Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 2

S/P–NSC files, lot 62 D 1, NSC 97 Series

Paper Prepared in the Petroleum Administration for Defense¹

top secret
PAD Report No. 435

Washington, December 10, 1952.

A World-Wide Petroleum Program to Fuel a Major War 1953–1957

i. purpose and scope

This report has been prepared at the request of the National Security Council and in conformity with a series of assumptions provided by that Agency.

The report has three main objectives: (1) to establish the probable minimum world-wide civilian and military requirements for petroleum in the event of a major war; (2) to analyze the adequacy of production, refining and transportation facilities to meet those requirements; and (3) to set forth what needs to be done to correct deficiencies where they may be indicated. All major areas of the world beyond the Communist dominated nations are covered.

The report represents a complete revision of an earlier study transmitted to the National Security Council on July 20, 1951 entitled “World-wide Demand and Supply of Petroleum in the Event of a Major War”² and of three supplements thereto which were completed later. Those supplements comprised detailed analyses of the adequacy of refinery facilities to make products in the relative volumes required and of inland transportation facilities and tankers to move the crude oil and products. This revision of the earlier study and its supplements coordinates requirements with detailed analyses of production, refining and transportation facilities and is therefore a complete study of all major aspects of the petroleum industry under the basic assumptions provided by the National Security Council.

The original assumptions established for the report conceived of two cases (A and B) regarding the areas to be held by the Allies and consequently the areas from which petroleum supplies might be drawn and for which requirements must be covered. The major difference is that in Case A the substantial crude oil producing regions of the Middle East are assumed to be lost, while in Case B, Bahrein, Saudi Arabia and Qatar are assumed to be retained.

A detailed analysis of Case B has not been made, but the results of retaining the three Middle East countries have been commented upon, particularly in the section devoted to the supply of crude petroleum. The reasons for this treatment are covered elsewhere in the report.

The conclusions of the study and the recommendations of the Petroleum Administration for Defense for meeting the problems of assuring an adequate supply of petroleum products to fuel a major war are outlined in the several succeeding pages, followed by a detailed supporting analysis and a statistical appendix.

ii. summary

In the event of a major war beginning on July 1, 1953, it is expected that substantial deficits of crude oil, refining capacity and transportation will be encountered during the first six months. It appears possible to cover military and essential civilian requirements after the initial six months period by a combination of severe rationing and planned expansion of petroleum supplies and transportation facilities along the lines recommended in this report.

High Military Needs Largely Offset by Civilian Rationing

The estimated military petroleum requirements for fighting a major war jump from about 500,000 B/D just before D-Day to 1,700,000 B/D in the first six months of the conflict, and finally reach almost 3,000,000 B/D in 1957. Over 2,200,000 B/D of this peak military need would be consumed abroad. This means that the wartime oil supply problem is a global one, where all possible sources of oil, both domestic and foreign, must be utilized.

Drastic rationing of civilian needs world-wide will be imperative. It is estimated that complete elimination on non-essential consumption would save 1,200,000 B/D here in the United States and about 700,000 B/D in foreign countries. After allowing for an additional 400,000 B/D of demand lost along with those areas assumed in the study to be overrun by the enemy, it becomes apparent that over 2,000,000 B/D of military supply can be squeezed out of present civilian consumption.

In the first six months of the conflict, however, when rationing is not fully effective, substantial deficits are encountered.

World petroleum requirements in 1954 are considerably lower and thereafter are estimated to rise only moderately in the succeeding three years.

World Petroleum Requirements

(Thousands of B/D)

	Mobilization First Half 1953	Wartime
		Last Half 1953	1954	1955	1956	1957
Civilian Inland:
United States	7,036	6,489	5,933	5,966	6,018	6,039
Foreign	3,747	3,081	2,722	2,885	2,954	2,967
Military	538	1,706	2,004	2,457	2,827	2,990
Bunkers & Other	1,104	1,072	1,081	1,131	1,184	1,212
Total Requirements	12,425	12,348	11,740	12,439	12,983	13,208

Estimated 1957 wartime requirements are only about 6 percent above those in the first half of 1953. Clearly, by drastic civilian rationing, it is possible to hold total wartime petroleum consumption to levels not far above peacetime consumption. The wartime petroleum supply problem therefore, does not arise from excessive requirements, but rather from damage to and loss of supplies through enemy action.

A High Wartime Crude Oil Drilling Rate is Essential

In order to meet wartime crude oil requirements it will be essential to maintain a record high level of exploration and drilling activity steadily throughout the war period. The present study is based on maintaining record annual drilling rates of 50,000 wells in the United States and 6,300 wells abroad. Even with this high drilling activity, substantial crude oil shortages are encountered in the first six months of the conflict. Thereafter a reasonable but narrow balance could be maintained.

World Crude Oil Balance

(Thousands of B/D)

	Crude Available	Crude Required	Surplus/(Shortage)
1953–Last Half	10,915	11,592	-677
1954–Year	11,455	10,953	+502
1955–Year	11,875	11,598	+277
1956–Year	12,148	12,105	+43
1957–Year	12,378	12,293	+85

A cutback to 35,000 wells annually in the United States would mean a sizeable and intolerable crude oil shortage ranging up to 1,300,000 B/D by 1957.

The high drilling rates required for war cannot be assured without expansion of oil country tubular goods capacity in the United States. Steps to promote this expansion are regarded as an absolute requisite to an effective petroleum preparedness program.

The foregoing remarks all pertain to Case A of this report, wherein it is assumed that more than 2,000,000 B/D of Middle East oil will be denied to the Allies in wartime. This is the worst case considered, and the bulk of this analysis is devoted to it. In Case B, where Arabia, Bahrein and Qatar are assumed to be held, the tenuous world crude oil balance could be improved materially by use of Middle East crude oil. Present military guidance indicates that almost 1,000,000 B/D of crude oil could be made available from Arabia, Bahrein and Qatar in war, but that tanker losses in the area might be so high as to make it almost prohibitive to move the oil from those countries. It is important that the military re-evaluate the protection of tankers in this area to determine whether or not it might be made less costly to make this crude available in war to relieve the overtaxed Western Hemisphere resources.

There are, of course, many other reasons why Middle East oil is important to the western world. Although this report indicates steps through which it might be possible to offset the loss of Middle East oil in wartime, this should in no way be interpreted as meaning that the Middle East should be written off.

Refining Capacity Shortage Especially in First Six Months

Basic crude oil refining capacity will be deficient in the first six months of war by about 900,000 B/D when operated conventionally. However, prompt adaptation of refining operations to permit larger scale processing of crude oil on thermal cracking units would overcome most of this initial deficiency. Completion of an estimated 1,300,000 B/D of refining capacity under construction at the outbreak of war affords a reasonable balance of capacity against requirements in 1954 and 1955. Construction of at least 400,000 B/D and preferably 500,000 B/D of added capacity must be started shortly after the war to meet anticipated 1956 and 1957 needs.

World Refining Balance

(Thousands of B/D)

	Last Half 1953	1954	1955	1956	1957
Long/(Short) Position Against Conventional Operation	(900)	104	107	(287)	(317)
Effect of Running Crude on Thermal Cracking Coils	400 to 600	—	—	—	—
New Capacity Begun During War	—	—	—	400	500
Net Long/(Short)	(300) to (500)	104	107	113	183

Loss of refining capacity due to sabotage and bombing is an important reason for the tight refining position. Military guidance anticipates a temporary loss of about 450,000 B/D of U.S. refining capacity in the early part of the war, and more permanent loss of about 1,000,000 B/D of refining capacity in retained foreign areas. In addition, under Case A nearly 700,000 B/D of refining capacity is assumed to be lost in Western Germany, Sweden, Burma and the Middle East. …

Aviation Gasoline Shortage is Serious

Estimated wartime aviation gasoline requirements of 500,000 B/D to 600,000 B/D present the most serious supply problem in the field of petroleum refining. A shortage of 200,000 B/D is indicated for the first six months of the war and no practical measures other than stockpiling product prior to the outbreak of the conflict are available for meeting this deficit. To cover requirements for subsequent years will necessitate construction of additional alkylate capacity totaling 90,000 B/D over and above that presently under construction or definitely planned. Of this 90,000 B/D total, at least 30,000 B/D should be initiated now and the necessary emergency measures should be taken to assure its completion by the beginning of 1954. Such measures are required because this schedule means engineering and construction in a one year period as contrasted to the normal two years for completion of such facilities.

U.S. Gulf to East Coast Pipeline Capacity Must be Expanded

Inland transportation facilities of the United States could be stretched to handle the oil requirements of the first six months of the conflict only if a number of expansions and emergency alterations of existing pipelines were promptly made after the start of the war. In addition, maximum utilization of mobile transportation would be required.

To provide necessary flexibility in transportation and to reduce tanker requirements, several major pipeline construction projects would be necessary. One of these is construction of a new 30-inch crude line along the “Big Inch” line from Texas to the East Coast, utilizing existing pumping equipment. In addition, the “Little Big Inch” should be reconverted from gas to oil service and a new 30-inch line built from Lima, Ohio to Philadelphia. These major projects could virtually eliminate tanker transportation from the Gulf to the East Coast and assure the continuity of this important oil movement in wartime.

Major Wartime Tanker Construction Program Must be Planned

The problem of tanker tonnage availability appears to be one of the most serious aspects of the wartime petroleum supply problem. Based on military guidance it is estimated that almost 1,500 tankers (expressed as T–2 tanker equivalents), amounting to over 90 percent of the present tanker fleet, would be sunk by enemy action in the course of a four-and-one-half year war. An effective program must be developed for construction of up to 400 T–2 equivalent tankers per year during the war.

Even such a major tanker construction program could not avert a tanker shortage during the first six months of a war. It appears that the Department of Defense should intensify its efforts to decrease wartime tanker losses.

iii. recommendations

A. Crude Oil Production

1. Provision must be made for a wartime drilling program of 50,000 wells a year in the United States and of 6,300 wells annually in retained foreign areas.

2. The National Production Authority and PAD, in collaboration, should take immediate steps to assure coverage of the tubular goods requirements for such a wartime drilling program. The first step should be the preparation of a study to determine the availability of oil country tubular goods in wartime after taking into account military needs for rockets, shells and the like, as well as the probable loss of some foreign mill capacity.

3. It is strongly recommended that the military reappraise the possibilities of better protection of tankers moving crude from the Middle East so that this crude can be made available in wartime.

4. The need to develop sufficient locations to drill the recommended number of wells each year points up the necessity for Congress promptly to resolve the legal uncertainties which have stagnated development of the tidelands.

B. Crude Oil Refining

1. PAD should develop a survey of all larger refineries to determine the feasibility of converting thermal cracking units to crude topping service and to have in readiness a specific program for the prompt conversion of all facilities possible to that service in the event of a war.

2. Provision must be made for construction of a minimum of 400,000 to 500,000 B/D of crude topping capacity in addition to completion of the 1,300,000 B/D of balanced refining capacity expected to be in process on the date of the outbreak of the assumed conflict.

3. Post attack rehabilitation and reconstruction, especially for refineries, should be studied and an effective program worked out for meeting these problems.

C. Aviation Gasoline

1. It is recommended that the military begin immediately to stockpile additional aviation gasoline and accept more excess cost product currently available to accomplish this end.

2. Additional alkylate facilities totaling 90,000 B/D will be required over and above those presently under construction or definitely planned. Of this total, at least 30,000 B/D should be initiated now and the necessary emergency measures taken to assure completion of construction by the beginning of 1954. Construction of the remaining 60,000 B/D of alkylate capacity must be initiated soon after the assumed outbreak of the war. Government and industry must work out a way to build these facilities which are only needed for war. Recommended changes in the “Facilities Contract” which have been made to the Munitions Board by PAD should be approved promptly as a first step in meeting this problem.

3. PAD should develop a specific operating plan for the nation’s refineries which would maximize wartime aviation gasoline production. The military procurement agencies should follow this work so that the uneconomic aspects of the problem will not be a factor in delaying the application of the program in time of war.

D. Inland Transportation

1. It is recommended that PAD develop detailed plans for the immediate expansion, after the outbreak of the assumed war, of four existing pipeline systems and for the substantial change in operations of several others. Provision must be made for accomplishing these objectives within the space of about three months.

2. PAD should thoroughly investigate the problems of constructing two major crude oil pipeline systems and of converting the “Little Big Inch” line from natural gas to refined products service, and should develop plans for the prompt initiation of these projects in the event of a major war.

3. It is assumed that production in the Elk Hills Naval Reserve will be immediately reopened upon the outbreak of a war. The military should take prompt action to provide pipeline transportation to handle this production, being guided by the study now under way in PAD of available facilities in that area.

E. Tanker Transportation

1. The Maritime Administration should develop promptly a program having as its minimum objective making available a total of 300 new tankers (T–2 equivalents) during the first 18 months of the war and of 400 per year thereafter. PAD should cooperate with the Maritime Administration in working out the optimum program.program

2. The Maritime Administration should consider what other steps might be taken to meet a shortage of 275 T–2 equivalents in the first six months of war.

3. The Department of Defense should intensify its efforts to develop means of reducing wartime tanker losses.

F. General Recommendations

1. A program of rationing civilian consumption of petroleum products in this country should be completed as soon as possible in all its administrative details and held in readiness to be activated, upon the outbreak of hostilities, more promptly than has been assumed in this report. The interagency Petroleum Requirements Committee recently initiated by PAD as the organization to determine the allocation of available supplies of petroleum products to various consumer groups in wartime should be organized on a stand-by basis. The Economic Stabilization Agency has made good progress on the problem of rationing petroleum products at the consumer level and should be encouraged to continue its work in that field.

2. The State Department and the U.S. delegations to the NATO Petroleum Planning Committee should continue their efforts to encourage other nations to develop stand-by petroleum rationing programs.

3. The Military should take steps to reduce liftings of products during the first six months of war by buying ahead and/or deferring liftings.

4. The Military should consider the availability of petroleum products in design and planning the use of its equipment. For instance, lower octane quality for even a portion of the military aviation gasoline requirements would assist materially in meeting the volume requirements. Again, the large volume of motor gasoline available in wartime from rationing of civilian consumption makes this product preferable over diesel oils in automotive equipment.

5. In view of the indicated shortages of crude oil, refining capacity and transportation in the first six months of the war, crude oil and products should be stockpiled before D–Day.

1. This paper, which was 70 pages in length and included an additional 13-page statistical appendix, consists of 10 sections. In addition to the three printed here, it includes sections entitled “Basic Assumptions and Procedure”;, “Estimated Wartime Demand for Petroleum”, “Supply of Crude Petroleum”, “Supply of Natural Gas Liquids”, “Supply of Refined Products”, “United States Inland Transportation”, and “Ocean Transportation”. The paper was transmitted to the NSC Senior Staff under cover of a memorandum by Lay, dated Dec. 22, 1952, which indicated that the Senior Office of Defense Mobilization Member of the Staff had requested that it be considered.
2. Not printed; designated PAD Report No. 185, it includes 44 pages of text and several statistical exhibits and is divided into the following 7 sections: 1) Introduction; 2) Conclusions and Summary; 3) Recommendations; 4) Demand; 5) Supply; 6) Summary of World-Wide Demand and Supply; 7) Transportation. It assumed a five-year war beginning on July 1, 1952, and recommended an immediate acceleration in building refining capacity, an increase in pipelines and tankers, and more advance planning for future rationing. (S/P–NSC files, lot 61 D 167, NSC 97 Series) PAD Report No. 185 had formed the basis of NSC 97/2, approved Dec. 13, 1951; for text, see Foreign Relations, 1951, vol. i, p. 978.