MEMORANDUM TO(Sanitized)FROM STANSFIELD TURNER

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01554R003300260031-8
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 16, 2016
• Document Release Date: February 23, 2005
• Sequence Number: 31
• Publication Date: May 14, 1979
• Content Type: MF

Approved For Release 2005/03/16 : CIA-RDP80B04R003300260031-8
Tape 15
Side A, 4 1/3 - 4 1/2
14 MAY 1979
STAT MEMORANDUM FOR:
Mr. Tom Watson may call or have his man, Bill Jackson, call for an
appointment this week. If so, I want to do it.
STAT
STAT
0C
Approved For Release 2005/03/16 : CIA-RDP80BO1554R003300260031-8
 THE ATLANTA CONSTITUTION
Article appe ved For Releases 5 / 7. IA-RDP80B01554R003300260031-8
on page A-1, 7
CIA Warns
Of Serious
'til Crunch
WASHIIGTON (AP) - A new CIA.'
study painted a gloomy picture Wednes-
day of the nation's ability to recover
from the loss of Iranian oil and warned:
of major shortages, higher prices and an>
economic slowdown.
Industry and government energy offs-
dais told a Senate panel they would not.
dispute the agency s findings. And they.
insisted that current worldwide oil short-
ages are indeed real, not contrived by:
big oil companies to drive up prices and::
boost profits.
"The bottom line is that unless-Iranian.-
production is soon restored to a level of
about 3 to 4 million barrels per day, or
oil consumption is restrained, stocks wilL-.
fall to abnormally low levels by mid-:
year." the CIA said.
"rhis will inevitably lead to increased:
rationing of supplies by oil companies,,
higher prices, and curtailed economic.
growth," said the study, which was
released by Sen. Mark Hatfield, R-Ore.
The CIA claimed these consequences:
will happen "even with high levels of
production in Saudi- Arabia and else
where."
Saudi Arabia increased its productiow
by about 1 million barrels a day to help
offset the loss of Iranian oil, but there
has been considerable speculation that:
the Saudis will back off their exports
somewhat now that Iranian oil is ag
flowing.
Iran, which- produced about 6 millio
barrels of oil daily before all production:
was ceased is December, has recently.;
resumed production. But. US-,, oHIcials.
say Iranian production has risen to only::,
about 2.5 million barrels aday, which.'
they claim would permit maximum ex-
ports of some 1.8 million barrels daily...
Yasser Arafat, leader of the Palestine
Liberation Organization, has said he will
call for an embargo of Middle Eastern
oil shipments to the United States be-
cause of its role in arranging the treaty.
But' Shariar Rouhani?,; who has been
Iran's chief official representative to the
United States since Ayatollah Ruhollah
Khomeini came to power, told reporters
at a news conference Wednesday that re-
sumption of Iranian oil, shipments "en-
tirely depends on American intentions
and American friendship" toward Iran.:: _'
"The American people have to get
some oil, and the Iranian people have to
sell their oil. So we shall export oil ac-
cording to those principles," he said.
Before the revolution, Iran accounted,
for 10 percent of the world's oil and 5
percent of the U.S.. supply.
Hatfield made public the conclusions
of the otherwise-classified CIA report at
at a Senate Energy Committee hearing !
into the magnitude of the 3-month-old
Iranian cutoff..
Oil industry officials told the panel
they agreed that restoration of Iranian
oil supplies alone does not signal an end
to tight supplies. They warned of spiral-
lag prices and shortages of gasoline and
other petroleum products in the months
to come.
"If demand is not brought into balance
with supply fairly promptly, oil invento-
ries will diminish to inoperable levels as
working stocks are drawn," testified
Robert N. Dolph,, president of. Exxon
International Co.
Dolph . denied contentions by some
committee members that oil companies
may be overstating the seriousness of
the Iranian situation and deliberately
boarding oil supplies.. to drive up the
price.
However, he conceded that Exxon is
doing a brisker business and increasing
its profits in Europe as a result of the
events in Iran. But, he said, "eve do not
think the record will show that benefit
has been excessive."
Assistant Energy Secretary Harry E.
Bergold Jr. told the panel: "We have
every reason to believe that companies
are behaving reasonably and equitably in
the present difficult situation."
'Questioned on the CIA's findings, Ber-
gold agreed that serious shortages-
especially of heating oil for next winter
-are possible. And he said there". is.," no
guarantee" that. Iranian production ..will
reach the 3-million to 4-million-barrel
daily level the CIA says is the-minimum
production needed to-.avoid such short
ages..... :_.
. Bergold said that President Carter,, as
he assembles details of his March. 29
energy policy address- to the nation;. is
considering options to deal with the-loss
of Iranian oil that include:
? Steps to reduce energy consumption.
in buildings "and in the transportation
sector."
? Fuel-switching ' by-. utilities-}:,and'
industries from oil togas and coaL .
? Moving: electric power from `coal
fired power plants to regions served by,
utilities that burn oil:
? Increased production of oil from
Alaska and the government's Elk' Hills
petroleum reserve in California.
Exxon officials also told the panel
they supported decontrol of crude-oil
prices-another option reportedly being ;
considered by the president-but that it
would not help ease shortages caused-by
the Iranian turmoil. . -
However, the Exxon witnesses- esti-
mated that full decontrol would result in
about $13 billion in higher costs to con-
sumers over the next 2% years.
Herbert L Goodman. president of Gulf
Oil's Trading and Transportation subsidi-
ary, told the panel in prepared testimony,
that another major problem is growing,
shortages of. the kind of oil-light crude!
-usually. used to make gasoline and jet.,
fuel. . ?.
This. scarcity began to: crop up even,
before. the Iranian developments and,,
"therein lie . the seeds of . the. next oil!
crisis," he said. -._... ...'- ,. ... :j
Approved For Release 2005/03/16 : CIA-RDP80B01554R003300260031-8