine s s Nonrespondent no data

Comp anies o p er a t ing in the p r imary d i s t r ibut i on sy s t em .

K- 4

Cod e s L-R :

L arge , S i n g l e PADD , No t P r imary

The s e s trata are c ompr i s ed of al l " l a r ge " compan i e s that we re not i n the pr imary d i s tr ibut ion sys tem and we re known to operate in on l y one PADD . The de f i n i t ion of " l a r ge " var ied from PADD to PADD . C od e s S -Y :

Sma l l , S i ng l e PADD , No t P r imary

The s e s trata are compri s ed of a l l " sma l l " compan i e s th a t we re n o t i n t h e p r imary d i s t r ibu t ion s y s tem , wer e known t o ope r ate in o n l y o n e PADD , and we re not i n c l uded among code s L - R above . Add i t i on a l s ub s trata were de fined f o r PAD D s I X a n d IY ; and fo r PADDs I I I and V . I n PADD s I X and I Y , s ub s trata S l and T l we re de f ined to i nc lude compan ie s wh ich reported on l y r e s ident i a l S ub s trata S 2 s al e s o f No . 2 h e a t ing o i l o n the frame survey s . and T 2 con s i s te d o f the rema ining compan i e s i n tho s e d i s t r i c t s . I n PADD s I I I and V , sub s t rata W l and Y l we re de f i ne d to i n c l ude compan i e s that reported on ly r e ta i l s a l e s on the frame s urvey . Th e rema i n i ng compan i e s in tho s e d i s t r i c t s we re i n s ub s tr a t a W 2 and Y 2 . Code s ZA and Z B :

No Vo l ume t r i c Data Ava i l a b l e , No t P r ima ry

S tratum ZA c o n s i s t s o f comp an ie s for wh i c h no vo l ume t r i c data a r e ava i l ab l e , b u t the compan i e s a r e known to be i n bu s i ne s s . S tra tum Z B a l s o cons i s t s o f comp a n i e s f o r wh i ch the r e a r e n o vo lume t r i c d a ta . Howe ve r , noth ing e l s e i s known abou t them e i ther . I t i s expected that s tr a tum Z B wi l l have a h i gh e r proport ion o f out-o f-bus i ne s s or ' out-o f - s cope c ompan i e s . E s t ima tion Proc e dure s The u .s. total for a s tr a tum wa s e s t ima ted a s the aver age o f the reported d a ta mu l t ip l i ed b y the e s tima ted numb e r o f compan i e s wi th s torage c apac ity i n the s tratum . Pool ing wa s u s ed in two p l ace s : wh en c a l c u l a t ing th e e s t i ­ mat e s o f the number o f f i rms with s torage , and whe n e s t ima t ing I n the f ir s t th e s i z e of th e ave rage f i rm for each p roduc t . ins tanc e , s imi l a r s trata wer e poo led t o ach i eve a more accurate ra tio of th e numb e r of f i rms with s torage to the numbe r of to t a l r e s pons e s . The r a t i o f o r the ent i re poo l wa s u s e d f o r e ach stra tum in the poo l to e s t ima te th e numb e r of f i rms w i th s to rage in that s tratum . I n the second i n s t anc e , the e s t imated s i z e o f Th i s the ave rage f i rm for e ach produc t re f l e c t e d the poo l i ng . provided add i t io n a l a s s u r ance o f con f iden t i a l i ty . The U . S . to ta l e s tima t e s c an be v i ewed a s th e s um o f the r e s po n s e s and of the e s t imate s of the nonre sponde n t s and tho s e not surveyed . T h e r e s pondent s we re a s sumed t o re s emb l e the non­ re s ponde n t s and tho s e no t surveyed i n t e rms of the i r aver age s i z e and o f th e percentage th a t have s tor age c apac i ty . The e s t ima t e for the nonre spond e n t s w a s d i s tr ibuted b y PADD a c c o r d i n g to the percen tage of the s a l e s for the aggregate of the no n r e s ponden t s

K- 5

in that PADD . The s a l e s data ava i l ab l e for d i s t i l l a te fue l o i l , re s idua l fue l o i l , and mo tor g a s o l ine on the E I A- 7 6 4 s u rvey we re used to d e t e rm i n e the appropr i ate perce ntage s . Al though vo lu­ me tr ic s a l e s and s to rage have been shown to b e uncorre l a t e d , it wa s a s s ume d th at the s a l e s data provided i n forma t i o n c once r n i ng the PAD D s i n wh ich the nonre sponding compan i e s operated . The e s t imate s for the nonre spondents and tho s e n o t s urveye d i n s tr a t a z and Z 1 we r e d i s t r ibuted bas ed on the PAD D breakdown o f the r e s po nd ing sma l l s i ngle -PADD f i rms . Re s u l t s o f the S urvey O f the 1 , 9 9 5 c ompan i e s surveyed , 5 2 pe r c e n t re sponded . An a ly s i s wa s per fo rme d on the accuracy o f the e s t ima t e s . No e f forts wer e made to aud i t the accuracy o f the s urvey r e s po n s e s . As an t i c ipated at the ou t s e t o f th i s s urve y , the p ro j e c t ion s have varyi ng degre e s o f re l i ab i l ity . The n a t i o n a l l eve l e s t i ­ ma t e s o f s torage c apac i ty for mo tor g a s o l ine , d i e s e l / d i s t i l l a te fue l o i l , and r e s i du a l fue l o i l are accurate , at a 9 5 pe r c e n t con f idence l eve l , t o w i thin 1 6 . 8 , 3 0 . 5 , and 4 6 . 0 p e r c e n t , r e s p e c ­ tive l y , o f t h e ac tu a l value s . The PADD l eve l e s t ima te s range from b e i n g qu i t e u s e fu l ( the e s t ima te of s to rage c apac i ty o f motor g a s o l i ne i n PADD I X i s accurate to w i th i n 9 . 8 pe rc ent ) to be ing unre l i ab l e ( th e e s t ima te of s to r age c apac i t y o f r e s idu a l fue l oi l i n PADD I Y i s only accurate , w i th 9 5 per c e n t c o n f idence , to 1 8 9 . 7 p e r c e n t o f the actua l leve l ) . I n g e ne r a l , e s t ima t e s at the PADD l e ve l for e i ther p r imary o r nonpr ima r y f i rm s are unre l i ab l e . Aggre gat ing up to th e tota l PADD e s t imate or the n a t i on a l e s t ima te produc e s increas ingly re l i ab l e pro j e c t i o n s . The r e s u l t s o f the s urvey , con f i de n c e l eve l s , and r e s pon s e rate s b y s tr atum a r e shown i n Tab l e s K- 2 , K- 3 , a n d K - 4 , re s p e c ­ tive ly . C a l c u l a t i o n s o f Var i anc e s and Percentage Ac curac i e s The methodo logy u s e d i n c a l c u l at i ng t h e accuracy o f the e s t ima te s is de s c r ibed b e l ow : 1.

Var i a n c e o f Re s pon s e s Re c e ived - Th i s numb e r i s c a l c u l a ted from the d a t a ba s e and is not inc l uded i n the repor t . Formu l a :

n 2 l s = �= 1 •

.

x�

/ n - AVG

2

�

��:�: n � i h � s � �

!� !�� � � �� !

���;= � �

�� � ��! �

f i d s r d d s x = 0 ) , n = number o f r e s pond ing f i rms , and AVG = s um o f r e s pon s e s r e c e ived d ivided by n . d

a

K- 6

TABLE NP C

1 988

S TORAGE CAPAC ITY AND

K- 2

SURVEY OF INV ENTORY IN BULK PLANTS

SUMMARY OF E S T IMAT E S (Mi l l i o n s

P ADD IX Mo t o r Gas o l in e

S t o rage C ap a c i t y Invent ory

� I

-.J

I

Dies e l / Dist illate Fue l Oil

S t o rage

C ap a c i t y

Swi t chab l e

Oil

Mo t o r Gas o l in e

S t o rage C ap a c i t y I nvent o ry

To t a l *

S t o r a g e Cap a c i t y Inv e n t o r y

* To t a l s may n o t

add due

IY

PADD

IZ

PADD

II

PADD

III

PADD

to

IV

PADD V

To t a l

--

1 . 14 0 . 53

1 . 73 0 . 88

2 . 43 1 . 17

7 . 28 3 . 43

2.31 1 . 08

0 . 96 0 . 44

1 . 14 0 . 56

1 6 . 98 8 . 09

2 . 47

3 . 74

3 . 73

1 2 . 06

4 . 22

1 . 44

1 . 63

29 . 29

1 . 36 0.96

2 . 43 1 . 32

2 . 19 1 . 44

7 . 19 4 . 52

2 . 34 1. 70

0 . 88 0 . 56

0 . 95 0 . 64

1 7 . 35 1 1 . 14

0 . 33 0 . 18

0 . 70 0 . 28

0 . 44 0 . 29

1 . 52 0.97

0 . 56 0 . 36

0. 17 0 . 10

0 . 22 0. 11

3 . 93 2 . 29

3 . 94 1 . 68

6 . 17 2 . 48

6 . 60 2 . 90

20 . 85 8.92

7 . 09 3 . 14

2 . 57 1 . 10

2 . 99 1 .31

5 0 . 20 2 1 . 52

to

Invent ory Re s idual Fu e l

PADD

o f Bar r e l s )

ind e p e n d e n t

round ing .

*

TABLE K- 3 NPC 1 9 8 8 SURVEY OF STORAGE CAPAC ITY AND INVENTORY IN BULK PLANT S S UMMARY OF PERCENTAGE ACCURAC IES AT 95 PERCENT CONFIDENCE LEVEL *

::"l

I (X)

I

PADD IX

PADD IY

PADD I Z

PADD I I

PADD I I I

PADD IV

PADD V

Total

Mo tor Gas o l ine

S t orage Cap a c i ty Inventory

9.8 11.9

36. 0 45 . 5

37 . 8 37 . 5

34 . 8 45 . 7

24 . 8 24 . 1

19 . 4 14 . 0

32. 9 36 . 0

16 . 8 21 . 2

D ie s e l / Dis t i l lat e Fue l O i l

S t o rage Cap a c i t y Swi t chab l e t o Mo tor Gas o l ine Inv ent ory

35 . 9

152. 5

33 . 6

30 . 4

132 . 7

17 .4

35 . 0

30 . 5

49 . 0 48 . 5

75 . 0 77.o

33 . 0 33 . 6

30 . 0 29 . 8

228 . 0 2 20 . 5

15 . 0 14 . 5

43 . 0 41 . 7

38 . 0 37 . 5

Re s idual Fue l Oil

S t o rage Cap a c i t y Invent ory

78 . 4 1 64 . 8

1 89 . 7 5 27 . o

23 . 4 49 . 7

73 . 6 13 1 . 2

77 . 4 1 45 . 0

31.7 1 14 . 0

26 . 9 88 . 9

46 . 0 90 . 0

*

" The s e e s t imat e s are accur a t e t o wi thin perc ent of the t o t a l in Thi s tab l e c an b e read a s : 95 p e r c ent of the c a s e s . " The f ormu la u s e d to calcu l a t e the conf id enc e l eve ls is 1 . 9 6 ( s quare roo t (var iance o f t o t al / t o t a l ) ) .

TABLE K-4

RATES OF RESPONSE BY STRATUM

Refused Not Stratum

to

Firms

Total

Total

Wi th Some

Responses

Surveys

Storage

Received *

Response Rate

Appl icab le

Respond

Dup l i cate

PR

30

1

0

16

51

77

66

A

17

1

0

5

24

48

50

B

8

1

c

0

3

13

28

46

18

1

0

8

D

30

52

58

12

0

0

1

15

19

79

E

31

1

0

5

38

58

66

F

30

2

0

4

G

35

79

44

5

1

0

2

7

12

58

H

16

2

1

2

19

31

63

120

10

1

25

157

279

56

B-H

Sent

(Percent )

J

29

10

1

16

53

102

52

K

92

32

2

181

290

529

55

L

14

4

1

M

17

32

55

58

8

1

0

3

N

13

27

48

6

2

0

7

0

14

30

47

10

3

0

p

6

18

31

58

4

1

0

3

8

15

53

0

10

18

39

46

6

25

49

51

128

246

52 53

Q

6

2

R

15

3

L-R

63

16

1

52

Sl

5

8

16

30

S2

9

1

0

15

30

62

48

Tl

4

0

0

3

13

25

52

T2

13

3

0

u

28

50

86

58

10

6

0

v

25

35

76

46

16

12

1

47

64

144

56

4

4

0

5

9

25

36

Wl W2

6

2

0

X

25

34

70

49

2

4

0

9

12

30

40

0

Yl

7

2

Y2

3

2

S-Y

79

36

1

ZA

7

2

0

2

11

38

21

ZB

16

3

0

6

22

108

19

453

109

6

482

1 , 025

1 , 99 1

52

Total

*

5

12

18

67

9

14

28

50

1 79

289

564

51

(Number o f firms responding not appl icab l e )

+

(Number of firms providing data ) ;

excludes firms refusing to respond and includes firms operating in the secondary system that have no s torage .

K- 9

2.

Var i an c e o f E s t imated Total . 2 Formu l a : V = N ( N - n ) S / n ; whe re N = the numb e r o f f i rms T i n the popu l a t ion ( l e s s dup l i c a te s ) .

3.

P e rc e n tage Ac curacy - Th i s va lue give s an und e r s tandab l e me a s ur e o f the accuracy o f the n a t i o n a l e s t ima te s . The number s shou ld be i nterpre ted a s s ay ing " Th e s e e s t imate s a r e p e r c e n t o f t h e tota l i n 9 5 p e r c e n t a c c u r a t e to w i t h i n o f the c a s e s , " w i th t h e percen tage a c c u r a c y numb e r i n s erted A s ummary o f percent age accurac i e s i s i n the b l ank . pre s ented i n T ab l e K- 3 . Formu l a : 1 . 9 6 ( S quare roo t o f VT / E ) ; whe r e VT = var i a n c e o f e s t imated U . S . to t a l ( # 2 above ) and E = e s t ima ted u . s . t o ta l .

RETAI L MOTOR FUEL OUTLETS C a l c u l a t ing s torage c apac ity and i nventory s to r e d at r e ta i l mo tor fue l out l e t s i n the Uni ted S tate s i nvolved e s t imat ing the tot a l number o f ou t l et s , a l ong with an a s s e s smen t o f the ave r age s to r age c ap ac i ty and inve ntory a t the s e out l e t s as o f March 3 1 , 1 9 88 . Ga s o l ine s e rv i c e s ta t i on s , conven i e n c e s to re s , t ruck s tops , ma s s merchandi s e r s , and other s tore s th a t have r e t a i l s a l e s o f ga s o l ine o r d i e s e l fue l for veh ic l e s wer e inc luded i n The s e e s t ima te s were b a s e d on d a t a obta ined from the e s t ima t e s . trade ar t i c l e s and d i s c u s s ions h e l d w i th repre s e nta t i ve s o f pe tro l eum trade a s soc i a t i on s , re f i n e r s , mark e te r s , j obbe r s , and f i rms in re l a te d i ndu s tr ie s . Where prac t i c a l , i ndepende n t sourc e s were u s e d to te s t t h e reasonab l e ne s s . and accuracy o f each e l emen t u s ed in the final s torage c apac ity and i nve n tory e s t imat ion . Number o f Re t a i l Out l e t s T h e e s t ima te o f t h e number o f out l e t s i s t h e re s u l t o f a con s en s u s re ached by the Counc i l a f ter eva l u a t i o n o f a l l ava i l ab l e d a t a source s . The u . s . Bureau o f the C e n s u s e s t ima te s that the r e we re about 1 1 7 , 0 0 0 g a s o l i ne s erv i c e s ta t i o n s i n ope r a t i on i n the U n i t e d S t a te s at the end o f 1 9 8 7 and that there wi l l be about 1 1 1 2 , 0 0 0 a t the end of 1 9 8 8 . In a con t i nuat i o n o f a long-term trend , the number o f g a s o l ine s e rvice s tat ions h a s d e c l i ne d from a pe ak o f 2 2 5 , 0 0 0 i n 1 9 7 2 , dropp ing at a r a t e o f ne a r l y 3 p e r c e n t p e r year . B a s e d on the e s t imated r a te o f dec l i n e , there we r e abou t 1 1 5 , 0 0 0 s e rv i c e s ta t i ons i n op e r a t i o n a s o f M a r c h 3 1 , 1 9 8 8 .

1

Bure au o f the C e n s u s , u . s . D epartmen t o f Comme r c e , February 1 9 8 8 . F ranch i s ing i n the E conomy , 1 9 8 6 - 1 9 8 8 .

K-10

The Ce n s u s e s t ima te , howe ver , i s compr i s ed o f on l y tho s e r e ta i l outl e t s th a t me e t th e C e n s u s de f i n i t i on o f " s e rv i c e s ta t i on . " A " s e rv i c e s ta t i on " mu s t generate over 5 0 per c en t o f i t s reve nue from the sale of g a s o l ine and petrol eum produc t s . The r e are many o ther r e ta i l ope r a t i o n s that s e l l motor fue l bu t generate a sma l l e r frac t i on o f th e i r to t a l revenue s from s a l e s o f pe tro l e um I n many par t s o f the na t i on , conven i e nce s to r e s produc t s . ( C - s tor e s ) such a s " 7 - 1 1 " o r " Qu i k - S top , " ma s s merchand i s e r s such a s S e a r s , K-Mar t , and J . C . Penney , c a r washe s , and au tomo t i ve / truck repa i r shop s s e l l mo tor fue l i n the r e t a i l mark e t . S tud i e s have shown tha t the non- s e rv i c e s tat ion vo l ume o f p e t ro l eum produ c t s so ld i s s ub s t a n t i a l . F o r examp l e , the Na t i on a l Pe tro leum News , 1 9 8 8 F ac t B ook , e s t ima t e s th a t C - s tore s a n d ma s s merchand i s e r type s o f non - s ervice s ta t i on r e t a i l ou t l e t s a c c ou n t f o r about 2 5 percent o f t h e to t a l moto r fue l out l e t s a n d for ov 2 r 1 0 percent o f the mo to r fue l vo lume s s o l d i n the U n i ted S t a te s . In add i t i on , Nat i o n a l P e t r o l eum News e s t ima ted that th e r e are abou t 1 5 , 0 0 0 " o the r " re ta i l ou t l e t s s e l l in g mo tor fue l . " O th e r " out l e t s are c ar wa sh e s , c ar d e a l e r s , farm imp l ement d e a l e r s , and o ther sma l l out le t s . Expand ing the C e n s u s s e rvice s ta t i o n count by Na t i o n a l Petro l e um News ' s e s t imated pe rcentage s o f C - s to r e s a n d the e s t ima ted 1 5 , 0 0 0 " o the r " out l e t s gave a pro j e c te d to ta l number o f reta i l ou t l e t s s e l l ing mo tor fue l to b e about 1 7 0 , 0 0 0 i n e a r l y 1988 . Other s ource s , s uch a s t h e Lundberg Le t t e r ( March 1 7 , 1 9 8 7 ) and i ndependent e s t imate s from pe tro l eum c omp an i e s , tend to corrobor ate the r e ta i l mo tor fue l out l e t popu l a t i o n . The NPC e s t ima ted previou s ly th a t in 1 9 8 3 there we r e approxima t e l y 2 1 0 , 0 0 0 out l e t s . Ave rage S torage The average s torage c apac i ty per r e t a i l ou t l e t var i e s w i th th e type o f out l e t s e l l ing mo tor fue l . The ave rage re ta i l s e rv ice s ta t i o n ( one o f fe r ing automo t i ve r e pa i r s a s we l l a s fue l ) tend s to b e an o ld e r bui ld ing with o l der tankage . New s i t e s th a t o f fe r fue l on ly ( no r ep a i r or maintenance s er v i c e s ) a r e l ar ge r ­ vo lume s i t e s and h ave newe r , l arge r in-g round t anks . S eve r a l compan ie s h ave e s t ima ted average s torage c apac i ty for a var i e ty o f out l e t type s . An ave rage s e rvice s ta t i on h a s an e s t imated s tor age c apac i t y of 1 6 , 0 0 0 gal l on s . An average fu e l -o n l y out l e t h a s a n e s t ima ted s to r age c apac i ty o f 3 0 , 0 0 0 g a l l o n s . A n ave rage C - s tore and ma s s -me rchand i s e r out l e t has an aver age s to r age capac i ty o f 2 4 , 0 0 0 g a l lons . The fue l - o n l y and C - s tore out l e t s tend t o be newer e s t ab l i shme n t s that h ave a l arge r mon th l y vo l ume o f s a l e s and have mo re tank s to a l low the out l e t to o f f e r two

2

Nat ional P e trol eum N ews , Company , D e s P l a i ne s , I L .

1 9 8 8 F a c t B ook , Hunter Pub l i sh ing

K-1 1

gr ade s o f un l e aded g a s o l ine , a l e aded ga s o l ine , and a d i e s e l fue l . The ave r age out le t s torage capac ity t ime s the e s t ima t e d numb e r o f out l e t s for each o f s erv i c e s ta t i on s , fue l s o n l y , c - s to re s , and " othe r " out l e t s y i e l d s an e s t imate o f r e ta i l mo tor fue l ou t le t s torage c apac ity of 8 3 mi l l ion barre l s c apac ity on March 3 1 , 1 9 8 8 . The previou s NPC s tudy e s t ima t e d 8 7 mi l l ion barre l s of s torage c apac ity i n 1 9 8 3 . T ab l e K- 5 summar i z e s the numbe r and type s o f out l e t s , average s to r age c ap ac i ty , and tota l s torage for e a ch type o f reta i l mo tor fue l out l e t .

TABLE K- 5 E S T IMATED NUMBER OF MOTOR FUEL OUTLETS , AVERAGE TANKAGE , AND STORAGE CAPAC I TY *

Number S ervice S t a t i o n s Fue l O n l y Conven ience S tore s Oth e r To t a l

S ourc e :

70 , 45 , 40, 15 ,

000 000 000 000

170 , 000

Ave rage Tankage ( Ga l l o n s ) 16, 30 , 24 , 3,

000 000 000 000

To t a l S to r age C apac i ty ( Thou s an d s o f B ar re l s ) 27, 32 , 23 , 1,

000 000 000 000

83, 000

NPC e s t ima te .

Average I nventory The amount o f g a s o l i ne and d i e s e l fue l i n i nventory at any ou t l e t i s a func t i o n of the loc a l d i s tr ibu t ion s y s t em . Many Sma l l er l arge vo l ume out l e t s have fue l s upp l i e s de l ive r e d d a i l y . The 1 9 8 4 out l e t s may r e c e ive s upp l ie s only once or twi c e a week . NPC repo r t i nd i cated tha t i nventory in t ankage wa s , on Ma rch 3 1 , 1 9 8 3 , on ave rage , b e twe e n 3 0 and 4 5 pe r c e n t o f s to r age c apac ity . Th i s a s s umed that s ome out l e t s we re c l o s e to c apac i ty , having j u s t r e c e ived a de l ivery , and othe r s were c l o s e to empty and due to r e c e ive a d e l ivery . In add i t ion , on Apr i l 1 , 1 9 8 3 , a 5 ¢ p e r ga l l on incre a s e i n t h e F ed e r a l Exc i s e T a x on mo tor ga s o l i ne wen t i nto e f fec t . Th i s c a u s e d e x tr aordinary draws o n the i nven to r i e s o f a number o f r e t a i l out l e ts . The Counc i l b e l i eve s tha t the f i l l -d raw c yc l e o f a tankage sys tem ope r a te s on the premi s e th at no r e t a i l out l e t wi she s to

K- 1 2

run ou t o f fue l and , there fore , wi l l ope r ate i n s uch a mann e r th at a s a f e ty cush i on o f fue l i s a lway s i n t h e tanks . Th i s mean s that the out l e t c yc l e s from ne a r l y fu l l tanks to , perhap s , o n l y 2 5 percent fu l l be fore o r d e r i n g more inventory . There fore , i n a pe r fect d i s t r ibu t i on s y s tem , i f a l l r e t a i l out l e t s are aver age d , the tanks shou ld b e h a l f - fu l l above the s a fety cu s h i o n l eve l a t any po int i n t ime . S i nce de l iver ie s a r e s tagge r e d and not uni form for a l l outl e t s , and not every out l e t gets it t ank s " f i l l ed " whe n i t r e c e ives a d e l ive r y , on aver age t ank s s hou ld be abou t 5 0 percent f i l l ed a t any point i n t ime . Add ing a s a fe ty cush ion o f 1 0 to 1 5 pe r ce n t to an e s t ima ted 35 to 4 0 percent f i l l br ings ave rage inve n tory to 5 0 to 5 5 per­ c ent . Th i s e s t imated range was cor robor a t ed by s eve r a l petro leum compan i e s ' r epor t e d ope ratio n s . As a r e s u l t , the NPC e s t imat e s th at the re wer e abou t 4 4 mi l l ion barre l s o f mo tor fue l in inventory on March 3 1 , 1 9 8 8 . The breakdown o f the s torage c apac ity at r e t a i l mo tor fue l ou t l e t s betwe en motor g a s o l ine and d i e s e l fue l wa s made by a s s um­ ing tha t mo tor fue l s torage capac ity i s rough l y the s ame propor ­ tion a s s a l e s vo l ume s . Data f o r mo tor g a s o l i ne a n d d i e s e l fue l s a l e s by s tate from E IA ' s Petro l eum Marke t i ng Annua l , 1 9 8 6 we r e used t o de te rm i ne PADDs I - IV and PADD V s torage c apac i ty for bo th fue l s . The NPC e s t ima te s th at th ere we re about 7 5 mi l l ion bar­ re l s of mo tor g a s o l ine s torage and 8 mi l l ion barre l s of d i e s e l fue l s torage a t r e t a i l mo tor fue l out l e t s a s o f March 3 1 , 1 9 8 8 . Th i s i s shown on Tab l e K- 6 . Aver age invento r i e s for mo tor gas o l ine and d i e s e l fue l by PADD we re d e r ived by app lying the ave rage inventory e s t ima te o f betwe en 5 0 and 5 5 per c e nt o f capac i ty o n March 3 1 , 1 9 8 8 . Th i s i s e s t imated to b e about 4 0 mi l l ion barre l s o f mo tor g a s o l i n e and 4 mi l l ion barre l s o f d i e s e l fue l a s o f March 3 1 , 1 9 8 8 .

TABLE K- 6 RETA I L MOTOR FUEL OUTLETS E S T I MATED S TORAGE CAPAC I TY AND INVENTORY AS OF MARCH 3 1 , 1 9 8 8 (Mi l l i o n s o f B a r re l s ) PADD s I - IV Mo tor Ga s o l ine Die sel To ta l

Source :

Ca E ac it y PADD Total v

PADD s I - IV

I nve ntor y PADD v

Total

62 6

13 2

75 8

33 3

7 1

40 4

68

15

83

36

8

44

NPC e s t imate .

K- 1 3

Code N umber*

____

NATIONAL PETROLEUM COUNCIL 1 988 SURVEY OF

U .S. P ETRO LEU M I NVENTO RI ES AN D STO RAG E CAPAC ITI ES (S ECON DARY D I STRI B UTI O N SYSTEM)

Please note any changes to the above information: Company Name:.

______________________________

Address:.

______________________________

-----

Zip Code:

____

Person in reporting company to be contacted if questions arise:

Phone: (___)

_________________________

Please report on a company-wide basi s ; if you are a subsidiary, send this form to you r parent com­ pany. To prevent duplication of reporting, list on th e next page the companie s for which you are repo rti ng . If your company does not operate in the secondary petro leu m distri bution system (see defi nition o n the next page) o r if this is a duplicate survey, please mark the appropriate box below and return the survey to Deloitte Haskins & Sells.

0

Not in Secondary Petroleu m Distribution System

0

Duplicate

Please return this questionnai re by M ay 1 6, 1 988, to : Deloitte Haskins & Sells Suite 800 1 1 01 1 5th Street, N.W. Washi ngton, D.C. 20005 ATTN : NPC Survey Team

(A stamped self-addressed envelope is enclosed for your convenience.)

If you h ave qu estions regardi ng this survey, please call M r. Benjamin A. Olive r, Jr. at the National Petroleum Cou nci l office, (202) 393-61 00. *This entry, and other N P C Code spaces on subseq uent pag es, will be entered by the acco u nting firm for data tabulation purposes.

K- 14

Cod e N u m ber____

Th e following definitions apply to this survey : Reportable Stora g e -- This su rvey is based on custody of I nve nto ry i n tankag e . If you h ave cu stody of any of the products covered by the survey (motor gasoli ne, diesel/disti llate fuel oil [excluding kerosi ne] , and residual fu el oil) , repo rt the storage capacity in which that i nventory is h eld plu s operable , associated tankage not cu rre ntly in service . Tankage not cu rrently in service should be reported in the product category of its last use . Seco ndary D i st ributio n S ystem I ncludes bu lk plants and faci lities of reselle rs of petroleum products, such as jobbe rs and fue l oil dealers. I nventory and sto rage capacity at gaso li ne service statio ns are not covered by this survey. --

Bulk Plants A nonco nsumer faci lity used for storage and/or marketing of petroleum produ cts that has total storage capacity of less than 2 . 1 million gallons (50 ,000 barre ls) and does not receive petroleum p roducts by barge, ship, or pipeline. I nclude any tanks not currently in service ; such tankage shou ld be repo rted in the product catego ry of its last use. --

Pet ro l e u m Adm i n ist rat i o n fo r Defense Dist rict (PADD) - I nfo rmatio n i s requ ested on a PAD D basis with PADD I subdivided i nto three areas. The states are grouped by PAD D below : -

PADD I N ew E n g l a n d ( P A D D

IX)

Connecticut M ai ne M assachusetts New Hampshire R hode Island Vermont

IV)

Centra l At lantic ( P A D D

Delaware District of Columbia M aryland N ew Jersey New York Pennsylvania Lowe r At l a n t i c ( P A D D

IZ)

Florida Georgia North Carolina South Caroli na Vi rginia West Virginia

PADD

II

Illinois I ndiana Iowa Kansas Kentucky Michigan Mi nnesota Missouri Nebraska North Dakota Ohio Oklahoma South Dakota Tennessee Wisconsi n

PAPP

PADD

IV

Colo rado Idaho M o ntana Utah Wyoming

PA D D

V

Alaska Arizona California Hawaii N evada O rego n Was hi ngton

Ill

Alabama Arkansas Louisiana Mississippi New Mexico Texas

Please circle the states in which you h ave storage .

If you are i n the Secondary Petroleum Distribution System, but do not h ave storage capacity check here and retu rn ____

Companies for which you are reporting:

K- 1 5

NATIONAL PETROLEUM COUNCIL 1988 SURVEY OF I NVENTORIES AND STORAGE CAPACITIES IN THE SECONDARY PETROLEUM DISTRIBUTION SYSTEM (Less than 2.1 million gallons per site)

Code N u m ber

Please provide the fol lowi ng information as of M arch 31 , 1 988, u n less otherwise noted:

PRODUCT

PADD IX

PADD IY

PADD IZ

PADD I I

PADD I l l

PADD IV

PADD V

{Gallons)

{Gallons)

{Gallons)

{Gallons)

{Gallons)

{Gallons)

{Gallons)

MOTOR GASO L I N E

1. Total storage capacity {exclud i n g service stations, C-stores, truckstops, and any other retail motor fuel outlet tankage ) .

D I ESEL/ DISTILLATE FUEL OIL RESI D UAL FUEL OIL

2. Amount of Distillate Fuel Oil storage capacity in Question 1 that can be switc hed to motor � I

I-' 0'1

gasoline storage without modifications costing over $1 ,000 per tan k .

PRODUCT

PADD IX

PADD IY

PADD IZ

PADD I I

PADD I l l

PADD IV

PADD V

{Gallons)

{Gallons)

{Gallons)

{Gallons)

{Gallons)

{Gallons)

{Gallons)

PADD IX

PADD IY

PADD IZ

PADD I I

PADD I l l

PADD I V

PADD V

{Gallons)

{Gallons)

{Gallons)

{Gallons)

(Gallons)

{Gallons)

(Gallons)

MOTOR GASOLI N E

3 . T h e total amount o f you r i nventories i n the storage capacity reported in Question 1 as of March 31, 1988.

D I ESEL/ DIST I LLATE FUEL OIL R ESI DUAL F U E L OIL

PRODUCT MOTOR GASOLI N E

4. The total amount of you r inventories as of September 30, 1987.

D I ESEL/ DISTILLATE FUEL OIL R ES I D UAL FUEL OIL

I

APPENDIX L METHODOLOGIES FOR DETERMINING PETROLEUM INVENTORIES AND STORAGE CAPACITY IN THE TERTLruRY STORAGE SEGMENT

APPEND I X L METHODOLOG I E S FOR DETERMINING PE TROLEUM INVENTORI E S AND S TORAGE CAPAC I T Y IN THE TERT IARY STORAGE SEGMENT

E s t ima te s for i nvento r i e s and s torage c apac i t i e s are pre s e nte d by produ c t and , in s ome c a s e s , reg iona l ly ( PADD s I - I V and PADD V ) The N a t i o n a l Pe tro l e um Counc i l ( NPC ) c a u t i o n s that th ere is l e s s c o n f idence i n the i nd i vidua l p rodu c t c a tegor i e s than in the aggregate produc t volume s , and l e s s c on f i d e n c e i n the regiona l e s t ima te s by PADD th an in th e to t a l u . s . vo l ume s . •

AGRIC ULTURAL SECTOR The agr icu l tu r a l- s e c tor inc lud e s a l l farms , r anche s , and s imi l a r ent i t i e s i n the Un i ted S t a t e s . P e t r o l eum s torage fo r th i s s e c tor i n c l ude s mo tor ga s o l ine and d i e s e l fue l u s ed i n farm veh i c l e s and equ ipme n t . D i s t i l l a te fue l o i l for r e s i d e n t i a l he a t i ng o n farms and r anch e s i s inc l uded in t h e r e s i d e n t i a l sec tor . Data Sourc e s The e s t ima te s o f farm petro l eum s torage a r e b a s ed o n two sourc e s . Th e l a te s t Bure au o f th e C e n s u s s urvey o f farms was comp l e ted in 1 9 8 2 . The S tate F arm Maga z i ne Bureau s urveyed 1 0 , 0 0 0 farme r s reg ard ing farm pe tro leum s to r age fac i l i t i e s in 1982 . Methodo logy The S tate Farm s urvey re s u l t s we re ad j u s te d for the d i s ­ tribu t ion o f farm s i z e found by the C e n s u s B u r e au . Wh i l e the nomi n a l s i z e farm i n the S t ate F a rm Maga z in e Bureau s urvey wa s 6 1 7 acre s , the Cen s u s data average farm s i z e wa s o n l y 4 4 0 acre s . The average s torage , by g a s o l ine and d i e s e l , and by farm s i z e , wa s mu l t ip l ied by the numb er o f farms i n the c o r r e s ponding C e n s u s c a t e gor i e s . S torage C apac ity The comb in e d ga s o l ine and d i e s e l fue l s to r age c apac i t y wa s e s t imated to be 4 0 . 1 mi l l ion b a r re l s , s p l i t a l mo s t 5 0 / 5 0 betwe e n the two produc t s . From d a t a provided b y fue l mark e te r s , i nven­ tory wa s e s t ima ted to be approx imate ly 3 5 p e r c e n t of c apac i ty , or 1 4 . 1 mi l l ion barre l s . The s e data , a l ong wi th a r e g iona l break­ down , are shown i n Tab l e L - 1 .

L- 1

TABLE L - 1 AGR I CULTURAL S E CTOR E S TI MATED S TORAGE CAPAC I T Y AND I NVENTORY AS OF MARCH 3 1 , 1 9 8 8 * ( Mi l l io n s o f B arre l s ) Total

P ADD s I - IV

PADD V

Capac i ty Motor G a s o l i n e D i e s e l / D i s t i l l a t e Fue l O i l Total

19 . 7 20 . 4

17.1 17 . 8

2.6 2.6

40 . 1

34 .9

5.2

6.9 7.2

6.0 6.2

0.9 1.0

14 . 1

12.2

1.9

I nve n tory Motor Ga s o l in e D i e s e l /D i s t i l l a te Fue l O i l Total

*

PADD e s t imate s ba sed upon 1 9 8 2 C e n s u s o f Agr i c u l tu r e Survey .

PADD E s t imat e s The 4 0 m i l l ion barre l s o f s tor age c apac i ty and 1 4 m i l l io n barre l s o f i nventory we re d i s tr ibu ted b e twe en P e t r o l e um Admi n i s ­ trat ion for D e fen s e D i s tr i c t s ( PADD s ) I - IV and PAD D V b a s e d on the i r propo r t i o n s i n the C e n s u s of Agr i cu l ture s u rvey . COMMERC IAL SECTOR The c omme r c i a l s e c to r inc lude s non-manu f a c t u r i n g e s tab l i s h­ ment s such a s o f f i c e bui l d i ngs , apartment bu i l d i n g s of ove r four un i t s , mot e l s , re s taurant s , who l e s a l e and r e ta i l bu s ine s s e s , ho s ­ p i ta l s , and o th e r h e a lth and pr ivate edu c a t iona l i n s t i tu t i o n s . C apac i ty and i nventory data for the c omme r c i a l s e c to r are not r e gu l a r l y co l l e c ted . The procedure emp l oyed to e s t imate c om­ merc i a l s to r age c apa c i ty and i nvento r i e s i s b r i e f l y de s c r ibed b e l ow . The to t a l U . S . c omme r c i a l s ec to r demand for k ey p e t ro l eum produ c t s wa s d e t e rm i n ed . An e s t imate o f d a y s ' s upp l y o f capa­ c i ty , i . e . , the ratio of s torage c apac i t y to da i l y ave r age

L-2

demand , was th en ca l c u l a ted u s ing d emand and s torage c ap a c i t y d a t a from a sma l l s ampl e o f comme rc i a l u s e r s . To t a l s to r age capac i ty wa s d e r ive d by mu l t i p ly in g th e c omme r c i a l s ec to r ' s d a i ly average demand by the e s t imate of days ' s upp l y o f c apac i ty . Dai ly Ave rage Demand for P e trol eum P roduc t s Demand for k e y pe tro l e um produc t s , s to r a ge c ap ac i ty , and inve ntory i n the comme r c i a l s e c tor is shown i n T ab l e L - 2 . The o i l demand inc lude s the o i l equ i va l e n t demand o f c omme r c i a l u s e r s who have dua l - f i r in g ( o i l / ga s ) capabi l i t i e s . The s e c omme rc i a l u s e r s typi ca l l y u s e gas , but are inc l uded b e c au s e they a l s o h ave oi l s torage c apac i ty . S torage Capac i ty A var ie ty o f c ommerc i a l u s e r s wa s s amp l e d to obta i n the i r annual con s umpt ion a n d s torage c apac i ty . T h e s amp l e inc l uded The s e d a t a a r e pre s e n t e d i n both o i l -only and dua l - f i r e d u s e r s . Tab l e L- 3 . As shown i n th i s tab l e , t h e r a t i o o f s torage c apac i t y t o ave rage dai l y demand f o r th i s s amp le i s appro x ima t e l y 7 4 days ( ve r s u s 9 0 day s in the 1 9 8 3 survey ) ; thu s , the ave rage da i l y demand wa s mu l t ipl i e d by 7 4 t o der ive the s to r a ge c apac i t y o f the commerc i a l s e c tor . The s tor age c apac i ty e s t imate of 3 3 mi l l i on barre l s for 1 9 8 8 i s s l i ght l y lower than the 1 9 8 3 e s t ima te o f 3 4 mi l l ion barre l s , ma i n l y due to a better e s t ima te o f day s ' s upply , re f l e c t i ng a l a rger s amp l e o f c u s tome r s s uppl i e d . I nve ntory I n order to e s t imate o i l inventory on h and as o f March 3 1 , 1 9 8 8 , near th e end o f the heat ing s e a s on , a s amp l e o f o i l - o n l y comme r c i a l u s e r s wa s u t i l i z ed . The i r tank s r anged from 2 5 to 6 0 I t was a s s umed percent fu l l , with the me an about one - th i rd fu l l . tha t oi l inven tory i n th e dua l - f i r i ng por t ion o f the c omme rc i a l s e c tor wa s n e g l igib l e , b e c au s e o i l was n o t e c onom i c a l c ompa r ed wi th gas at th e t ime o f the s urvey and g a s s u pp ly wa s r e ad i ly ava i l ab l e . PADD E s t imate s To d i s tr ibute the s torage c apac i ty and i nventory e s t ima te s between PADD s I - IV and PADD V , i t was a s s umed th a t the s h a re o f s to rage c apac i ty and inve n to r i e s i n the comme rc i a l s e c to r i n PADD V wa s th e s ame as the PADD V share of U . S . to t a l d emand in the comme r c i a l s e c to r . Thu s , i t i s e s t ima ted tha t the r e wer e 2 mi l ­ l i on barre l s o f s to r age c ap ac i ty and 0 . 4 mi l l ion b ar r e l s o f i n ­ ventory i n t h e c omme r c i a l s e c to r in PADD V a s o f March 3 1 , 1 9 8 8 . ELECTRIC U T I L ITY SE CTOR The e l e c tr ic u t i l i ty s ec t o r inc lude s e l ec tr i c u t i l i t y powe r p l ants .

L- 3

TABLE L- 2 COMME RC IAL S E CTOR 1 9 8 7 DEMAND AND E ST IMATED S TORAGE CAPAC ITY AND I NVENTORY AS OF MARCH 3 1 , 1 9 8 8

1987 Equiva l e n t Oil Demand ( MB / D ) * D i s t i l l ate Fue l O i l Re s idua l Fue l O i l To t a l

C a E ac i ty ( M i l l i o n s o f B a r re l s ) P ADD v� PADD s I - IV Tota l

345 99

25 6

1 1

26 7

444

31

2

33

§

I nve ntor y ( Mi l l ion s o f B a r re l s ) PADD s I - IV P ADD V� Total D i s t i l l a te Fue l O i l Re s i du a l Fue l O i l To t a l

5. 4 1.3

0.3 0.1

5.7 1.4

6.7

0.4

7. 1

**

*

Ave rage 1 9 8 7 e qu i v a l e n t o i l demand i n the c omme r c i a l s e c tor ( 2 7 9 MB / D o f d i s t i l l at e fue l o i l , 1 1 5 MB / D o f r e s idua l fue l o i l ) from En ergy I n format i o n Admi n i s tr a t ion , P e tro l e um Gove r nme n t demand ( 4 6 MB / D o f Marke t i n g Mon th l y , June 1 9 8 8 . d i s t i l l a t e fue l o i l , 6 1 MB / D o f r e s i dua l fue l o i l ) w a s e x c luded to avo i d doub l e count ing ( s e e Mi l i ta ry / Gove r nme n t S e c to r ) Inc lude s o i l equ i va l ent 1 9 8 7 g a s demand a t dua l - f i r e d f ac i l i t i e s ( 1 1 2 MB / D o f d i s t i l l ate fue l o i l and 4 4 MB / D o f r e s idua l fue l oi l ) from Ame r i c a n G a s A s soc i a t i on , F u ture G a s Con s urnE t i on in the u . s . , vo l . 1 4 , 1 9 8 7 , and d i s cu s s i o n s wi th Ame r i c a n G a s As soc i a t io n repre s e n t a t i ve s . MB / D = th ou s an d s o f b a r re l s . •

§ �

B a s e d on 7 4 days '

s upp ly o f c apac i ty .

E s t ima te b a s e d on the PADD propor t i on o f 1 9 8 6 demand m i x .

**

E s t imated to be one - t h i r d o f s torage c apac i t y a t o i l burn ing fac i l i t i e s o n l y . D ua l - f ir e d f ac i l i t i e s we r e a s s ume d to ho l d n e g l i g ib l e p e t r o l eum inve ntory .

L- 4

TABLE L-3 COMMERCIAL HEATING OIL C U S T OMERS

Total T o t a l Annua l Numb e r Reg ions

o f Users

( Thou sand s

S amp l e d *

o f Gal l ons )

Ea s t C o as t Midwe s t P a c i f i c N o r thwe s t Total

* §

D emand §

75 7 32 10

4 , 024 1 , 478 4 10

799

5 ,912

S t o ra g e

S t o rage

C ap a c i ty,[

C ap a c i t y

( Thousands Exp r e s s ed of Gallons)

Days '

In

Supp ly

% Wt .

779 316 1 00

71 78 89

79% 1 5% 6%

1 , 195

74

100%

---

**

Includ e s a mix o f o i l -only and dual- f i r e d u s e r s . Inc lud e s o i l- equival ent d emand o f dua l - f i r e d u s e r s .

,I s t or a g e c ap a c 1 t y d 1v 1· d e d b y d a1· 1 y d eman d C annua 1 d eman d I 3 6 5 d ays ) . ·

**

·

The s e a r e a s r e p re sent

The we igh t ing r e f l e c t s

9 7 p e r c ent o f t o t a l U . S . h e a t ing o i l s a l e s . 1 9 8 6 s a l e s in e ach ar e a ,

the p r o p o r t ion o f a c tu a l

b a se d on E IA d a t a .

To e s t ima te s to rage c ap a c i ty and i nve n t o r y i n the e l e c tr i c u t i l i ty s e c to r , two s ourc e s o f d a t a were u s ed - - the 1 9 8 8 P e t r o ­ l eum Marke t e r s ' H andbook ( pub l i shed a n nu a l l y b y t h e O i l Buyer s ' Guide ) and the March 1 9 8 8 E l e c t r i c P ow e r Mont h ly f r om the E n e r g y I n forma t i o n Adm i n i s t r a t i o n ( E I A ) . T h e P e t r o l e um Marke t e r s ' H a n d ­ book c o n t a i n e d d a t a on f u e l c o n s ump t i on and s to r age c ap a c i t i e s for app ro x ima t e l y 9 0 e l e c t r i c u t i l i t y c ompan i e s , w i t h the i n f o r ­ T h e s e d a t a we re ma t i on provided b y s t a t e , c ompany , a n d product . ver i f i e d by i n t e rv i ews w i t h s eve r a l of the s e u t i l i t i e s t o d e t e r ­ S to r a g e c ap a c i ty data we r e a l s o c o n f i rmed w i th mine a c c u r acy . the appropr i a t e r e g i o n a l powe r po o l s . D a t a we r e a l s o c h e c k e d f o r a l l comp an i e s th a t r epor t e d change s i n s to r a g e c ap a c i t y f r om the previ o u s e d i t i o n of the H andbook . A c ompa r i s o n o f the d a t a sourc e s i nd i c a t e d t h a t a f t e r appropr i a t e ad j u s tme n t s , the s to r a g e c apac i t i e s i n t h e H andbook qu i t e a c c u r a t e l y r e f l e c te d i n d i v i d u a l comp an i e s ' s to r a g e c ap ac i t i e s . A c apac i t y u t i l i z a t i o n r a t io was d e t e rm i n e d by d i v i d i ng the tot a l s to r a g e c apac i ty of tho s e c ompan i e s re f e r e n c e d i n the Pe tro l e um Mark e t e r s ' Handbo o k by t h e r a t i o o f the E I A i n v e n to r i e s th at tho s e u t i l i t i e s r e pre s e nted i n t o t a l E IA u t i l i t y inve n tor i e s o n March 3 1 , 1 9 8 8 . T h i s wa s about 9 6 p e rc e nt o f r e s i d u a l f u e l

L-5

o i l i nven to r ie s and 6 7 pe r c e n t o f d i s t i l l a te fue l o i l inven­ tor i e s . The c apac i ty u t i l i z a t ion r a t i o wa s a s s ume d to be repre ­ s enta t ive o f a l l u t i l i t i e s in a l l r e g i on s . The f i n a l i nvento ry data for March 1 9 8 8 we r e o b t a i n e d from E IA ' s e le c t r i c power data ba s e and we r e ad j u s te d to re f l e c t o n l y tho s e i nve n to r i e s h e l d a t u t i l i t i e s . A number o f u t i l i t ie s h ave a coope r a t ive fue l pur ch a s ing agreement th a t a l l ow s r e du c e d c o s t s for larger vo l ume purcha s e s . A po r t i on o f tha t fue l i s h e l d i n the pr imary d i s tr ibu t i on s y s tem un t i l s h i pment t o the gene r a t i ng The NP C ad j u s te d the inventory l eve l s repor t e d to the E IA s i te . on the form E IA- 7 5 9 , Month l y Power P l a n t Repor t , to reduce u t i l ­ i ty s e c tor i nv e n to r i e s b y the vo lume s he l d i n the pr imary d i s tr i ­ but i on s y s tem . The d i s aggrega t i o n o f s torage c apac i ty and i nven tor i e s by produ c t for PADDs I - IV and PADD V was e s t imated by u s ing the Pe tro l eum Marke ter s ' Handbook data and E IA ' s E l e c t r i c P owe r Month ly d a t a b a s e for each ut i l i ty i n e ach PADD grouping . T ab l e L - 4 i s a breakdown o f PADD group ings .

TABLE L - 4 ELEC TRIC UT I L I TY S EC TOR STORAGE CAPAC I T I E S AND INVENTOR I E S B Y PADD , A S O F MARCH 3 1 , 1 9 8 8 ( Mi l l ions o f Barre l s ) D i s t i l l at e Fue l O i l I nve ntory S torage PADD s I - IV PADD V Total

R e s i du a l Fue l O i l I nventory S torage

33 8

11 2

89 45

33 15

41

13

134

48

I n o ther are a s , such a s Texa s and C a l i fo rn i a , u t i l i t i e s h ave been burn ing natural g a s rather than o i l , due to i t s p r i c e ad­ vantage . The s e u t i l i t i e s have been ma i n t a i n ing o i l inve n t o r i e s above tho s e that appe a r t o b e requ i re d for the i r pre s en t s h o r t ­ term c o n s ump t i on ( o f ten a s much a s 5 0 percent o f s to rage c a p a ­ c i ty ) . F or u t i l i t i e s burn ing gas i n dua l - fu e l gen e r a t i ng un i t s , o i l inventor ie s are he l d a s back-up fue l for u s e whe n g a s b e c ome s unava i l ab l e due to h i gher pr ior i ty demand on the g a s s y s tem , s uch a s i n co l d we a ther ; or whenever o i l pr i c e s drop b e l ow t h a t o f n atu ra l g a s , mak ing e le c t r i c power gene r a t i on by u s i ng o i l mo re economi c a l . I nve n tory requ i r emen t s for the s e u t i l i t ie s are d e s igned to me e t i nventory t arge t s based upon s udden and h i gh l eve l s o f o i l u s e , r athe r th an on ave rage d a i l y u s e . The u s e o f o i l for e l e c t r i c powe r gene r a t i on h a s b e e n reduc e d by 6 8 p e r c e n t from t h e 1 9 7 8 peak . A s a r e s u l t , u t i l i ty L- 6

o i l inventory requ i reme n t s have a l s o been reduce d . O i l i nven­ tor i e s a t uti l i t i e s are now approach ing 5 5 pe r c e n t of the i r 1 9 7 8 leve l s . Howeve r , ut i l i t i e s in a l l r e g i o n s o f t h e country h ave found th at the pre s e n c e of l arge b a s e load g e n e r a t i n g un i t s , particu lar ly nuc l e a r u n i t s , h a s inc re a s ed the v a r i a b i l i ty o f the The var i a ­ gene rat i on from o i l and g a s un i t s on the i r s y s tems . b i l i ty o f o i l u s e h a s been further i nc r e a s ed by the r e l at i ve pr ice vo l a t i l i ty b e twe e n o i l and natu r a l g a s . For s ome u t i l i t ie s , the incr e a s e i n the var i ab i l i ty o f o i l ­ based e l e c t r i c power gene r a t ion , c omb ined w i th the reduc t i on o f the over a l l l eve l o f th a t generat ion , may a c t u a l l y i n c re a s e the leve l o f o i l inventor i e s requ ired to me e t prud e n t inventory manageme nt s tand ard s . F o r o th e r compan i e s , the changi ng fue l mix for e l e c t r i c power gene r a t i on wi l l cont inue to reduce o i l inventory r e qu i r eme n t s . INDUS TRIAL SECTOR The i ndu s t r i a l s e c to r i s compo s e d of the p l an t s and fac­ tor i e s i n the Un i ted S ta t e s , but exc lude s r e t a i l and s e rv i c e ente rpr i s e s ( s e e Comme r c i a l S e c tor ) . I n th i s an a l y s i s , c o n ­ s truc tion a n d o f f-h i ghway non- tran s portat i on u s e s ( e . g . , l ogg i ng and min ing ) are a l s o inc luded i n the indu s tr i a l s e c to r . For the purpo s e of th i s d i s cu s s ion , petrol eum re f in e r i e s and e l ec t r i c uti l i t i e s a r e n o t con s i dered in the i ndu s tr i a l s e c to r b e c a u s e fue l for re f i n e ry u s e i s part o f the pr imary s y s tem , wh i l e ut i l i t i e s are repo r t e d a s a s eparate s e c t o r . Tot a l s to r age c apac i ty and inventor i e s i n the indu s t r i a l s ec tor we re e s t ima ted u s ing i n forma t i o n ob t a i n e d from contac t s wi th indu s try and var i ou s pub l i shed data o n petro l eum produ c t s and natur a l ga s c on s umpt ion . The b a s ic me thodo l ogy i s t o app l y day s ' s upp ly s torage a n d inve ntory e s t imate s to a c o n s umpt i on f igure . S tor age C apac i ty Conta c t s wi th indu s t r i a l s ec tor con s ume r s we r e u s e d i n de­ te rmining that , on ave r age , indu s try had s torage c apac i ty to ho l d 3 0 -days ' consump t i o n i f natu r a l g a s were unava i l ab l e . I t appe a r s th at the r e i s qu i te a var i ance in the s e f i gur e s w i th a te nde ncy for fac i l i t i e s w i th lowe r pe tro l eum u s e to ma i n t a i n l e s s s torage capac ity r e l a t ive to c o n s ump t ion . The 3 0 - day e s t imate re f l ec t s a we i ght ing for the d i f fe r ing s torage p a t t e r n s o f the u s e r s . The 3 0 -day f i gure wa s th en app l i e d to ad j us te d c on s ump t i on . D i f­ ferent me thods we re u s e d i n arr iving at a d j u s te d con s umpt ion for var ious produc t s . F o l l owing are summar i e s of the d e r iv a t i o n o f the con sump t ion figur e s . D i s t i l l a te Fue l O i l and Re s idu a l Fue l O i l The r e are two c ompone n t s t o the con s ump t ion e s t ima t e for d i s t i l late and r e s i du a l fue l o i l s . F i r s t is e s t imated ac tu a l pe tro leum con s ump t ion by indu s t ry , der ived from t h e E IA 1 9 8 6 L- 7

The fo l l ow ing E IA group ing s o f u s e r s we r e c o n s i d e r e d a s data . being p a r t o f the i ndu s tr i a l s e c tor : •

I ndu s tr i a l

•

O f f - H i ghway D i e s e l U s e ( D i s t i l l at e F u e l O i l o n l y ) De f i ne d by E I A a s " fue l ing eng ine s wh i ch r equ i r e d i e s e l fue l , but are not u s ed for tran sport a t i o n , s uc h a s c o n s tru c t i o n , logg ing and road bu i ld ing equ ipme n t "

•

A l l O ther .

- ­

The s econd c omponent i s natura l gas c o n s umpt i on swi t c h ab l e to petro l eum ( in barre l s per day petrol eum equiva l e n t ) Ame r i c an Gas As s o c i a t ion d a t a ( G a s Requ ireme n t s Commi t t e e , " Future G a s Con s ump t i on i n t h e U n i ted S ta te s , " November 1 9 8 7 ) we re u s ed t o determine the vo l ume o f g a s con sumption that c ou l d be switched into petro l e um , and D OE / E IA data for 1 9 8 6 we r e the s ou r c e for indu s tr i a l g a s c o n s umpt ion . The rat iona l e for i n c l u d i n g th i s component i s th at fa c i l i t i e s that c ou l d switch t o p e tro l eum con s umpt ion h ave s to r a ge i n p l ac e to hand l e tha t c o n s umpt i o n . Tab l e L- 5 shows the ad j u s te d c o n s umpt i on data for d i s ti l l a te and r e s i du a l fue l o i l s . •

TABLE L- 5 ADJUS TED CONSUMP T I ON OF D I S T I LLATE AND RES I DUAL FUEL O I L S ( Thou sands o f B arre l s p e r D a y ) D i s t i l l a te Ac tu a l Con s ump t ion from E IA S ource s Natur a l Ga s - P e tro leum Equ iva l e n t To t a l Ad j u s te d Con s umpt i on

Re s idual

295 387

313 581

682

894

Ga s o l ine I ndu s t r i a l ga s o l i ne con s umpt ion i s e s t ima t e d to be 7 5 per­ cent of the Departmen t o f Tran s por t a t i o n ' s f i gu r e for i ndus tr i a l , cons truc t ion , and c omme rc i a l u s e a s reported i n the F e d e r a l H i gh­ U s ing way Adm i n i s trat ion pub l i c at ion H i ghway S t at i s t i c s , 1 9 8 6 . ial tr s indu , te the s e d a t a and the 75 percent con s umpt ion e s t ima . day r e p s l barre 0 0 0 , 5 3 at ted ima ga s o l ine con s ump t i on i s e s t C a l cu l a t ions for S tor age C apac ity E s t ima te s E ach to t a l c on s ump t i on f i gure was fac tored upward by a p l ant ut i l i z a t ion a d j u s tme nt of 6 . 6 percent ( s e e P l an t U t i l i z at ion Ad­ j u s tme n t be l ow ) . Th i s f i gure wa s then mu l t ip l i ed by the 3 0 - day

L- 8

e s t imate to arr ive a t s torage c apac ity . shown in Tab l e L- 6 .

Tho s e c a l cu l a t i on s are

TABLE L- 6 INDU S T RIAL SECTOR STORAGE CAPAC I TY

Con s ump t i on X ( MB / D ) Ga s o l ine D i s t i l l ate Fue l O i l Re s idua l Fue l O i l Tota l

P l ant Ut i l i z a tion Ad j u s tme nt

X

D ay s ' S uppl y

=

To t a l S torage C ap ac i ty ( MB )

35

1 . 066

30

1, 119

682

1. 066

30

21, 812

894

1 . 066

30

28 , 590

1, 611

1. 066

30

51 , 521

P l an t Ut i l i z a t i on Ad j u s tme nt I n 1 9 8 6 , manu fac tur i ng p l ant ut i l i z a t ion was 7 9 . 7 p e r c e n t , To a c c ou n t fo r compared to a prac t i c a l max imum o f 8 5 p e r c e n t . the fact that s t or age c apac i ty was mo s t l ik e l y bu i l t to a c c ommo­ date product n e e d s at fu l l c apac i ty , an upward ad j u s tme n t ( p l a n t uti l i z at i on ad j u s tmen t ) o f 6 . 6 percent wa s m a d e to t h e c on s ump­ tion data . I nve nto r i e s A s w i th s torage c apac i ty , a days ' supp ly numb e r wa s app l ied to daily con s ump tion fi gur e s . However , th e c o n s umpt i on f i gure s used d id no t i n c lude a natur a l gas e qu i va l e n t for the d i s t i l l a te and r e s idual fue l o i l c a t e gor i e s , nor wa s a p l an t u t i l i z a t i o n I t i s a s s ume d tha t the l eve l o f i nvento r i e s ad j u s tme nt app l ied . wa s managed o n the b a s i s o f ac tua l con s umpt i on . The c a l c u l a t io n s for inve n tor i e s are shown in T ab l e L- 7 .

( ba s e d on 1 9 8 6 c o n sump t io n )

MI L I TARY / GOVERNMENT SECTOR The mi l i tar y / gove r nme nt s e c tor inc lude s fede r a l , s t a t e , and loc a l gove rnment s and a l l branche s of the u . s . mi l i tary s e rvi c e located in the U n i t e d S t ate s , bu t exc l ude s mun i c ipa l u t i l i t i e s . The De f e n s e Fue l S upp l y Center prov ided the a c t u a l d a t a for mi l i tary s torage c apac i ty and inventory as of March 3 1 , 1 9 8 8 . No data we re ava i l a b l e for federa l , s tate , and l o c a l gove r nme n t s . An e s t ima t i n g appro ach wa s emp loyed to d e t e rm i n e s to r age c apac i ty and inve ntory in th i s s e c tor .

L- 9

TABLE L - 7 I NDU S TRIAL S ECTOR INVENTOR I E S Con s ump t ion ( MB / D ) Ga s o l i ne D i s t i l l ate Re s i du a l To t a l

X

Days ' S upp ly

=

I nven tory

35 295 313

15 15 15

525 4 , 425 4 , 695

643

15

9 , 645

( MB )

F i r s t , the petro l eum demand by ma j or produc t for e ac h i n ­ dividua l fede r a l , s tate , a n d l o c a l gove rnmen t s ub s e c tor wa s d e ­ termined . Ne xt , data f o r a s ampl e o f s e l e c te d gove rnme n t un i t s we re obtai ned to d e t e rmine the i r s tor age c ap ac i ty and d emand for var i ou s pe tro l eum produc ts . The r a t i o of s torage c apac i ty to ave rage d a i l y d emand c a l cu l ated from the s amp l e wa s u s ed to e s t i ­ mate t h e s to r age c apac i ty o f the to t a l fed e r a l , s t a te , a n d l o c a l governme n t s e c to r . F i n a l l y , the o i l i nventory h e l d by the gove rnmen t s e c to r wa s e s t imated as a pe rcen tage of that capac i ty . D emand E s t ima t e s of pe tro l e um produ c t d emand by ma j o r p roduc t are s umm a r i z ed in T ab l e L- 8 . Ac tua l demand d a t a were repo r t e d by the E IA for m i l i t ary and c iv i l i an fede r a l governme n t ac t i v i t i e s . Howeve r , the s e d a t a d i d not s egregate fue l o i l s b e l on g i n g to fede r a l , s t a t e , and loc a l government s into d i s t i l l a t e and r e s id­ u a l fue l o i l s . The demand wa s e s t imated by produc t a s shown in T ab l e L - 8 . E s t ima t e s o f s ta t e and l o c a l governmen t demand were der ived from a var i e ty of sourc e s . Mo tor g a s o l i ne demand was c a lc u l a t e d by a s s uming tha t c a r s , bu s e s , and tru c k s owned by s ta t e a n d l oc a l gove rnme n t s u s e the s ame amoun t o f fue l p e r year a s the n a t i o n a l ave rage . 1 T h e sp l i t b e twe en s tate and l o c a l f l e e t s for c a r s and truc k s wa s e s t imated to be 3 6 / 6 4 , the ra t i o o f s ta t e emp l o ye e s to 2 loc a l governme n t emp loye e s exc luding teacher s . A l l s choo l bu s e s were a s s igned t o the l o c a l government s ub s e c tor . D i s t i l l a t e and r e s i dua l fue l o i l d emand by s tate and l o c a l governme n t s , ma i n ly for s p a c e he a t ing requ i rement s was b a s e d o n the r a t i o o f s ta t e 3 ( inc lud ing t e a c he r s and an and l o c a l gove rnme n t emp l oye e s 1

Mo tor Veh i c l e Manu f a c tu r e r s of Ame r i c a , Mo tor Veh i c l e F ac t s and F i gure s , 1 9 8 7 . 2

U . S . Departmen t o f Comme rce , Bure a u o f the C e n s u s , S ta t i s t i c a l Ab s tr a c t o f the Un ited S ta te s , 1 9 8 7 , 1 0 7 th ed . 3

Ibid . L- 1 0

TABLE L - 8 M I L I TARY / GOVERNMENT S E C TOR 1 9 8 7 PETROLEUM P RODUCT DEMAND ( Th o u s and s

of

B arre l s

pe r Day )

M i l i ta r y / Mi l i tar;t*

Fede ra l Gov . §

Cj[

Gove r nme n t Total

Gov . Total

Loc a l Gov .

S ta te Gov .

Cj[

144 . 0

150 . 8

4 . 8

145 . 2

6 . 8

11.9

41 . 1

140 . 4

3 . 8

1 . 0

N /A * *

57 . 0

5 . 0

9 . 0§§

32 . 0§§

4 6 . 0§§

103 . 0

Fue l O i l

12 .5

6.6

1 1 . 9§§

4 2 . 4 §§

60 . 9§§

73 . 4

To ta l

216 . 7

27 . 3

Mo tor G a s o l i n e Kero-Je t Fue l

91.0

D i s t i l l at e Fue l O i l Re s id u a l

*

Mi l i t a ry u s e

the E I A r e po r t ,

o f d i s t i l l a te

" Sales

and

o f Fue l O i l

r e s i du a l

and

inc r e a s e

for motor

g a s o l i ne b e tween

demand in 1 9 8 7 w a s a s s ume d to shown i n the 1 9 8 4 NPC r e p o r t . §

Fede r a l

e nergy u s e CJ[

gove r nme n t u s e

r e po r t s ,

B a s ed

on

FY

veh i c l e s

be

is

fue l

Kero s in e

leum Marke t i ng Month l ;t , J u l y 1 9 8 7 ) . Mo t o r a s s ume d to h ave i n c r e a s e d in propo r t i o n to 1987

from the

in

oil s

is

1987"

from

( Pe t r o ­

g a s o l i ne d emand wa s the t o t a l U . S . d emand

and

unchanged

4 72 . 4

255 . 7

1 65 . 4

63 . 0

1982 .

from

EIA

Kero- j et

1982

f e de r a l

data

fue l

as

quar t e r l y

1987 . ( cars ,

bus e s ,

and

truck s )

own e d

by

s ta te

and l oc a l gove r nme n t s and a s s um i n g t h a t fue l c o n s umpt i o n p e r veh i c l e i s the s ame a s the u . s . ave rage . Source : Mo t o r Veh i c l e Manu fac ture r s o f Ame r i c a , Mo tor Veh ic l e F a c t s and F i gur e s , 1 9 8 7 . **

N /A

=

N o t Ava i l a b l e .

§§

B a s e d on the r a t i o o f s t a te and l o c a l gov e r nme nt emp l o ye e s t o fede r a l governme n t emp l oye e s mu l t i p l i e d b y f e de r a l government dema nd . The s e e s t imat e s we r e ad j u s t e d upward by a f a c t o r o f 2 for l oc a l and 1 . 3 7 for s ta t e governme n t s to r e f l e c t c o n s ump t i o n b y s c h oo l s a s e xp l a i n e d i n the M i l i t ar y / Gove rnme n t S e c t o r D emand section .

L- 1 1

e s t imated numb e r o f s tude nt s } to fede r a l c ivi l i an emp l o ye e s , mu l t i ­ p l ie d b y f ed e r a l government demand . The s e s tate and l oc a l gove rn­ ment data wer e ad j u s te d upward by a fac tor of 1 . 3 7 for s ta te gove r nmen t s and 2 . 0 0 for loc a l government s to a c c ount f o r the l arger s choo l room s p a c e - he at ing requ i r eme n t s i n s choo l bu i ld in g s . The h i gh e r factor u s e d for l oc a l governmen t s r e f l e c t s a h i gher r a t i o of t e a c h e r s ( 3 6 percent of l o c a l emp l oye e s } than f o r s ta t e emp loye e s ( 1 3 pe r c e n t o f s tate emp loye e s } a s s h own i n T ab le L- 9 . TABLE L- 9 LOCAL , S TATE , AND C IV I L IAN FEDERAL GOVE RNMENT EMPLOYE E S , ( Thou s and s }

Loc a l

S tate

T o t a l Emp loye e s

9 , 685

3 , 984

Teache r s

3 , 475

526

Emp loye e s ( exc lud ing teache r s }

6 , 210

3 , 458

*

C iv i l i an Federal 3 , 02 1

19 85

*

Total 16, 690 4, 001

3 , 021

1 2 , 689

D a t a taken from Stat i s t i c a l Ab s trac t o f the u . s . , T ab l e 4 6 8 , p . 2 0 0 .

1987,

S torage Capac i ty To deve lop the s to rage c apac i ty e s t ima te s f o r the govern­ ment s ub s ector , i nd ividual s tate and l o c a l gove r nmen t s we r e contac ted to d e t e rmine the i r days ' s upp l y o f s to r age c apac i ty . The r a t i o s prov i ded we r e i n the range o f 3 8 to 1 3 1 day s , a s shown i n Tab l e L- 1 0 . On average , the r a t i o s were hi ghe r for h e a t in g o i l s than f o r mo tor g a s o l i ne , due t o t h e mor e pronounced s e a s on a l f l uc tu a t i o n i n d emand for h e a t i ng o i l s . Mo re s to rage c ap a c i t y i s n e e d e d for h e a t ing o i l to a c c ommodate peak demands i n the w i n t e r . There ­ for e , for s e a s o n a l produc t s s uch a s d i s t i l l a t e and r e s i du a l fue l o i l s , a r a t io o f 9 0 day s ( the s ame a s 1 9 8 3 e s t ima t e } w a s u s ed fo r the s t o r age c apa c i ty c a l cu l a t ion , wh i l e for p roduc t s w i th l e s s s e a son a l i ty ( motor ga s o l ine and kero- j e t fue l } , a r a t i o o f 5 0 days ( 6 0 days i n 1 9 8 3 s tudy } wa s u s e d . I n the c a s e o f s ta t e and l o c a l gover nme n t s , the s to r age c ap a c i t y e s t imate for mo tor g a s o l ine was ad j u s te d downward by 2 0 percent to a c c ount for fue l ing o f gove r nment veh i c l e s a t s ervi c e s ta t ions .

L- 1 2

TABLE L- 1 0 SAMPLE OF GOVERNMENT U S E RS DAYS ' S UP PLY OF S TORAGE CAPAC I TY

Governme nt Un i t

D a y s ' S upply o f S to r age Capac i ty

Fue l

Oregon S t a t e

Mo tor Ga s o l ine * Fue l O i l §

Mi ch igan S t ate

Mo tor Ga s o l ine Fue l O i l

C l i fton , New Jer s e y

Motor Ga s o l ine * * Heating O i l § §

*

demand § demand

!

53 131 ii 6o 6 3*** 38 83

4 6 0 , 0 0 0 -ga l l on she l l c apac ity d ivided by ave rage d a i l y ( annu a l demand o f 3 . 1 5 mi l l ion ga l l on s / 3 6 5 day s ) . 9 3 6 , 0 0 0 - ga l lon s he l l c apac ity d ivided b y ave r a ge d a i l y ( annua l d emand o f 5 , 7 5 5 mi l l ion ga l l o n s / 3 6 5 days ) .

!

1 6 5 , 0 0 0 - ga l l on she l l capac i ty d ivided by ave rage d a i l y demand ( annua l demand o f 8 4 7 , 9 9 7 ga l l on s / 3 6 5 day s ) . **

6 7 5-barr e l s he l l c apac i ty d i vided b y ave r age d a i l y demand ( annu a l demand of 2 5 5 , 0 0 0 ga l l on s / 3 6 5 days / 4 2 ga l l on / b ar re l ) . §§

4 , 7 0 0 -barre l she l l c apac i ty d ivided by ave r age d a i ly demand ( annu a l d emand o f 7 4 0 , 0 0 0 ga l l on s / 3 6 5 d a y s / 4 2 ga l l on / barre l ) •

!! demand *** demand

2 5 , 0 0 0 -ga l l on she l l c apac ity d ivided by ave r age da i ly ( annu a l d emand o f 1 5 2 , 7 0 9 g a l l on s / 3 6 5 day s ) . 3 0 , 0 0 0 -gal l on s he l l capa c i ty d ivided b y average da i l y ( annua l d emand o f 1 7 3 , 3 2 4 ga l lo n s / 3 6 5 days ) .

L- 1 3

The a c tu a l m i l i t ar y s to rage c apac i ty d a t a and gover nment e s tima te s are shown i n T ab l e L - 1 1 . I t wa s a s s umed that for the le s s s ea so n a l produ c t s ( mo t o r gas o l ine a n d k e ro - j e t fue l ) , gove rnmen t inven to r i e s we re e qu a l to 5 0 pe r c e n t o f s tor age c apac i ty . F o r s e a s o n a l produc t s ( d i s t i l ­ late and r e s i du a l fue l o i l s ) , i t wa s a s sumed th a t th e inve n to r i e s on March 3 1 , 1 9 8 8 , toward the e n d o f the h e a t i ng s e a s on , repre­ The a c tu a l mi l i tary s ented o n l y one - t h i rd of t ank capac i ty . i nventory data and government e s t ima te s are s hown i n Tab l e L - 1 2 .

TABLE L- 1 1 M I L I TARY / GOVERNMENT S ECTOR STORAGE CAPAC ITY AS OF MARCH 3 1 , ( M i l l io n s o f Barre l s )

1988

M i l i tary / ! E s t imated Gover nmen t Mi l i Government Loc a l Total tary * § F ede r a l S tate To t a l Motor Ga s o l i n e 0.5 Ke ro-Jet Fu e l 10 . 7 D i s t i l l a te Fue l O i l 18 . 7 Re s idu a l FUe l O i l 2.1 T o ta l

32 . 0

0.6 0.3

1.6 0.1

0.5

0.8

0.6 2.0

**

3.6 0

**

5.8 0.4

6.3 11 .1

2.7

4.3

22.9

1.1

3.8

5.5

7.6

3.6

10 . 3

15. 9

47 . 9

*

Actu a l s torage c ap ac ity a s repor ted to the NPC by D e fe n s e T h e N P C e s t ima ted the produc t s ' s to r age Fue l S upp l y C e n t e r . capac i ty b a s e d on the De f e n s e Fue l S upp l y Center reported i nve nto r i e s of tho s e produc t s . §

Exc l ude s on-board s to rage c apac i ty o f m i l i t ary veh i c l e s , ve s s e l s , and a irc r a f t . !

s torage c apac i ty wa s c a l c u l a te d from the days ' s upp l y o f c apac i ty e s t imate s s hown i n Tab l e L- 1 0 u s ing 5 0 days for motor ga s o l i n e and k e r o- j e t fue l and 9 0 day s of d i s t i l l at e and re ­ s i dua l fue l o i l s . **

C apac i ty wa s furth e r ad j us te d downward by 2 0 pe r c e n t to account for gover nment veh i c l e fue l i ng at c omme r c i a l s e rv i c e s ta t ion s .

L- 14

TABLE L- 1 2 M I L I TARY / GOVERNMENT S EC TOR INVENTORY AS OF MARCH 3 1 , 1 9 8 8 ( Mi l l ions o f B a r r e l s ) M i l i ta r y / � Gove rnment Mi l i E s t imated Gove r nme n t Total t ary * § Fede r a l S tate Loc a l To t a l Mo tor G a s o l i ne Kero-Jet Fue l D i s t i l l ate Fue l O i l Re s idua l Fue l O i l Tota l

0.4 5.3

0.3 0 . 15

0.8 0 . 05

1.8

2.9 0.2

3.3 5.5

5.5

0.2

0.3

1.0

1.5

7.0

0.6

0.2

0.4

1.3

1.9

2.5

0 . 85

1 . 55

4.1

6.5

18 . 3

11 . 8

*

Actua l March 3 1 , 1 9 8 8 , inve ntory a s r eported to the NPC by the De fen s e Fue l Supp l y Cente r . §

Exc l ude s on-board i nventory o f mi l i t a r y veh i c l e s , ve s s e l s , and a i r c ra f t . �

E s t ima te d i nventory wa s c a l c u l a ted a t one -ha l f o f s to rage c apac i ty for mo tor g a s o l i n e and kero- j e t fue l and o ne - th i rd o f capac ity for d i s t i l l a te and r e s idua l fue l o i l s .

PADD E s t imate s No PADD d a t a are ava i lab l e for the m i l i t ary s torage c apac i ty and inven tory . For the gover nme nt s ub s e c tor , i t wa s a s s umed th a t PADDs I - IV a n d PADD V s torage c apac i t ie s and i nventor i e s we r e about 8 5 pe r c e n t a n d 1 5 p e r c e n t o f t h e U . S . to t a l , re s p e c t i ve ly , wh i ch i s the i r proport i on o f the to t a l U . S . po pu l a t ion . RE S I DENT IAL SECTOR S torage for re s ide n t i a l heating fue l inc l ud e s tankage for s i ngle fami l y home s and mu l t i - fami ly dwe l l i n g s of up to four uni t s . S tor age for l arge apartment bu i l d i n g s i s part o f the comme r c i a l s e c tor . E s t ima te s o f r e s ide n t i a l invento r i e s we r e b a s e d p r ima r i l y on two s ourc e s o f data , the Departme nt o f Comme r c e / D ep a r tment o f

L- 1 5

1983 , Hou s ing and Urban Deve l opme nt ' s Annua l Hou s i n g Survey : " P ar t F - - E ner gy- Re l ated Hou s ing Ch aracte r i s t i c s , " ( Cu r r e n t Hou s i ng Repor t s , S e r i e s H- 1 5 0 - 8 3 ) , t h e mo s t r ec e n t d a t a ava i lab l e on t h e hou s i n g s tock , a n d the trade pub l i c a t i o n Fue l O i l & O i l Heat , wh i c h e s t ima te s con s ume r i nvento ry l eve l s annua l l y . Ce r t a i n d a t a from E n e r gy I n forma t i o n Adm i n i s t r a t i o n r e po r t s , i n c l u d i n g Re s i dent i a l Energy Con sump t i o n Survey : C o n s umpt i on and Nat i o n a l Expend i tu r e s , Apr i l 1 9 8 2 th rough March 1 9 8 3 , " P ar t 1 : Data , " ( DOE / E IA 0 3 2 1 / 1 [ 8 2 ] ) , we re a l s o u s ed . Demand S ever a l f a c to r s h ave con tr ibuted to a n e t d e c l ine in the numb er o f o i l -h e a ted home s dur i ng th e 1 9 8 0 s . F i r s t , th e o i l h e a t s h a r e o f th e new home mark e t h a s o n l y r e c e n t l y begun to r e cover from th e very l ow l e ve l s i t h i t a fter the p r i c e i n c r e a s e s o f F o r e x amp l e , o i l c ap tured h a l f o f the N o r th e a s t ' s new 1 979-80 . s i ng l e f ami ly home mark e t in 1 9 7 6 and 1 9 7 7 , and o n ly 1 3 p e r c e n t o f i t in 1 9 8 1 . The s h a r e i n 1 9 8 7 h a d r i s e n t o 2 7 p e r c e n t . S e cond , c onve r s i o n s o f o i l -h e a ted hou s ing un i t s to g a s h e a t sub s tan t i a l l y outnumb e re d con s truc t i on o f o i l - h e ated u n i t s . In th e year s 1 9 7 9 through 1 9 8 6 , accord ing t o t h e Ame r i c an G a s A s s o ­ c i at i on , appro x imate l y 1 . 8 m i l l i o n o i l -h e a t e d h ou s i n g un i t s ( s i n g l e f ami l y and a l l mu l t i - fami ly ) we re c onve r ted from o i l t o g a s , wh i le about 2 0 0 , 0 0 0 n e w o i l-heated un i t s we r e bu i l t . The pace of c onve r s ion s h a s s l owed in r e c e n t y e a r s , p a r t l y be c au s e o f p r i c e change s and part ly becau s e o f d i s s i p a t i n g fe a r s o f o i l shortage s . I n the Northe a s t , 1 9 8 6 and 1 9 8 7 probab l y s aw n e t i n c re a s e s ( a l be i t sma l l o ne s ) i n the numb e r o f o i l - h e a t e d s i n g l e fami ly home s . D i s t i l l at e fue l o i l con s ump t ion i n the re s ident i a l s e c to r h a s i n c re a s e d s i n c e t h e 1 9 8 4 NPC repor t , r i s ing by ne a r l y 3 per­ c e n t per ye a r n a t i onwi de . Co n s umpt ion i n the No r the a s t , wh i ch accoun t s for about two - th i r d s o f the nat ion ' s r e s i d e n t i a l to t a l , r o s e more s l owly , wi th the Mid-Atl an t ic r e g i o n mode r a t i n g the D i s t i l l ate fue l o i l c o n s umpt i on h ad rap i d growth i n New Engl and . f a l l e n d r ama t i c a l l y a f t e r the price i n cre a s e s o f 1 9 7 9 - 1 9 8 0 , and at the 1 9 8 7 vo lume o f about 5 0 0 thou s and barre l s per day ( MB / D ) , s t i l l doe s not appro ach the e a r l i e r l eve l s ( e . g . , i n 1 9 8 0 r e s i ­ de nt i a l c o n s ump t i on wa s mo re than 6 0 0 MB / D ) . Ac c o rd i ng t o t r ade e s t ima te s , c o n s umpt i on p e r cus tome r has f a l l e n abou t 3 0 percent in the l a s t dec ade , from mo re th an 1 , 3 0 0 ga l l o n s p e r s e a s on in th e mid- 1 9 7 0 s to 1 , 0 0 0 ga l l on s i n the 1 9 8 6 - 1 9 8 7 he a t i ng s e a s o n . Th e ma j o r po r t ion o f the drop had occurred by the e a r ly 1 9 8 0 s . Indus try-wide e s t ima te s th at re f l ec t changed behav i o r a ft e r the pr i c e p lunge i n 1 9 8 6 are not yet ava i l ab l e . S to r age C apac i ty The s i z e o f fue l tank s in the r e s ident i a l s e c to r var i e s from 5 5 - g a l lon drums mounted on an outdoor s t and to 2 , 0 0 0 - ga l l on un­ derground tan k s . Mo s t home s , however , h ave t a nk s rang i ng f rom a capac ity o f 2 5 0 ga l l o n s ( 2 7 5 ga l l ons i s a s t andard s i z e tank for a s i n g l e fam i ly home ) to 8 0 0 g a l l on s .

L- 1 6

B a s e d on Fue l O i l & O i l H e a t ' s annu a l s urvey o f c apac i ty uti l i z ation d a t a , the c apac i ty o f cus tomer tank s wa s c ompu ted to be 3 8 0 ga l l on s on ave rage for a l l reg ion s in 1 9 8 7 . New E n g l and ' s tank s te nd to be sma l l e r ( 3 4 5 ga l l on s ) , and the M i dd l e At l an t i c ' s tend to be l arger ( 4 2 0 gal lon s ) th an the ave r a ge . The s e r e g i o n a l d i f ferenc e s are probab l y a func t i on o f hou s e s i z e ; they are echoed in mo s t reg iona l e s t imate s of consump t ion p e r c u s tomer . To ar r ive a t an e s t imate o f the to t a l tank capac i t y and i n ­ ventor i e s , i t wa s a s s umed th at e ach t ank i n a mu l t i - f am i l y s t ructure s erve s thr e e un i t s , and that e ach s in g l e f am i l y home ha s i t s own tank . The r e are thu s approximate l y 8 . 4 mi l l ion re s ident i a l o i l tank s for No . 2 oi l , for a t o t a l of 3 . 2 b i l l io n ga l lons o f tank c apac i t y or 7 7 mi l l ion b a r re l s . For k e ro s i ne , a Kero s in e s tor age sma l ler t ank s i z e o f 2 5 0 g a l l o n s was a s s ume d . capac i ty i s e s t imated at 2 mi l l ion barre l s , with inve n t o ry s l i ghtly lowe r a t 5 0 percent o f c apac i ty . Inventory The tr ade pub l i c a t ion Fue l O i l & O i l H e a t has rou t i n e ly con­ duc ted an annu a l s urve y of h e a t ing o i l de a l e r s to d e t e rmine the I t s d a t a s h ow inventory prac t ice s of the r e s ident i a l s e c t o r . th at cus tome r tanks we re 6 3 percent fu l l , c a r r y i n g about 2 4 0 g a l ­ lons , on Oc tober 1 , 1 9 8 7 . I t i s important to note tha t by far the m a j o r i ty o f de l iv­ e r i e s of home h e a t i n g o i l are ini t i ated by the d e a l e r on the bas i s of compu te r account manageme nt that c a l c u l a te s degree day s , the home ' s the rma l e f f i c i ency , the c u s t ome r ' s t empe r a ture s e t­ t ing , e tc . D e a l e r s a im to s upply be twe en two - th i r d s and three­ Th a t i s , quar te r s o f the t ank ' s c apac i ty with e ach de l ive ry . they a l low the tank to fal l to 2 5 - 3 3 pe r c e n t o f i t s c apac i ty be fore d i spatch ing another de l ivery to f i l l the t ank . As a r e s u l t , tank s wi l l be 6 0 - 6 7 percent fu l l o n ave r age . The s ys t em has remove d the s e a s on a l i ty o f con sume r inve n tory l eve l s ; t an k s wi l l be as fu l l on O c tob e r 1 a s they are on M a r c h 3 1 . O n l y the frequency of de l iver i e s var ie s s e a s o na l ly . S o - c a l l ed · " wi l l c a l l " accoun t s , whe r e the c u s tome r r e que s t s each de l ivery s eparate l y , wi l l l ike ly s t i l l e xh i b i t s e a s on a l swings i n the i r inven tory vo lume s , and on ave r age w i l l h o l d l owe r stocks . The s e a c c oun t s , however , repr e s e n t a sma l l share o f the They marke t , accor d i ng to d i s c u s s ions with h e a t i ng o i l de a l er s . are re l a t ive l y mor e c ommon in s ome are a s , such a s part s of M a i n e , but over a l l probab l y repre s e n t about 1 0 - 1 5 pe r c e n t o f th e North­ e a s t ' s home h e at ing o i l c u s tome r s . I nventor i e s , a t 6 3 percent o f tank c apac i ty , we r e app ro x i ­ ma t e l y 5 0 mi l l ion barre l s on March 3 1 , 1 9 8 8 . The Northe a s t he ld about ha l f of the vo l ume . Comb i n ing the e s t ima t e s for e a c h o f the E a s t Coas t r e g i o n s , we s e e th at re s ident i a l i nve n t o r i e s wer e about equ a l t o t h e s tock s he ld i n t h e PADD I pr imary s y s t em a t th at t ime . Tab l e L- 1 3 s ummar i z e s s torage c apac i ty a n d inve ntory .

L- 1 7

TABLE L - 1 3 RES I DENT IAL SECTOR E S T I MATED STORAGE CAPAC ITY AND INVENTORY AS OF MARCH 3 1 , 1 9 8 8 ( Mi l l ions o f Barre l s ) C apac i ty D i s t i l l a te Fue l O i l / Ke r o s i ne

I nventory

79

50

TRANSPORTAT I ON S ECTOR Th i s s e c tor i s compr i s e d of the fo l l ow i n g c a te gor i e s o f transport a t i on mode s : r a i l road , bu s , t ru c k i n g , a v i a t ion , mar i ne ve s s e l s , tax i c ab , r e n t a l c a r s , and pe r s ona l veh i c l e s . As in prev ious NPC s urvey s , t h e ana ly s i s inc lude s d a t a from f i xe d and on-board s torage , but exc lude s pay load s tor age c apac i ty and i nventory . Methodo l ogy T er t i ary s torage data for the tran s po r t a t ion s ec to r ' s c at e gor i e s are d i f f i c u l t to obta in . I n add i t ion to the l arge

TABLE L - 1 4 TRANSPORTAT I ON SECTOR E S T IMATED STORAGE CAPAC I TY AS OF MARCH 3 1 , 1 9 8 8 ( Mi l l i o n s o f Barre l s ) Transportation Mode Ra i l road Bus Truck Av i a t i o n Mar i n e Mar ine P le a s u re Craft Car Ren t a l T ax i c ab Motor Veh i c l e Total

Kero s ine & K e ro - J e t Re s i du a l Motor Fue l O i l To t a l Fue l G a s o l in e No . 2 D i e s e l 9.6 0.8 6.6 5.1 5 1 0 74

10 . 6

7. 2

21 . 5

82. 3

44 . 2

L- 1 8

.6 .8 .6 .6 .3

6.0 1.5 0.7 96. 2

0.6

.4 .5 .7 .7

9 0 6 10 12

10 . 6

7.2

144 . 3

number o f indu s tr i e s tha t make up th i s s e c t o r , e ac h i ndu s try i s compr i s ed o f many sma l l and l arge f i rms . To overcome th i s d i f f i ­ cu l ty , survey data we r e gathered from trade a s s oc i a t i o n s , gove rn­ ment age nc i e s , a nd the l arge s t f i rms of the va r i ou s s ec to r s . The c apac ity and inve ntory data thu s e s t ima ted are s umma r i z e d on Tab l e s L- 1 4 and L- 1 5 and de s c r ibed by s e c t ion b e l ow .

TABLE L- 1 5 TRANSP ORTAT I ON S ECTOR E S T IMATED INVENTORY AS OF MARCH 3 1 , 1 9 8 8 ( Mi l l ion s o f B a r re l s ) Tran s po r t a t i o n Mod e Ra i l road Bus Truck Avi at ion Mar i ne Mar ine P l e a s ure Cra ft Car Renta l Taxicab Mo tor Veh i c l e Tot a l

Mo tor Kero s ine & K e r o - J e t Re s idua l G a s o l i ne No . 2 D i e s e l Fue l Fue l O i l Tota l 5.0 0.5 3.3 2.6 4. 0. 0. 47.

1 8 4 0

13 . 6

52 . 3

25 . 4

5.8 3.6

0.4

5.0 0.5 3.3 5.8 6.2 4. 0. 0. 60.

5.8

3.6

5 8 4 6

87. 1

Ra i l road Tran s po r t a t i on I n 1 9 8 2 , the As s o c i a t i on o f Ame r i can Ra i l ro a d s c onduc ted an exten s ive s urve y of the i ndu s try th a t it s er ve s . Th i s s urvey include d data on fue l u s e by the r a i lroad i ndu s try . As s uch , it bec ame the bas i s of th e i n f o rma t i on s ubm i t te d for the 1 9 8 4 NPC survey . The As s oc i a t i o n o f Ame r i c an Ra i l roads h a s not c o nduc ted a forma l s urvey s in c e 1 9 8 2 . However , the Ope r a t i o n s and M a i n t e ­ nance Departme n t o f t h e As soc i a t ion updated k e y d i e s e l i nven tory data . Th i s i n forma t ion and the month l y volume s of " Th e O f f i c i a l Rai lway Equ ipme nt Re g i s te r " a r e the s ou r c e o f the f igure s for inve n tory and s torage c apac i ty of the r a i lroad s ub s ec tor l i s ted on Tab l e L- 1 6 .

L- 1 9

TABLE L- 1 6 RAILROAD TRANS PORTAT I ON E S T I MATED S TORAGE CAPAC ITY AND INVENTORY AS OF MARCH 3 1 , 1 9 8 8 ( Thou s ands o f B a r re l s ) C apac i ty F i xed S tor age Tankage On-Board Locomo t ive Tanks To t a l

I nve n t o ry

7, 695 1 , 914

4 , 000 957

9 , 609

4 , 957

Bu s Transpor t a t i o n The bu s tr a n s po r t a t i o n s ub s e ctor i s c ompo s e d o f th r e e d i s t in c t s y s tems : pr iva te bu s c ompan i e s , pub l i c t r an s i t c ompa ­ n i e s , a n d s choo l bu s e s . The d a t a i n th i s r e po r t i nc lude o n ly f ixed tank a ge , not on-board s to rage c apac i ty , wh i c h i s i n s t e ad shown w i th the mo tor veh i c l e e s t ima te s . Add i t io na l l y , f i xed s torage c apac i ty and i nventory data for the s choo l bu s s ub s ec t or are not g i ve n h e r e . Such data are inc luded i n the m i l i t ar y / gove rnme nt s e c to r a s p a r t o f loca l gove rnme n t . D a t a for the bu s s y s tems rece iving fede r a l fund ing we r e ob­ tai ned from the Ame r i c an P ub l i c Tran s i t As s oc i a t i o n , wh i l e data for the p r ivate s e c tor we re submi tted by the Ame r i c a n B u s As s o ­ c i a t i on . The s e are the s ame s ourc e s th at u s ed a 1 9 7 8 s urve y t o furn i sh d a t a for t h e 1 9 8 4 N P C repor t . Bu s r e g i s tr a t i o n f i gures ind i c at e that e s s e nt i a l ly no growth h a s o c c u r r e d s i nce 1 9 8 3 i n the number o f bu s e s r e g i s tered i n the Un i te d S t a te s . Add i ­ tion a l l y , the Ame r i c an Pub l i c Trans i t As s oc i a t i o n e s t ima ted th a t the 1 9 7 8 d a t a on s torage c apac ity a n d i nventory i s repre s e n t a t ive of today ' s s i tu a t ion . The i n format ion l i s ted on T ab l e L - 1 7 re f l e c t s th i s and the fac t that i nvento r i e s a r e n o rma l ly he ld a t 6 0 perc e n t o f c apac i ty .

TABLE L- 1 7 BUS TRANSPORTAT I ON E S T IMATED F I XED S TORAGE CAPAC I TY AND I NVENTORY AS OF MARCH 3 1 , 1 9 8 8 ( Thou s an d s o f Barr e l s ) C apac i ty Kero s ine Diesel Pub l i c Bus S y s tems P r ivate Bus S y s tems To t a l

I nven tory D ie se l Kero s ine

80

238 489

48

143 293

80

727

48

436

L-2 0

Truck Transportation The trucking indus try c an be d i vided i n t o thr e e c a t e go r i e s : for-h i re , private , and owne r / operator or i ndependent . Compan i e s i n the f i r s t two c a te gor ie s f i l l the i r fue l i n g ne e d s b y u s i n g the ir own f ac i l i t i e s a n d purch as ing fue l a t t ruck s top s , wh i l e owne r / operato r s u s e truck s tops a lmo s t e xc l u s i ve ly . The s to r age c a pac i ty a t truck s top s is part of the s ec o nd ary d i s tr ibu t ion sys tem and is inc luded in that s e c t ion . On ly the on-board and truck ing-company-owned s to rage and inve ntory f i gure s are con­ s i de red to be part o f the t er t i ary s torage s egme n t s tran s porta­ tion s e c tor . A number o f s o urc e s were used to a t tempt to qu an t i fy the r s torage c apac i ty o f t e rmina l s owned by the trucking i ndu s try . Howeve r , i t wa s found tha t no comprehe n s ive s tudy o f under ground s torage tanks i n the t ruck ing i ndus try h a s ever b e e n unde r t ak e n . Thu s , s torage c apac ity was determined by e s t ima ting i t s re l a t i o n ­ sh ip t o fue l c o n s umpt ion . The E IA data ind i c ate that in 1 9 8 6 taxab l e on-h i ghway d i e s e l fue l demand was 1 . 2 mi l l i on barre l s p e r day . About 1 . 5 p e r c e n t o f th i s f igur e , howeve r , wa s d u e to automob i l e s and l i ght truck s . Thu s , th e truck ing i ndu s try con s umed 1 , 1 8 4 MB / D o f d i e s e l fue l i n 1986 . O f th i s f igure , i ndu s try sourc e s e s t imate tha t 4 0 percent or about 4 7 5 MB / D we re de l ivered th rough truck i ng - c omp any-own e d s torage f ac i l i t i e s . The Ame r i c a n Truck ing As soc i a t i o n e s t ima te s tha t the norma l inve ntory i n f ixed t ankage o f truck ing comp an i e s ( i n c l ud ing truck renta l f i rm s ) is abou t one we ek ' s fue l requ i r eme n t s o r 3 . 3 m i l ­ l i on barre l s . Total s torage c ap ac i ty i n the truck ing s ub s e c to r c an thu s be e s t imate d a t 6 . 6 mi l l ion barre l s , a s s uming that tanks are ha l f fu l l on ave rage . Air Tran sport a t i on The a i r transportat ion s ub s e c tor inc l ude s c omme rc i a l a i r­ l i ne s and a i rpor t s , general av i a t i on ( non - s chedu l ed ) a i rc r a f t , and h e l icopte r s . S torage c apac i ty and inventory for m i l i tary u s e are n o t part o f the d a t a reported i n th i s s e c t i on , s i nce that in­ format ion is part of the mi l i tary / governmen t s e c to r ana l y s i s . I t i s d i f f i c u l t to d e t e rmine the owne r s h i p o f the s torage capac i ty and i nventory at a i rpor t s . The fue l may be own e d by the airpo rt , the f i xed ba s e operator , the fue l s uppl i e r , o i l c ompa­ As s uch , a numb e r o f n i e s , a i r l i ne s , or a comb i n a t ion of the s e . sourc e s we re con s u l te d to obta i n data for the a i r t r a n s por t a t ion s ub s ector : •

A i r l ine compa n i e s

•

A i r Tran s po r t A s s o c i at ion o f Ame r i c a

•

A i rport Ope rators Counc i l I n terna t i o n a l

•

Fede ra l Av i a t ion Adm i n i s tr a t ion

L-2 1

•

G e n e r a l Av i a t ion Manu fac ture r s A s s o c i a t i on

•

Na t i o n a l A i r Tran s portat i on A s s oc i a t i on

•

Nat iona l Avi a t i on C l ub .

The NPC s urveyed the 3 0 l ar ge s t a i rpor t s i n the U n i ted S ta t e s and d e t e rmined that the i r comb i n e d on- s i t e s to r age capa­ c i ty amount s to 3 5 0 mi l l ion ga l l ons ( 8 . 3 3 mi l l ion b a r re l s ) . Con s umpt i on d a t a for the s e a i rpor t s i nd i c a t e th a t the 3 0 l arge s t fac i l i t i e s a c c ount for about 9 0 pe rcent o f the c omme rc i a l k e ro ­ j e t fue l consump t i o n i n the U n i te d S ta te s . Thus , i t i s e s t ima ted th at th e c omb i ne d on- s i te s torage c apac ity i n a i r po r t s h and l i ng c omme r c i a l av i a t io n amount s to 9 , 2 6 0 thou s and barre l s o f k e r o - j e t fue l . I t appe ars tha t a i r l ine s ma i n t a i n invento r i e s a t about 5 5 percent o f capac i ty . Th i s f i gure wa s then u s ed to e s t imate the inve n tory in s torage at a l l comme rc i a l avi at i on a i rpo r t s to b e 5 , 0 9 3 thou s and b a r re l s . The Federal Av i a t ion Admin i s tr a t i on ( FAA ) e s t ima t e s tha t th ere are appro x ima t e l y 7 0 0 gene r a l avi a t i on f a c i l i t i e s ( a i rport s that d o no t s e rv ice commerc i a l ly s ch edu l e d a i rc r a f t ) F o r th i s s tudy , i t wa s a s s umed th at each o f the s e l o c a t i o n s ma i n t a i n s abou t 1 0 , 0 0 0 g a l l o n s o f kero- j e t fue l s torage c apac i ty , wh i c h i s norma l l y f i l l e d about 5 0 pe rcent . •

O n -board s torage c apac i ty and i nven t o ry d a t a wer e e s t imated from in forma t i on provided by the FAA , and are s ummar i z e d i n Tabl e L- 1 8 . TABLE L - 1 8 A I R TRANSPORTAT I ON E S T IMATED STORAGE CAPAC ITY AND I NVENTORY AS OF MARCH 3 1 , 1 9 8 8 Capac i t y ( Thou s ands O f B arre l s )

Average I nven tory I nventory To C apac ity ( Thou s a n d s ( Pe r c e n t ) O f B arre l s )

9 , 260

55

5 , 09 3

Gene r a l Avi a t ion A irpor t s

167

50

83

Turboprop s / Turbo j e t s Gene r a l Avi a t ion and Sma l l Comme r c i a l ( 8 , 9 0 0 @ 9 0 0 ga l lo n s )

191

50

95

Turbo H e l i c o p t e r s ( 4 , 2 0 0 @ 1 4 0 ga l l on s )

15

50

7

975

50

488

Comme r c i a l Av i a t ion Airpo r t s

u.s.

Comme r c i a l F l e e t ( 3 , 1 5 0 @ 1 3 , 0 0 0 ga l lo n s ) Tota l

10 . 608

L- 2 2

5 . 766

Mar ine Tran s por t a t ion The mar ine transpor t a t i on sub s e ctor inc lude s a l l s h i p s and ve s s e l s engaged i n tr ade o r c ommerce . A s i n the 1 9 8 4 s tudy , the petro­ sh i p s and ve s s e l s were d ivided into two b a s i c c a te gor i e s : l eum and non -pe tro l eum carr ie r s . E ach of the s e c a t egor i e s wa s then d ivided by type o f tran s port . The vo l ume s l i s te d i n T ab l e L- 1 9 are on-board bunk e r s torage c apac i ty and inventory only . The data for the mar ine s ub s e c tor we re c omp i l e d w i th the as s i s tanc e of the U . S . Coa s t Guard , Wa terborne S t a t i s t i c s C e n t e r o f the Army Corps o f Engi ne e r s , U . S . Mar i t ime Admin i s tr a t ion , and The me thodo l o gy u s e d to e s t i ­ the Ame r i c an P e t r o l eum I n s t i tute . mate the s torage c apac i ty for the s ub c a t e go r i e s i s exp l a i ne d i n th e no t e s t o Tab l e L- 1 9 . For the e s t imated ave rage inve ntory o f the to ta l comme r c i a l marine tran s por t a t i on s ub s e c t or , i t was a s s ume d that inventory , on ave rage , r epre s e n t e d 5 0 pe r c e n t o f s tor age c apac i ty . Mar i ne P l e a sure Cra f t The u . s . C o a s t Guard e s t imate s th at there we re 1 0 . 2 mi l l ion Of the s e , p l e a sure boat s i n the Uni ted S tate s at year e nd 1 9 8 7 . app rox ima te ly 9 . 5 m i l l i on c r a f t ma inta i ne d on-board s torage for fue l , inc luding po r t ab l e tankage u s e d i n the sma l l e s t of c r a f t . Due to th e s e a s on a l i ty o f r e c r e a t i o n a l boat ing , fue l d emand and inventory vary wide ly . For thi s s tudy , i t was a s s ume d that on -board inventory i n p l e a s ure craft ave r age s 75 pe r c e n t o f c apac i ty , a s shown i n T ab l e L- 2 0 . The h i gh on -bo ard inven tory re s u l t s from the fact that mar ine p l e a s ure c r a f t are g e n e r a l l y s tored wi th fu l l fue l tanks t o preve n t conde n s a t ion . Car Ren t a l I ndu s try The car ren t a l i ndu s try inc lude s the c omp an i e s that are engaged i n d a i ly car and t ruck renta l s for bu s i ne s s and p e r s o n a l use . Thi s indu s tr y i s c ompo s ed o f four ma j o r c ompe t i to r s a n d a large number o f sma l l e r f i rms . A s such , fue l s torage and i nven­ tory data for the c ar rental s ub s e c to r we r e d i f f ic u l t to obta i n . The Ame r i c an C ar Ren t a l As s oc i a t i on , S e cur i t i e s and Exchange Commi s s ion repo r t s f i l e d by car renta l f i rms , and the Mo tor Veh i c l e Manu f ac ture r s A s s o c i a t ion we re c on s u l t e d i n th e c omp i la­ t i on of in forma t i o n for the c a r rent a l s ub se c t o r . B a s ed on the figu r e s ob t a i ned from the s e s ourc e s , i t is e s t imated th a t th e r e are abou t 6 , 5 0 0 c a r r e n t a l locat ions w i th f i xed fue l s to r a ge fac i l i t i e s i n the Un i t e d S t a t e s . The s e f ac i l i t i e s typ i ca l l y have 1 0 , 0 0 0 ga l l on s of c apac i ty , thu s g iving a t o t a l s torage c ap ac i ty o f 1 . 5 mi l l ion b a r re l s o f mo tor gaso l i ne for the c ar r e n t a l sub­ s e c tor . The i nventory on hand can b e a s s ume d to be 5 0 percent o f capac ity o r about 7 5 0 , 0 0 0 barre l s . Tax i c ab Transpor t a t ion The tax i c a b s ub s e c to r inc lude s the f or - h i r e automob i l e f l e e t for pa s s enger t r a n s p o r t a t i o n . The I n ternat i o n a l Tax i c ab A s s oc i a L- 2 3

TABLE L- 1 9

NUMBER O F MARINE VESSELS AND ESTIMATED BUNKER STORAGE CAPAC ITY AND INVENTORY

AS OF MARCH 3 1 , 1988 Bunker Sto rage Capacity (Thousands o f Barre l s ) Number o f Ves se l Clas s i fication

Ves sels

No .

2

Fuel

Residual Fue l Oi l

Total

Inventory*

Petro l eum Carriers§ U . S . Flag Ocean Tankers�

2 14

68

3 , 3 94 3

N/A

3 , 46 2

U . S . Flag Lake Ves sel s** Tankers§§ Barges�� Tuqs

3

3

6

N /A

1 19

51

51

N /A

215

71

71

N /A

17

N/A

Inl and Waterway Barges***

3 , 23 2

Towboats

6 , 000

3 , 48 1

3 , 48 1

N/A

503

8

8

N/A

262

79

3 , 5 89

3 , 668

N/A

Operating

57

114

1 14

228

Laid-up over one year

27

108

1 08

N /A

1 , 183

N/A

1 2 , 299

6 , 149

u . s . Coastal Barges§§§

17

Non-Petroleum Carriers u.s.

Flag Ocean Drybulk

Con tainer Sh ips��� U . S . Flag Lake Drybulk Carriers **** In temporary l ay-up

Offshore§§§§ Total

4

4

1 , 046

1 , 183

1 1 , 682

5 , 079

12

7 , 2 20

N/A N/A

16

* No t av a i l 1e . § ab App rov e d for p etro l eum serv i ce 1 excludes l iqui f ied petro l eum gas carriers . � Over 1 , 000 GT , and includes 8 Ready Reserve Fleet (RRF) vesse l s . Oceango ing vessels inclv�e those with routes for oceans , coastwise , l imited coastwise , and Great Lakes /coas twise . §§

Great Lakes vessels include those with routes for Great Lakes , Rivers and Great Lakes .

Over 1 , 000 GT.

�� Over 150 feet . *** For U . S . inland b arges ,

it is assumed that each ves sel has on-board storage of

o f fuel for pump engines /machinery . §§§ u . s . coastal barges (over 150 fee t )

2 5 0 gal l ons

average over 1 9 , 000 barre ls of capacity each .

been assumed that each vessel has on-board storage of

mach nery . � Over 1 , 000 GT and includes 79 RRF ves sels . * * Over 1 , 000 GT . §§§§ Includes boats , tugs , and other equipment used in supply ing materials for o f f shore

��

production fac i l it ies .

L-2 4

It has

500 gal l ons of fue l for pump engines /

TABLE L- 2 0 MARINE PLEASURE CRAFT E S T I MATED ON- BOARD S TORAGE CAPAC I T Y AND INVENTORY AS OF MARCH 1 9 8 8 Average Cra ft Tank Reg i s trat ions Capac i ty ( Mi l l i ons ) (Gal lons ) Ou tbo ard Mo tor ( Ga s o l in e Engine ) S tern Dr iven (Gasol ine Engine ) Cru i s e r and Aux i l i ary C r a f t ( G a s o l ine Engine ) ( D i e s e l En g i n e )

I nve n tory ( Th ou s an d s o f B a r re l s ) *

8.1

12

2 , 314

N /A

1.0

50

1 , 190

N /A

0 .4 0.1

200 250

1 , 905 595

N /A N /A

Tot a l

*

Capac i ty ( Thou s an d s o f B ar r e l s )

6 , 004

4 , 503

N / A = No t Ava i l ab l e .

t ion ( I TA ) records i nd i c ate tha t there are 6 , 3 4 2 tax i c ab c ompa­ n i e s operat ing 1 9 9 , 7 6 6 veh i c l e s in the Un i ted S t a t e s today . In i t s 1 9 8 7 annu a l s urvey , the I TA obta ined ope r a t i n g d a t a o n about 1 , 0 0 0 of the s e f i rms . The s urvey r e s u l t s i nd i c a te that about 2 1 percent o f the s e c ompa n i e s ma inta i n the i r own fue l i n g fac i l i t i e s , wh i l e the b a l ance fue l at s e rvice s ta t ions . The ave rage s torage capac i ty for the appro x imate ly 1 , 5 0 0 compan i e s tha t fue l the i r own f l e e t i s reported to b e 2 0 , 0 0 0 ga l l o n s , f o r a to t a l s torage c apac i ty of 3 0 mi l l i o n g a l l o n s ( 7 1 5 , 0 0 0 barr e l s ) i n the tax i c ab sub s e c tor . The ave rage f i xe d i nventory i s e s t imated to be 5 0 percent o f c apac i ty or about 3 5 7 , 0 0 0 barre l s . The I TA data i nd i c a te that there are 1 9 9 , 7 6 6 r e g i s t e r e d tax i c ab s . As s um i n g t h a t t h e on-board tank s average abo u t 1 6 ga l l ons e ach and are kept 5 0 percent fu l l , a tota l on-bo ard inventory i s about 3 . 2 mi l l i on gal l on s ( 7 6 , 0 0 0 b a r r e l s ) for the tax i cab compan i e s . Mo tor Veh i c l e F l e e t Th e motor veh i c l e s ub se c tor inc lude s pr ivate p a s s e ng e r veh i c l e s , mo torcyc l e s , bu s e s , tax i c ab s , renta l c a r s , truck s , and tra i l er s . On l y on-board c apac i ty and inventory are i n c luded in

L- 2 5

th i s s e c t ion . The f ixed s torage c apac i ty and i nventory h e l d i n tho s e s y s tems th a t s e r v i c e mo tor f l e e t s a r e i n c luded in the p e r t i ne n t s ub s e ct or s . The E IA , Motor Veh ic l e s Manu f a c t u r e r s As s o c i a t ion , a n d Ame r i c an Pub l ic Trans i t A s s oc i a t i o n wer e co n s u l ted i n the c omp i l a t ion o f the data shown i n T ab l e L - 2 1 .

TABLE L- 2 1 MOTOR VEH ICLE FLEET ESTIMATED ON-BOARD STORAGE CAPAC ITY AND INVENTORY*

AS OF MARCH 3 1 , 1988

Average Reg is tered

Tank

Vehi c l es

Capac ity

1987§

(Gal l ons )

Total Tank Capacity Thousands of Barre l s

Gaso l ine

Diesel 1 , 073

Automobi les

140 , 7 7 0 , 000

16

5 2 , 554

Motorcycles

7 , 6 10 , 000

4

725

Commerc ial

1 16 , 1 1 0

125

School

509 , 600

35

404

Es t imated

(MB)

Keros ine

Total

Inventory

(MB)

53, 627

3 3 , 785

7 25

457

3 45

217

425

26 8

Buses 259

86

21

Trucks� Light

3 0 , 0 1 0 , 795

20

13 , 5 76

7 15

Medium

7 , 7 7 1 , 570

14 , 2 9 1

7 , 401

9 , 003

Heavy

100

1 , 733 , 3 2 9

1 1 , 103

2 00

1 8 , 504

8 , 254

1 1 , 658

8 , 2 54

5 , 200

To tal

*

7 4 , 660

2 1 , 425

86

96 , 1 7 1

6 0 , 588

The Environmental Protection Agency reports that , on average , the motor veh i c l e f leet

maintains on-board inventory o f about 63 percent o f capacity . §

Motor Vehicles Manufacturers Association ' s 1986 figures increased by 3 percent to

es timate �

1987 registrat ions .

L ight trucks are under 6 , 000 pounds , medium trucks are 6 , 000- 2 6 , 000 pounds ,

trucks are over 2 6 , 000 pounds .

L-2 6

and heavy

APPENDIX M

GlOSSARY

APPEND I X M GLO S SARY

Ala skan c rude o i l in tran s i t by water - - c rude o i l c a r go e s i n tran s i t b y tank e r from A l a skan load i ng por t s to o th e r s ta te s , Pue rto Rico , t h e V i r g i n I s l ands , Guam , a n d the Hawa i i an Fore ign Trade Z o ne . I n c lude s c rude o i l s h ipped from a l l s ourc e s i n A l a s k a , inc luding Cook I n l e t and Valde z . barr e l - - the s tandard un i t o f me asureme nt o f l iqu i d s i n the pe tro l eum i ndu s t ry , cont a i n ing 4 2 U . S . s tandard ga l l on s at 6 0 °F . bas ic s e d ime nt and wat e r ( B S &W) bot toms , s ed ime n t s , and water th at co l l e c t a t the bottom of s torage t an k s . bulk p lant - - a nonc on s ume r fac i l i ty u s e d mark e t i ng o f pe t r o l eum produc t s that c apac i ty o f l e s s than 5 0 , 0 0 0 barre l s petrol eum produ c t s by barge , tanke r ,

for s tor age and / o r h a s to t a l s to r age and doe s not r e c e ive or p ipe l ine .

bulk termin a l - - a noncon s ume r f ac i l i t y u s e d for s torage a nd / or mark e t ing o f p e t r o l eum product s that ha s t o t a l s to r age c apa­ c i t y of 5 0 , 0 0 0 barre l s o r more or r e c e i ve s p e t r o l e um produc t s by b ar ge , tank e r , or p ipe l i ne . c l ean produ c t s -- mo tor ga s o l i ne , keros ine , l a te fue l o i l .

j e t fue l , and d i s t i l ­

c l e a r i nghou s e - - s ub s i d i ary o f a future s e xchange wh ich i n t e r ­ po s e s i t se l f b e tween every trade s o a s to become a party t o every contrac t . Ac t s a s c entr a l bu s i ne s s o f f i c e a n d c r e d i t corpor a t i on f o r the exchange . Gu arant e e s per forman c e o f a l l contrac t s and manage s the de l ivery proc e s s . c l o s e a po s i t ion ( to ) - - to c anc e l a l ong o r short po s i t i on through an o f f s e tt i ng s a l e or purc ha s e . Commod i ty Futur e s Trading Commi s s ion ( CF TC ) F e d e r a l agency author i z e d to regu l ate future s trad i n g i n a l l c ommod i t i e s . con s ump t ion - - the u t i l i z a t i on o f a produc t by an e nd - u s er . contingency space - - s pa c e in exce s s o f the max imum ope r a t ing inventory , exc l u s ive of the unava i l ab l e s p ace , th a t i s re­ qu i red to ma i n t a i n a wo rk ab l e ope r a t i ng s y s tem . Th i s s pa c e i s only u s e d i n t ime s o f ab norma l ope r a t i o n s , such a s e qu ip­ ment fa i l ure ( s e e F i gure 4 ) . crude o i l - - te chn i c a l l y de f i ned a s a mix ture o f hydro c arbo n s that e x i s t s i n natur a l under ground re s e rvo i r s a n d r ema i n s

M- 1

l iqu i d at a tmo sphe r i c pre s s ure a fte r p a s s i n g th rough sur f ac e s ep a r a t i n g f ac i l i t i e s . S t at i s t i c a l ly de f i n e d t o a l s o i n c lude l e a s e conde n s ate ( s e e de f i n i t i on ) a n d sma l l amoun t s o f nonhydroc arb o n s produc e d with the o i l . Unfini shed o i l s ( s e e d e f i n i t ion ) and n a tur a l ga s l iqu i d s produce d a t n a t u r a l g a s proce s s i ng p l an t s a n d mixed with crude o i l a r e exc luded . de l ivery area - - the po i n t s s pec i f ied i n an e xchange ' s ru l e s a s t o wh e r e de l ivery o f the phy s i c a l commod i ty c a n b e made . de l ivery month - - the month i n wh ich de l ivery aga i n s t a futur e s c on t r a c t take s p l ace . demand - - the wi thdrawal o f s tock s from the p r imary d i s tr ibu­ t i on s y s tem . d i s t i l l at e fue l o i l ( genera l ) - - a gene r a l c l a s s i f i c at i o n for one o f the petro l eum frac t i o n s th at is u s ed p r ima r i ly for space h e a t i ng , on-highway and o f f -h ighway d i e s e l e n g i ne fue l ( inc lud i ng r a i l road eng ine fue l and fue l for agr i cu l ture mach iner y ) , and e l e c t r i c powe r gene r a t ion . I n c luded are No . 1 , No . 2 , and No . 4 heat ing o i l , c o n f o rming to AS TM S p e c i f i c a t ion D 3 9 6 , and d i e s e l fue l , con form i n g to ASTM Spec i f i c at i o n D 9 7 5 for No . 1 -D and No . 2 - D . f ixed s torage - - s to r age c apac i ty th at i s h e l d a t a c e n tr a l l o c a ­ t i on for eve n t u a l con sumpt ion by an end-us e r , such a s j e t fu e l s tor age tank s a t an a i rport . forward mark e t s - - non- re gu l a te d crude o i l and p e tro l eum produc t s mark e t s i n wh i ch contra c t s for future d e l ivery o f c ommod i t i e s are tr aded . future s - - for the purpo s e o f th i s repor t , r e fe r s t o future s trad ing o f No . 2 fue l o i l / ga s o i l , mo tor g a s o l i ne , a nd c rude o i l on the New York Me r c an t i l e Exchange and the London I nte rnat i o n a l P e tro l eum Exchange . future s contr ac t - - an agreement to make or a c c e p t d e l ivery o f a s t andard i z ed amount o f a commod i ty , o f a s t andard i z ed qua l i ty , dur ing a spec i f ic month . Futur e s contrac t s a r e t r a d e d on a n organ i z ed centra l exch ange , a t p r ic e s s e t b y pub l ic auc t ion . T h e y are s ub j e c t to a l l t e rms a n d cond i t i o n s inc luded in t h e ru l e s o f an e xch ange . By c l o s ing a po s it ion be fore the de l ivery mon th , de l ive ry c an be avo ided . hedge - - the e s tab l i s hmen t o f an oppo s i t e po s i t io n i n the futur e s market from th at he l d i n the phy s i c a l mark e t a s a protec t i o n aga i n s t t h e po s s ib i l i ty o f adve r s e p r i c e f luctuat i o n s . idle t ankage - - t ankage that wa s i d l e on March 3 1 , 1 9 8 8 , for r e a s o n s o ther than programme d ma intenance , but that c ou l d be ava i l ab le for s e rvi ce w i th i n 9 0 day s fo l lowing l i t t l e or no mai ntenance work .

M- 2

in-trans i t i nventory - - i nventory that i s be ing t r a n s ported be­ twe e n dome s t i c s to r a ge loc a t io n s a t a g i ven t ime . inve ntor i e s - - l iquid barre l s o f c rude o i l and c e r t a in r e f ined petro leum produc t s located w i t h i n the c u s toms t e rr i tory o f the Uni ted S ta t e s ( e xc lud ing Puerto Rico ) that are s tored i n t h e pr imary a n d s e condary d i s tr ibu t i on s y s tems a n d t h e t e r ­ ti ary s torage s e gme nt . Doe s n o t i n c lude i nvent o r ie s in u .s. terr itor i e s and po s s e s s ions . kero s ine ( non- avi ation u s e ) - - a petrol eum produc t u s e d in s pac e he ater s , cook s tove s , wa ter heate r s , and mo tor fue l , a l s o s u i tab l e for u s e a s an i l luminant wh en burned i n w i ck l amp s . I nc luded are the two c l a s s i f ic a t i o n s r e c o gn i z e d by ASTM D 3 6 9 9 : No . 1 - K and No . 2 - K , and a l l g r ade s o f k e ro s i ne c a l l ed range or s tove o i l th at have prope r t i e s s imi l ar to No . 1 fue l o i l . kero s in e - type j e t fue l - - a r e l at ive l y l ow- f re e z i n g-po int pe tro­ leum produc t of the keros ine type u s ed pr ima r i l y for c omme r­ cial turbo j e t and tu rboprop a i r c ra ft engi ne s . Cove re d by ASTM Spec i f i c a t i on D 1 6 5 5 and M i l i t ary S p e c i f i c a t ion MIL-T- 5 6 2 4 L ( G rade s JP - 5 and JP- 8 ) . l a s t trad ing day - - th e day wh en fu ture s t r ad i ng c e a s e s for a part i c u l a r de l ivery month . For produc t s , i t i s gene r a l l y the l as t bu s i ne s s d a y o f the mo nth preced ing t h e de l ive ry month . l e a s e conden s at e - - a natu r a l gas l iqu id recovered from g a s we l l gas ( a s soc i a ted and non - a s s oc i ated ) i n l e a s e s ep a r a tor s or f i e ld fac i l i t i e s . Con� i s t s p r imar i ly of pentane s and heav i e r hydroc arbons and is inc luded w i th c r ude o i l i n th i s report . l e a s e s tock s - - c rude o i l s tocks h e l d i n s to r age on produc ing prope r t i e s . long -- the buy ing o f future s . A long hedge i s a buyer ' s hedge . A long po s i t ion i s one in wh i ch a pe r s on h a s comm i t te d to buy future s . margin -- good f a i th money depo s i ted by buye r s and s e l l e r s o f fu ture s contrac t s , t o e n sure per formanc e o f the t e rms o f the contrac t . Min imum mar g i n s are s e t by the exchange ' s ru l e s and c a n f luctuate . Mar gin depo s i t s mu s t vary with ch ange s in rate s and futur e s pr i ce s . max imum ope r a t ing inventory - - the max imum qu an t i ty that cou ld be s tored in a de f ined d i s tr ibu t i o n s y s t em wh i l e s t i l l ma in­ ta i n i ng a wo rkab l e operat ing sys tem ( s e e F i gu r e 4 ) . min imum ope r a t i n g i nve n tory - - the i nventory l eve l be l ow wh ich ope r a t i n g probl ems and shor tage s wou ld b e g i n to appe a r in a de f i ned d i s t r i bution s y s tem . I n c lude s " un ava i l a b l e "

M- 3

inventory a s we l l a s " requ i r e d wo rking " i nventory n e ce s s ar y t o ma i n t a i n normal ope rat ion s ; doe s n o t i n c lude s e a s o n a l i n­ ve ntory ( s e e F i gure 4 ) . mo tor g a s o l ine - - a comp lex mixture o f re l a t ive l y vo l a t i l e hydro ­ c a rbon s , w i th or wi thout sma l l qu ant i t i e s o f add i t i v e s , th a t have b e e n b l ended to form a fue l su i tab l e for u s e i n s park­ ign i t i o n eng i n e s . Con s i s t s of f i n i shed l e aded ga s o l in e ( inc lud i ng l e ad e d g a s oho l ) , f in i s h ed u n l e ad e d g a s o l i n e ( inc luding unl eaded g a s oho l ) , a n d mo tor g a s o l ine b l e nd ing compon e n t s . S pe c i f ic a t ions for mo tor g a s o l i n e are g i ven in AS TM S pe c i f i c a t i on D 4 3 9 and F e de r a l Spec i fi c a t i on VV-G- 1 6 9 0 B . net ava i l ab l e s h e l l c apac i ty - - the to t a l she l l c apac i t y o f tank­ age le s s the unava i l ab l e space for t ank top s and s a f e ty a l l owance ( s e e F igure 4 ) . NYME X - - New York Me r c an t i l e Exch ange . on-board s torage - - th e s torage capac i ty that i s u s e d to fue l an engine i n any t r an s portat ion mode , such as the g a s o l ine tank i n an automob i l e and d i e s e l tank s on t ruck s . open intere s t day .

c o n t r ac t s ou ts tand ing a t the end o f a t r ad ing

ope r ab l e c apac i ty ( re f i ne r i e s ) - - the max imum amount of inpu t thq t c an be proc e s s ed by a crud e o i l d i s t i l l a t ion uni t i n a a 4-fi our p e r i od , mak ing a l lowance s for proce s s i n g l im i t at io n s due t o type s a n d grade s o f input s , l im i t a t i o n s o f d own s tr e am fac i l i t i e s , s chedu l ed and un s chedu l e d downt ime s , and en­ I n c lud e s any shutdown c apac i ty vironme n t a l con s t r a i n ts . that c ou l d be p l ac e d in operation w i t h i n 9 0 d a y s . ope r a t ing c yc l e . the c yc l i c proce s s o f d e l ive r ing o i l from one or mo re s upp l y tanks a t one l o c a t ion i n the d i s tr ibut ion s y s tem to anoth e r t ank or tanks i n the s y s tem to me e t demand . The vo lume and frequency o f the cyc l e a r e a func t i o n o f many factors , inc lud ing the l o c a t ion o f both s upp l y and demand , the l eve l of demand , the ava i l ab i l i t y o f tr anspor t a t i o n and re f inery fac i l i t i e s , the mod e o f tran spor t a t i on , and the ava i l ab i l i ty and s i z e o f tankage . ope rat ing space - - space i n the pr imary s to r age s y s t em i n exc e s s o f the min imum ope r a t ing inventory , ava i l ab l e for ho l d i ng add i t io n a l i nve ntor i e s wh i l e s t i l l ma i n t a i n i n g a work ab l e s y s tem . I n c lude s s e a s o n a l inventor i e s and inventory bu i ld­ up for p l anned maintenance ( s e e F i gure 4 ) •

options - - contrac t s , wh ich c an be purcha s e d o r s o ld , that repre s e nt the r i ght , but not the ob l ig a t i o n , to make o r take de l i very of the unde r l y ing future s contrac t .

M- 4

PADD s

( Pe tro l eum Admi n i s tr a t ion for D e f e n s e D i s tr i c t s ) - - a geograph i c aggregation o f the 5 0 s ta t e s and the D i s t r i c t o f Columb i a i n to f i ve d i s t r i c t s o r i g i n a l ly de s i gned b y the P e tro leum Adm in i s tration for De fen s e in 1 9 5 0 for purpo s e s o f admi n i s t r a t i on ( s e e F i gure 1 ) . PADD I h a s b e e n d iv i ded into three sub- PADD s : I X , I Y , and I Z .

pay l o ad c apac i t y - - the cargo c apac i ty o f any t r a n s p o r t a t i o n mode u s e d to tran s po r t pe tro leum , s uch a s barge , t ank c a r , and tank truck . pe tro leum produc t s - - a gene r i c term u s e d to d e s c r ibe produc t s obt a ined from d i s t i l l i ng and proce s s ing c rude o i l , u n f in ­ i s hed o i l s , n a tu r a l g a s l i qu ids , b l end s to ck s , a nd other mi s ce l l ane ou s hydrocarbon c ompound s . I nc l ud e s a l l ga s o l ine , j e t fue l s , kero s i ne , d i s t i l l a t e fue l o i l , r e s i du a l fue l o i l , l iqu i f ie d p e t r o l eum ga s e s , petrochem i c a l f e e d s tock s , lub r i ­ c ant s , pa r a f f in wax , petro leum coke , a spha l t , and many other m i s c e l l aneou s produc t s . Under s ome s ta t i s t i c a l c l a s s i f i c a ­ t i o n s , pe tr o le um produ c t s may re fer t o a l l p e tro leum , ex­ c lud ing only c rude o i l and l e a s e c onde n s a te . p ipe l i ne f i l l - - i nventory i n a pipe l i ne b e twe e n the s h ipp ing and rece iving t ank s in the p i pe l i ne s y s t em . po s i t ion - - a mark e t c omm i tment . A buyer o f futu r e s h a s a l ong po s i t ion and a s e l l e r of future s h a s a short po s i t i on . pr imary d i s tr ibu t i o n s y s t em - - the s y s tem o f t a nk s , c ave r n s , t e r ­ mina l s , p i pe l i ne s , t ank e r s , barge s , t ank c a r s , t ank truc k s , and re f i n er i e s that rece ive , t r a n s port , s tore , and r e f ine crude o i l into produc t s for de l ivery to bu l k d i s t r ibution termina l s , the s e condary d i s t r ibu t i on s y s t em , or c e r t a i n end-u s e r s . Doe s n o t inc lude t h e S t r a t e g i c P e tro l eum Re s e rve ( s ee F i gure s 2 and 3 ) . r e s idua l fue l o i l - - the topped c rude o i l o f r e f i n e r y ope r a t i o n , wh ich i n c l ude s No . 5 and No . 6 fue l o i l s a s d e f i ne d i n AS TM Spec i f i ca t ion D 3 9 6 and Fede r a l Spec i f i c a t i on VV-F- 8 1 5C � Navy Spec i a l fue l o i l a s de f i ned in Mi l i t ar y S pe c i f i c a t ion MIL-F- 8 5 9 E inc luding Amendme nt 2 ( NATO S ymbo l F - 7 7 ) � and Bunker C fue l o i l . Re s idual fue l o i l i s u s ed for the pro ­ duc t i o n o f e l e c t r i c powe r , spac e he a t i ng , ve s s e l bunke r in g , and var ious i ndu s t r i a l purpo s e s . I n c l ude s impo r ted c rude o i l to be burned as a fue l . s e a s ona l i nventory - - i nventory that i s not immed i a t e l y neede d to suppor t cur r e n t deman d leve l s , but i s ma i n t a i n e d in a n t i c­ ipation o f h i gh e r ( s e a sona l ) demand leve l s that c annot be met wi th then- curr ent manu fac tur i n g o r t r a n s po r t a t ion c apab i l i t i e s . s e cond ary d i s tr ibu t i on s ys tem - - inc lude s nonc o n s ume r bu lk p l a n t s and fac i l i t i e s o f re se l l e r s o f p e t r o l eum p roduc t s , such a s

M- 5

ga s o l ine s e rv i c e s ta t ions , j obbe r s , and fue l o i l d e a l e r s ( s e e F igur e s 2 and 3 ) . s h e l l c apac i ty o f tankage - - the de s ign c apac i t y o f the tank F i gure 4 ) .

( see

short - - the s e l l ing o f future s . A shor t hedge i s a s e l l e r ' s hedge . A short po s i t i on i s one i n wh i ch a pe r s on h a s s o l d future s . s pe cu l ator - - a trader who i s not a hedger . One who a s s ume s r i s k i n order t o make a pro f i t th rough a favo r a b l e p r i c e move . s tocks - - s e e de f i n i t ion o f i nventor i e s . S t r ateg i c P e tro l eum Re s e rve ( SP R ) - - a fede r a l program c r e a te d by the Ene rgy P o l i c y and Con s e rvation Ac t o f 1 9 7 5 to e s tab l i sh a r e s e rve o f up to one b i l l ion barre l s o f c r ud e o i l and / or pe tro l eum produc t s i n order to reduce the imp a c t o f d i s rup­ tions i n petro l eum s upp l i e s and to c ar r y out th e ob l i gat i o n s o f the Un i te d S tate s under t h e I n t e r n a t i o n a l E ne rgy Program ( s e e Append i x G ) •

swing tankage - - tankage that i s u s e d to s to r e d i f fe r e n t produc t s a t d i f f e r e n t t ime s o f the year . tank bot toms - - inventory that fal l s be l ow the norma l s uc t i o n l i ne o f the tank . For f l o a t ing-roo f tanks , t h e amount re ­ qu i re d to k e e p the l e g s o f the roo f from touc h ing the tank bo ttom . The i nve ntory in tank bot toms ( in c l ud i ng B S & W ) i s unava i l a b l e ( s e e F i gure 4 ) . tankage under c o n s truc t i on - - s he l l c apac i ty under c o n s truc t i o n ( ground h a s b e e n broke n , t h e con s truc t io n c o n t r a c t s i gned , and maj or e qu i pmen t o rde r ed ) . te r t i ary s torage s e gme nt - - i nventory and s to rage c apac i ty o f produ c t s a t the c o n s umer l eve l ( s e e F i gure s 2 and 3 ) . tota l s y s tem c apac i ty - - the s um o f n e t ava i l a b l e s h e l l c apac i ty , s torage c avern s , and unava i l ab l e i nve ntory out s i de o f tank­ age ( de f i ned a s p ipe l i ne f i l l , i nventory i n r e f inery l i ne s , ope r a t ing e qu ipme n t , and in-trans i t from dome s t i c s ou rc e s I n the e xc luding A l a s k an crude o i l i n trans i t b y wate r ) . c a s e of c rude o i l i nventor i e s , produc e r s ' l e a s e tankage i s a l s o inc luded i n tota l s y s tem c apac i ty i f s to c k s a r e rou­ t i ne ly repo r t e d to the Departme nt of Energy . unava i l ab l e inven tory - - inc lude s i nven tory i n tank bottom s , p i pe l i n e s , re f i n e ry p ipe l i ne s , and oper a t ing e qu ipme n t ; quan t i t i e s s e t a s ide a s p l ant fue l or p ipe l i ne pr ime move r fue l ; and o i l i n tran s i t by truck , t ank c ar , b ar ge , and tanker from dome s t i c source s .

M- 6

unava i l ab l e s pace - - top po rtion o f a tank that i s no t ava i l a b l e to s tore inve n tory b u t i s requ i red f o r d e s i gn or s a fe ty c o n s ide r a t i on s ; e . g . , to a l l ow for therma l expan s io n ( s e e F i gure 4 ) . un f i n i shed o i l s - - m i x ture or comb i na t ion o f par t i a l l y proce s s ed pe trol eum oi l s or any compone n t s th e r e o f th a t a r e to be fur ­ ther proc e s s ed ; i . e . , any re finery ope r a t ion except me chan i ­ c a l bl end ing . vo lume - - the numbe r o f tr an s ac t ion s occurr ing dur ing a s pe c i f ic per iod o f t ime . E qu a l to the numb e r of purch a s e s or s a l e s o f contra c t s made dur ing the per iod . "we t " barre l s - - phys i c a l b ar re l s . "we t " ba rre l de l ive r y - - future s marke t d e l ive r y me chan i sm invo lving th e phy s i c a l t r an s fer o f the c ommod i t y dur ing the d e l ive ry mon th . working inven tory - - th a t port ion o f the m i n imum ope r a t ing inve ntory r equ i red above the unava i l ab l e inve n tory requ i red to k e e p the d i s tr ibut ion s y s t em func t i o n i n g n o rma l l y wi thout I nc l ud e s vo lume s needed to ope r a t i n g probl ems and run-ou t s . s upport the norma l ope r a t i ng c yc l e of s h ipme n t s and r e c e ip t s as l eve l s r i s e a n d fa l l in t a n k s with o i l de l ivery o r remova l . Al s o inc lude s t h e vo lume needed to h a nd l e unavo idab l e , recurring ope r a t i ng inte rrupt i o n s and s chedu l e change s , a n d vo lume s needed to f ac i l i ta t e the b l e nd ing o f Doe s n o t i n c lude f i n a l produc t s t o requ i red spec i f i c a t ion . s e a s onal inventory or s tocks held for p l anned ma intenance ( s e e F i gure 4 ) .

M- 7

INDEX

INDEX A

security of world supply of, 53 segregation of, 24

Agricultural sector, 64, 66-6 7

storage of, 56-5 7

Alaskan North Slope oil , 45

in Strategic Petroleum Reserve , 24

B

supply surpluses of, 36

D

Bulk plants, 13- 14, 3 1 , 6 1 -63 inventory of, 6 1-62 storage capacity of, 6 1 -62

Days ' supply of inventory calculations, 8-9 , 49-5 1

c

Distillate fuel oil minimum operating inventory of,

Colonial Pipeline , 25 Commercial sector, 66-67 Conservation Reserve Program, 64

Consumption, 35. See also Petroleum demand

Crude oil

43 , 47-48

storage of, 56-5 7

Distribution system. See also Primary distribution system; Secondary distribution system; Tertiary storage segment

Alaskan, 45

components of, 2 1

distribution system for, 2 1-24

for crude oil , 2 1-24

domestic oil , 2 1

dynamics of, 1 7-20

imported oil , 2 1

effects of sudden product calls on,

domestic production of, 39 domestic vs . foreign supply of, 10, 50

1 8- 1 9

mitigation of, 20

exports of, 2 1

overview of, 2 1-23

flexible processing of, 54

for petroleum products , 24-25

hubs for, 24

primary, 2-3 , 5- 1 3 , 42-59

minimum operating inventory of,

purpose of secondary and tertiary

43 , 45

operating cycles for, 28

inventories , 1 8- 1 9 secondary, 3 , 1 3- 1 5 , 59-63

pipelines for, 24

storage capacity and inventory of, 1 7

prices of, 36-3 7

tertiary, 1 5- 1 6 , 32-3 3 , 63-74

IN- 1

E

need for increase in, 5-6 products included in survey of, 6-7 , 44

Electric utility sector, 39 , 66-69 Equipment fill , 25

trends in, 5 operating space

Executive summary, 5-20

definition of, 29 planned maintenance periods and,

I' Futures market , 1 5 , 1 7 , 42 , 55

30-3 1 seasonal demand and, 30 reasons for decrease in, 7-8 in residential sector, 72-73 seasonality of demand and, 5 1

I Imports of crude oil , 1 0 , 50 distribution system for, 2 1 transit time of, 50 Industrial sector, 68-70 Inventory in agricultural sector, 66-67 in bulk plants, 6 1-62 changes since 1 983 in, 35, 42 in commercial sector, 66-67 days' supply of inventory calculations ,

security of world petroleum supply and, 53 total in primary distribution system, 5 1-52 in transportation sector, 73-74 unavailable inventory, 2 7 , 42 components of, 2 7 definition of, 2 7 working inventory, 28-29 , 42 definition of, 28 operating cycles and, 28 product blendings and, 29 system interruptions and, 28-29

8-9 , 49-5 1

K

effect of Strategic Petroleum Reserve on, 54 in electric utility sector, 68-69 estimate of, 1 7 in industrial sector, 69-70 maximum operating inventory, 3 1 , 56

Kero-j et fuel, 5 , 35 minimum operating levels of, 43 , 46-47 storage of, 56-57

definition of, 3 1 purpose of, 3 1 space available for, 27 in military/government sector, 70-7 1 minimum operating inventory , 5-7, 42-49 changes from 1 983- 1 988 in, 43-44 components of, 25, 42 of crude oil, 43 , 45

Maximum operating inventory , 27, 3 1 , 56. See aJso Inventory

Military/government sector, 70-7 1 Minimum operating inventory , 5-7 , 2 9 , 42-49 . See aJso Inventory

Motor fuel

definition of, 5, 29

distribution of, 1 8

estimation of, 29

inventory of, 1 9

factors affecting, 29

minimum operating inventory of,

of kero-j et fuel, 43 , 46-47

IN-2

43 , 46

method of estimation of, 44-45

retail outlets for, 1 3- 1 5 , 3 1-32 , 6 3

of motor fuel , 43 , 46

storage of, 56-5 7

0

effect of imported crude oil on, 1 0 inventory above minimum of, 9- 1 0 , 42

Operating space , 29-3 1 definition of, 29

maximum operating inventory of, 3 1 , 56

planned maintenance periods and, 30-3 1

seasonal demand and, 30

p Payment-in-Kind Program, 64 Petroleum Administration for Defense Districts (P ADDs) , 2-3 Petroleum demand

definition of, 3 1 purpose of, 3 1 space available for, 27 minimum operating inventory of, 6-7, 43-47

changes from 1 983- 1 988 in, 43-44 components of, 25, 42 of crude oil , 43 , 45-46 definition of, 5, 29

in agricultural sector, 64, 66

estimation of, 29

changes in industry patterns of, 44

factors affecting, 29

definition of, 35

of kero-j et fuel , 43 , 46-47

in electric utility sector, 39, 66-67 estimation of, 36 impact of government actions on, 39, 4 1

in industrial sector, 69 influence of prices on, 36-39 reasons for increase in , 35

method of estimation of, 44-45 of motor fuel , 43 , 46 need for increase in, 6-6 products included in survey of, 6-7 trends in, 5 operating space of, 29-3 1

recent trends in, 35-42

definition of, 29

seasonality of, 5 1

planned maintenance periods and,

by sector, 38 spare refining capacity and, 54-55 in transportation sector, 37, 39 by type of energy, 40 Petroleum futures, 1 5 , 1 7 , 42 , 55 Petroleum products bulk terminals for, 25 distribution system for, 24-25

30-3 1

seasonal demand and, 30 purpose of, 2 1 reasons for decrease in inventory, 7-8 storage capacity of, 1 0- 1 3 , 66-59 effect of Strategic P etroleum Reserve on, 1 3

security of world supply of, 53

forecasts for utilization, 1 3

storage of, 56-5 7

reasons for decrease in, 1 0- 1 1 , 56-6 7

Pipeline fill, 27 Prices of crude oil , 36-3 7 decontrol of, 36 decreases in, 36 effect on inventory levels , 5 1 influence on demand, 36-39 of petroleum products , 37 Primary distribution system, 5- 13

utilization from 1 948- 1 988, 1 1 - 1 2 , 5 7-69

utilization of, 59-60 survey of, 2-3 total inventory of, 6 1 -52 unavailable inventory of, 27, 42 working inventory of, 42 definition of, 28

analysis of, 42-59

operating cycles and, 28

days' supply of inventory calculations ,

product blendings and, 29

8-9 , 49-5 1

system interruptions and, 28-29

IN-3

B

in secondary distribution system, 1 3- 1 5

Refinery fill, 27

tertiary storage segment , 1 5- 1 6 , 32-33 , 63-74. See also Tertiary storage

Refining industry flexibility of, 54

segment

spare refining capacity of, 54-55 Residential sector, 72-73 Residual fuel oil

trends from 1 983- 1 988 in, 42 utilization of, 59-60 Strategic Petroleum Reserve , 2, 1 0 ,

idle tankage available for, 49 minimum operating inventory of, 43 , 48-49

51, 53 crude o n in, 24 Drawdown Plan for, 54

sources of, 54-55

effect on inventory, 54

storage of, 56-5 7

effect on storage levels , 1 3

s Secondary distribution system, 13- 1 5 analysis of, 59-63 bulk plants, 13-14, 3 1 , 6 1 -63 inventory of, 6 1-62 storage capacity of, 6 1-62 components of, 1 3

Tank bottoms , 2 5 , 2 7 Tertiary storage segment , 1 5- 1 6, 32-33 , 63-74 agricultural sector, 64, 66-67 commercial sector, 66-67 distribution to, 32

consolidation in, 63

electric utility sector, 66-69

definition of, 1 3 , 59

industrial sector, 68-70

purpose of, 2 1

inventory variations in, 33

reductions in, 3 1

military/government sector, 70-7 1

retail motor fuel outlets, 1 3- 1 5 , 3 1-32 , 63

purpose of, 2 1

survey of, 3

residential sector, 72-73

Storage capacity of primary distribution system, 10- 13 , 56-59

sectors, 1 5 , 32, 64 storage capacity and inventory of, 64-65 transportation sector, 3 7 , 3 9 , 72-74

effect of Strategic Petroleum

u

Reserve on, 1 3 forecasts for utilization, 1 3 reasons for decrease in, 1 0- 1 1 , 56-5 7 utilization from 1 948- 1 988, 1 1- 12,

Unavailable inventory, 2 7 , 42 . See also Inventory

57-59

•

cost of, 5 1 , 53 effect of futures market on, 1 5 , 1 7 estimate of, 1 7 idle tankage for, 5 7-58

IN-4

Working inventory, 28-29, 42. See also Inventory

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