Red Tape and More Red Tape

Why allocations don't work

If a driver in New York City has to wait in line for hours to buy a few gallons of gas, why is there plenty available for a driver in, say, What Cheer, Iowa? The answer lies in some complicated federal regulations that were originally designed, oddly enough, to prevent such inequities.

Under the 1973 Emergency Petroleum Allocation Act, the Department of Energy has the power to direct the distribution of gasoline supplies to the nation's 12,000 wholesalers and 225,000 retailers whenever shortages occur.

The nation is divided into five areas known as Petroleum Administration for Defense Districts (PADDS). Late each month, the oil companies estimate just how much fuel they will have available for sale in each region in the coming month. From this total supply, they subtract 5% to be set aside and distributed at the discretion of state authorities to alleviate local crises. They then subtract the amount they will require to supply all the needs of top priority customers like the military and farmers. The rest gets divided among retail gas stations.

It seems simple so far, but the rules require 400 pages of DOE instructions. Allocations are expressed not in gallons but as a percentage of what each individual customer, wholesaler and retailer, received in a given base period. What base period? Well, it can differ from customer to customer. The oil companies must work out not only how much they supplied each customer in the same month of last year but also how much they supplied, on average, in a five-month period from October 1978 to February 1979. If the latter is at least 10% higher than the corresponding month last year, then it becomes the base period.

DOE names the priority customers, like farmers, but makes no attempt to change the list quickly or to check that the customers really need what they ask for. Farmers, long after spring planting has been completed, can simply say that they need so many gallons, and the local distributor must supply that amount. The result is oversupply and hoarding in agricultural areas.

The program has been altered since the shortages began to get bad--the state set-aside was boosted from 3% to 5% so that spot shortages could be eased, and the five-month-average base was introduced in an effort to deal with seasonal population shifts--but the problems have not been solved. Criticisms are now mounting; last week the state of Maryland filed a lawsuit against DOE, challenging the allocation system as unfair. Says Economist Walter Heller: "I've heard it said that if God wanted us to have gasoline, he would never have created the Department of Energy."

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