The Oil Security System - An Oil Import Policy for the United States
CENTER FOR NAVAL ANALYSES ALEXANDRIA VA INST OF NAVAL STUDIES
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What should the United States do if some oil imports are cheaper but less secure than domestic energy production. In answer to this recurring question, the Oil Security System provides for more oil security and more imports too. It permits imports from insecure sources, either upon payment of a fee or if backed by commitments of emergency oil supplies issued by suppliers of secure oil. Such commitments, called guarantees, are obligations to sell on the market oil in an emergency from such sources as inventories, existing wells operated below capacity, capped wells, new wells drilled during the emergency, and diversions of U.S. exports of crude oil and refined products. In turn, possession of a guarantee is the qualification for receiving a fee-exempt import allowance. Both guarantees and fee-exempt import allowances would be bought and sold. Importers of oil would choose the cheaper way of importing between paying the fee and acquiring a fee-exempt import allowance. Under the Oil Security System the information on guarantees would at all times permit the government to maintain a detailed plan specifying where oil would come from and when it would be supplied in an emergency. In most situations, substituting an Oil Security System for an alternative import policy would both reduce the cost of importing oil and increase oil security in the form of emergency oil supplies.
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