Continued growth ln the export of oil froa the USSR to other Communist countries end to mmcountries, coupled with failure of the coal and natural gas Industries to perform at levels originally established by the Seven Year, has led to speculation that the USSR aay be encountering problems in the supply of fuel. Such speculation waaby statements of Chairman Kosygin and other Leading officials at the1 session of the Supreme Soviet.
This report was undertaken to determineuel shortage has in fact developed inR. Problems associated with the orderlyof supply and demand for fuel in the USSR are discussed. Future trends in energy supply are analyzed, and implications for the economy are noted.
roNTEvrs
Summary and Conclusions
X. Background
A. Official Concern with Shortages
D. Various Meanings of the Terr. "Shortage" . . .
IT. Grovth ln the Supply of Energy
Prlas&ry Energy
Oil
Gas
UI. Apportionment of Supply and Itc Implications . .
IV. lehortage?
V. Probable Future Trends in Energy Supply
Appviidix
Source References
Tnb
1. USSR: Production of Primary Energy, Selected
Surraary and Conclusions
In spite of recent statements by Chairman Kosygin and other Soviet officials that difficulties exist in supplying the USSR with fuel, no convincing evidence exists of serious fuel shortages.** During theYear Plan, there has beenwith minor exceptionsno cutback in industrial activity attributable to fuel shortages, no evidence of rationing, no rise in the normal level of consumer grumbles, and no letdown in international marketing of fuels. Supplies of fuelhave kept pace with the increase in overall economic activity. Furthermore, current planning for thc new Five Yearan proceed on the assumption that adequate fuel supplies will be forthcoming over the next few years.
What, then, is the cause of the official concern with fuel supplies? First, the USSR in recent years has tried to shift its primaryalance away from coal toward oil and natural gas. Coal, which suppliedercent of total primary energyas to supply onlyercent Responsible officials, because they overestimated the potential contribution of oil and gas to the national supply of fuel, arbitrarily reduced investment in the coal industry, halted construction of new mines, andumber of construction organizations. Moreover, consumers have not always been able to meet the time schedule for large-scaleof combustion facilities from coal to gas or oil.
Second, the pressing need for foreign exchange has led to rapidin exports of coal and oil. Thus, export of coal increased ln spite of lagging output, and thc expected reduction in the demand for coal was delayed. Oil exports have made sharp inroads into domesticrepresenting almostercent of domestic productionI1. two favorable factors have helped offset these adverse conditions: (l) output of crude oil has continued to exceed the annual planechnological advances unexpectedly increased the efficiency with which fuels were used in some industries.
Third, the greatest growth in demand for fuels has been in theUSSR and the Urals, whereas the major new deposits of coal, crude
* The estimates and conclusions in this report represent the best Judgment of this Office as* iscussion of the various meanings of the term shortage, see
p.elow.
*** The term primary energy as used in this report includes coal, crude oil, natural gas, peat, shale, and fuelvood, but excludes hydroelectric power and nuclear energy.
oil, and natural gas are located in Central Asia and Western Siberia. consumers have become Increasingly dependent on sore distant sources of supply. Soriet planners have been only partly successful in pushing the rapid development of large pipelines to get the fuel to
Fourth, these major shifts in thc Soviet fuel balance and the pattern of consumption and production have been superimposed on other problems chronic to the fuel industry. Among these longstanding problems ore (l) the difficulty in meeting the large seasonal peaks in demand,heto plan accurately for changes in the efficiency with which fuclH are used,he conflict between efforts to increase rapidly the output of fuels and effortB to raise the quality of output and to maximize the long-run yield of oilfields and coal seams.
Thc net result of thia complex of forces has beennot seriousshortages of fuelut spot shortages in certain geographicalat certain times of the year, and in certain industries. Because tbe Soviet economy ls run as close as possible to capacity and because it relies heavily on commands from the center to get things done, spotof this kind occur again and again in all kinds of supplies as well as fuelshat is, the economy lsisadvantage in achieving the fine adjustments that are normalestern "market economy-"
Although, as noted, the production of crude oil continues to exceed the annual plan, these above-plan quantities are not sufficient toshortfalls in coal and natural gao. esult, the total production of primary energy5 vill fall short of the original goal for that year by an estimatedercent. It la unlikely that this shortfall will engender any hardship for the economy. Continued growth in efficiency ln consumption andperhapa Just as importanteneral slowdown in the rate of economic expansionore accurate appraisal of the energy needs of the economy, as the plan unfolds, have permitted the economy to function with inputs of fuel below the amounts originally planned.
Standard fuelalorific valueilocalories per kilogram.
The same general forces affecting fuel supplies will be at work in the nev Five Year Plan. The concern shown by the leadership is likely to be reflected inartial rehabilitation of the status ofontinued effort to press forward with large-diameter pipelines for oil and gas (the planners will have to move fuel to the consumer; they are not likely to be able to move consumers to the fuel becauoo of vested interests in the industrialenewed efrort to achieve balance withinomestic economy and between domestic and foreign requirements and hence to eliminate the most seriouB spot Total productionO of major fuelsoal, crude oil, and natural gasis now scheduled to boillion metric tons (at) of standard fuelercent less than originally scheduled.
"
This revised plan, however, still represents an overage annual increase ofercent and fits in with the generally reduced growth trends in the economyhole. In summary, there is no reason to suppose that supplies of fuels over theears will constitute anconstraint on economic growth in the USSR.
r R T
I. Background
A. Official Concernhortages
In his speech before the Supreme SovietU,Kosygin drew attention to problems of fuel supply in the USSR by1/*
n recent years there has been certain difficulty in supplying the country with fuel. ThiB has occurredthe tasks of the Seven Year Plan for the extraction of coal and gas are not being met, while the major fuel-consuming brancheseavy metallurgy, electric power, and rail transportre developing according to plan.
He also observed that, despite thc broad measures to be undertaken5 to increase the supply of fuel and to add to the capability to move fuel to consuming centers, "the demand for fuel (in that year) will be satisfied with still some strain." The use of the term strain in the context ofof the fuel balance is not without precedent. The fuel situation in the USSR in the postwar period until thes was generallyasut in these years the USSR was working coalear, comparedays at present, andetof fuel. 2/
Other speakers at the same session of the Supreme Soviet,vested interests within the fuels industry, provided more details about the problem. Euch underscored fuel distribution difficulties and shortageside variety of equipment and material, and each outlined steps to be taken during the next several, years to mitigate the imbalance ln fuel supplies. For example, the Chairman of the State Fuels. Melnikov, admittedurrent "shortage" of coal and the need to take steps tostrain" on coal5lacing the blame in part on planners for givingattention to the cool industry.
* For serially numbered source references, see the Appendix.
A.K. Kortunov, Chairman of the State Production Committee for the Gas Industry, stressed that in the European portion of the USSR the supply of fuel remainedarticularly in the case of gas. hj Kortunovost ambitious gas pipeline construction program designed to facilitate the movement of large quantitiec Of gas fromAsia to Moscow and the surroundingi stance of moreilometers (km), lightly different. Sidorenko, Chairman of the State Committee for Geology, noted that alleviation of the "strain" in the fuel balance will depend in considerable part on the achievement of drilling plans for oil and gas, andcriticizedequipment manufacturers for their inability to keep pace with
the growing demandsoth in quality and quantityof the petroleum . Ivashchenko, Chairman of the EconomicCouncil of Nationalities, plugged for an Increase ln the supply of fuel for use by households. 6/
Following the close of the Supreme soviet session, the soviet pressrive calling for greater economy in thc use of fuels, including electric power. Admonishment to conserve fuelamiliar thing in the USSR and cannot be expected to exert any significanton levels of consumption (see the accompanying cartoons.
B. Various Meanings of the Term "Shortage"
The term shortageifferent connotationarketlike the US thanommand economy like the USSR. In bothhortage of fuels vould have to be distinguished as to time period, as follows: (l) the immediate time periodthat is, the period in which supplies arc limited to those already produced and already transported to consuminghe short-run time periodthat is, the period in which supplies may be increased by applying more labor to existing wells and mines or by transporting quantities from distant stockpiles or foreign sources;he long-run time periodhat is, the period in which new productive capacity (wells and mines) and equipment can be built and put into operation to augment supplies. For the USSR,shortages are illustrated by seasonal shortages, transportationand waste of inventories at hand; short-run problems arc those connected with annual plansfor example, the failureewto be completed on scheduleelay in completing the conversion of an electric power station from the burning of cool to the burning cf natural gas; and long-run problems are those connectedearear plansor example, the injudicious halting of thc construction program for new coal mines or the failure to locate new industrialnear new sources of fuel supply.
In addition to the time dimension of shortages, there is the geographical: whether, for instance, shortages are local, regional, or national and whether shortages are to be explained by transportation difficulties and/or thc locational pattern of consumer industries rather then by the available supplies of fuels themselves.
Finally, there is an institutional dimension to shortages,in thc USSR, where price adjustments are not normally available to alleviate shortages. Moreover, the USSRaut economy, itstypically being worked to the limit, and at any one time most goods are in short supply. There is no general slack to be taken up infor example, those caused by bad weather or by crash demands from consumers. When shortages are the common thing, it Is necessary to distinguish those that matter (in the sense that they hamper production) from those that do not. hehortage of spare ports formachineryhortage of large-diameter pipe to move oil and
one sefmincly insurmountable task is to convince responsible authorities to build up supplies of fuel in the summer timi rather than waiting until winter the sign over tht oesk reads
"chief of the fuel branchgrandfather frost."
question: and who is that in our office ?
answer, thatew it operates only in the winter
support of the many ano varied conservation programs urgedthe government often is limited to lip service ,
question: why have all the chairmen arrived on skis ?
answer; well, today there eeting on the saving of fuel.
unclassified
gas does matter,hortage of private automobiles hardly matters at all. It is necessary to assess the degree and importance of shortages. How big is the gap between what is needed and what is available? Bow enduring? To what extent may the gap be made up by substitute products? How serious would the loss of some of thc final product be?
Shortages are not always to be measured in terms of the amount by which production falls short of plans. Plans for the consumption of fuelsear period are notoriously inexact and speculative. For example, unpredictable changes in the international political climate or in the need for scarce foreign currencies may change the need for exports of fuels. Also, consuming industries may fail to achieve plannedln the use of fuels, or they may be more successful than anticipated. Annual plans for the consumption of fuels arc more likely to reflect actual needs than long-term plans, but even here unanticipated events are apt to change the needs for various fuels- Thus shortages of fuelsractical matter, not of differences between plan and performance, but of differences between what is needed here and nowragmatic basis and what is actually available here and now.
IT. Growth in the 8upply of Energy
A. Total Primary Energy
The production of primary energy in the USSRat an average annual rateercent,illion rat of standard fuel (see Roughlyercent of the growth inof primary energyas provided by crude oil and natural gas. Indigenous availability of minor sources of primaryeat, shale, and fuel woodwas approximately the same4 as it had Been Relative stagnation in the output of coal, coupled with above-plan output of crude oil and sustained high rates of growth in thc extraction of natural gas (seeesultedore rapidof coal In the early years of the seven Year Plan than had been foreseen originally. By the close of the planowever, it is probable that crude oil and natural gas taken together will account for virtually the same share of primary energy production as had originally beenercent). Above-plan performance in the production of crude oil will offset bclow-plan output of coal and natural gas.
If the USSR continues to match previous performance In the over-fulfillment of annual production goals for crude oil and natural gas and if output of coal continues to increase as it has in theears, then indigenous production of primary energy mayillion mt by the end evel of output would beercent less than theillion mtoriginally called for. Thatoutput of primary energy5 willercent less tnan originally planned, however, docs not imply any hardship for the economy. Because of greater efficiencies in consumption and becauseeneral slowdown
USSR; Production of PrLcary Energy a/ Selected
Millionof Total
Tons
Fuel
l*
si
d/
y
d/
original
e/
revised
plan
fj
fj
g/
estimate
cool, crude oil, natural gas, peat, shale, andexcluding hydroelectric and nuclear energy. Data are fronunless otherwise Indicated.
fuelalorific valueilocalories per
onversion from natural units to units of standard fuel, based on the following rates:
Coaletric ton (mt)'- or standard fuel.
Crude oiltt of standard fuel. Natural gasubic meters7 mt of ntimdord fuel.
on.
ars fromnd have been converted toc conversion factors.
In growth ofonsuming branches of Industry, the demand for fuel has been less than originally anticipated.*
B. Coal
Output of coal has been well below the annual levels necessary for achievement of the5 goal. This supports, at least in part, the reasoning of Kosygin that fuel difficulties had arisenthe production of coal had been falling short of output levels established by the Seven Year Plan, while the major coosumors continued to develop along planned lines. Indeed,ears of the Seven Year Plan period had passed, extraction of coal had increased by only Uor by aboutillion mtcompared withercent under the guidelines of the Seven Year Plan. For comparison,he last year prior to initiation of the Seven Yearrowth of almostillion mt was achieved. Little conscious effort was madeo2 to raise levels of production through planning sizable increments in output. On the contrary, as illustrated in Tablennual plans, each substantially revised downward from the Seven Year Plan controlalled for only modest growth in output. Moreover,he planned production of coal was actually less than the level achieved in the preceding year.
* A. Korobov, Deputy Chairman of Gosplan, has noted on severalthat, because of progressive shifts in the production and in the consumption of fuelespecially in industry and in transportthe demand for fuel5 will be satisfiedomewhat lower volume of fuel than was called for by the Seven Year*omparison of revised annual output goals with actual production indicates that generally these revised goals have been met and, at least3u, overfulfilled sharply. Inotal ofillion mt of coal, was produced ln excess of the planned amounts. Moreover, it is estimated that5 Plan, which callsodest growth ofillion mt in output, not only will be met but that output may exceed plan by as much asillion toillion mt. The above-plan coal apparently has been used to support additional demands resulting from above-plan performance ln thc major consuming sectors of the economy, to build up reserves and stockpiles, and to enlarge sales of coal.
It is unlikely that Soviet officials knowingly would accept annual plans for production of coal which would not provide for output in quantities sufficient to sustain priority economic activities. Barring any unpublicized difficulties which would have restricted the growth in output to levels less than those needed to meet the growth in demand, it must be assumed that annual output plans have been realistic in terms of capability and only slightly less realistic in terms of requirements. The absence of complaints from major consumers of coal (for example, electric power stations) with regard to inadequacies in the supply of fuel lends strong support to this belief. Complaintc by consumers have been concerned with inadequacies in quality rather than quantity.
USSR: Production of
Vcar
5
Production Under Original Seven Year Plan r/
/
Revised Annual Plan
/
j
Actual Pro-duction b/
/
Between Actual
Production and Original Seven Year Plan
nless otherwise indicated. Estimated.
i
The upper end of the range of 6OO million to 6l2 million mtfor the year, k.
* One writer used the following rationale in attempting to explain why certain officials disregarded the planned expansion of the coal22/ In thc early years of the Seven Year Plan the extraction of natural gao expanded quite rapidly. At thc same time, certain major industrial enterprisesconsumers of high-quality coalad not yet been converted to the utilization of natural gos. Thc gas was thento electric power stations where anthracite fines were being burneduel. Because these fines [footnote continued on
Attempts by Soviet officials to explain why and how the cool industry failed to develop to the levels colled for by thc Seven Year Plan have been less than satisfactory.* It is apparent that responsible officials overestimated the contribution of oil and gas to the national supply of fuel. In their eagerness to adhere to thc Party line which
supported priority expansion of production of crude oil and natural gas, they shunted the cool industry aside. Capital investment was reduced sharply, construction activities designed to add new mine capacity were cut back drastically,umber of specialized mine-constructionwere liquidated. esult, actual commissioning of new coal minesrovided additional capacity rated at onlyillion mt of coal per year, whereas the original Seven Year Plan had called for the commissioningillion mt of annual output capacity during these years.
The regional pattern of extraction of coal in the USSR has changed only slightly in recent years, with output ln the eastern regionsthe Urals) increasing7 percent of the total85 percent Historically the bulk of the coal produced has been consumed in the western regions, and thus long, expensive, andrail hauls to the consumer have been necessary. Until majorof coal can be established in the eastern regions, preferably in Siberia, the problem of regional imbalance in coal supply and demand will continue to prevail.
C. Crude Oil
were not appropriate for useoiler fuel or for use in meeting communal and household requirements for fuel, they began to accumulate at the mine-head: , such accumulation increasedillion rat3 million mt. This increase in reserves gave the false but widely held impression that coalurplus fuel beingby more progressive and more effective fuelsnatural gas and residual fuel oil. esult, no significant development of the coal industry wae sought by the responsible planners.
Crude oil is the only form of primary energy for which the annual production goals established by the Seven Year Plan have been met and exceeded. As shown in Tablennual production consistently hasplanned goals, which, in turn, forearave represented upward revisions from the Seven Year Plan. By thc closeU, cumulative production8 in excess of the original plan totaled aboutillion mt. It is estimated that ubove-plon performance will continue5 end that output in that year probably will slightly exceed the plan. Heverthelcss, these continued high rates of growth in production of crude oil apparently were sustained by certain production practices which, although enabling oilfield managers to meet plans, ultimately proved to be injurious to the industry. From the initial period of operation the reservoir pressure of Soviet oilfields had been kept at high levels by meansery broad program of water-flooding. Taking advantage of high underground pressures, the oilfield manager had been able to increase output simply by opening thc valve on the production line. Continued reliance on this practice, coupled with
subsequent shortfalls in providing for increases ln waterflooding, has resulted in sharp declines in reservoir pressure. In turn, the drop in reservoir pressure has reduced (and in some instances halted) the flow of oil fron previously free-flowing wells. In addition, drilling has lagged sharply, and expansion of the capacity to produce crude oil has suffered accordingly. Finally, moat of the major discoveries or crude oil in recent years have been in very remote areas, where industrial and transport development generally are absent and where climaticare extreme. Soviet planners, after taking all these factors into consideration, inlAn called for reduced rates of growth ln output of crude oil (the absolute increment of l6 million at scheduled4 was the lowestn an attempt toore balanced approach which would be reasonable in both the short term and the long run.
Table 3
USSR: Production of Crude
Million Metric Tons
Year
Production
Under Original Seven Year Plan 5/
Revised Annual Plan V
Actual Production 5/
5
o
2u2 ej
j
during the same period fromillion mtillion mt. Thebetween domestic consumption of oil and the weighted output of the major consuming sectorsagriculture, transport, and industryhas remained practically constant throughout the entire period. There have been no major complaints from either the domestic consumer or the foreign purchaser to the effect that supplies of petroleum were inadequate or that trade contracts were not being met. Such complaints would be the most probable indicator of an oil shortage. Because oil per se was not singled out by any of the speakers before the Supreme Soviet, it seems reasonable to assume, in the absence of evidence to the contrary, tbat production of crude oil has been sufficient to meet the requirements of thc economy functioning within thc framework of current annual plans.*
D. natural Gas
Tbe natural gas industry generally haoource offor Soviet planners. Encouragedumber of discoveries of very large deposits of natural gas in thes which appeared adequate to support sustained growth in productionumber of years, officials laid out grandiose plans for the industry. These plans so far have not been realized, largelyhe availability of gas-consuming equipment has not kept pace with the expansion of the potential for gas productionnadequate compressors on existing gashave precluded operation of the lines at full or planned capacity. Until more realistic annual output goalsn terms of capability to transport and to consumewere introduced2 (see Tablehe gas industry had been characterized by continual failure to meet planned goals. Beginning in that year, less ambitious growth was scheduled, with the result that output has been able to exceed plan consistently. With the completion3 of the ftO-inch gas pipeline from Bukhara, in Uzbek SSH, to tbe Ural industrial region,very substantial addition to the capability to move gas was realized. esult, extraction of guft Jumped by almostillion cubic metersn increase ofercent. Nevertheless, improvements in tho means to deliver gas and ln the means to consume it have come about too late to permit achievement of the5 production goal of about lftfl billion cu m. Thc revised goal for this year calls for an output ofillion cuor 1ft percent less than originally scheduled, and itikely that this level will be exceededercent.
* Recent complaints of the failure of the USSR to honor itB oil export commitments during the first quarter5 indicate only an immediate shortage of fuel in the USSR. The growth In output of crude oil during thc first quarter5 dipped slightly In comparison with the growth achieved In the preceding year.esult, supplies of crude oil (and therefore of petroleum products) were tight, and difficulties were encountered in meeting both domestic and foreign commitments.
The major problem currently confronting the Soviet gasne which Is unlikely to be resolved quicklyls the growingbetween Indigenous regional supply and demand for gas. The leading
USSR: Production of Natural Gas
4
riginal plan
evised annual plan
8 d//
Actual Production
8 IO8.5
f
Difference Between Actual
Production and
Annual Plan
3
3.0
4.0
0.9
m to the south; and: Dashava in the western Ukraine,an. Gas for the Urals currently is provided by tbe Bukhara deposits in Uzbek SSR, and movement of the quantities of gas required has called for the construction of tvonch lines, eachm in length.
Apparently, future growth in delivery of gas to thc Urals and to the Moscow area,arge degree, will have to be provided by the exploitation of gaefields other than those currently under development. Those major fields currently in production lack the potential for any further significant growth in output. Such new fields are available fin Turkmen SSR and West Siberia, for example) but are located in areas quite remote from the major gas-consuming centers.* Thus the geographicalof the consumer from his sources of supply of gas is thc principal cause for whatever problem bave arisen in the supply of gas to consumers in timely and adequate quantities.
E. Other
Tho minor forms of primary energy ia the USSR Include peot, shale, ana fueivood. Their total production fluctuated somewhat, reflectingegree the influence of inclement weather on the mining of peat. Output of these fuels4 approximated8uch higher level than bad been anticipated because of greater use of fuelwood In rural areas. These fuels were scheduled toercent of total primary energy availability in the USSRercentut lt is likely that use of wooduel will continue to exceed plan.
III. Apportionment of Supply and Its Implications
* To meet the growing requirements for natural gas In the Moscowarea, the USSR5 Is to begin Installationra gas pipeline leading from newly discovered deposits In Uzbek SSR and. Initio! plans call for the construction of two parallel lines, eachnches in diameter, capable of deliveringillion cuof gas annually. " Only insignificant quantities of natural gasessercent of outputre exported, all to Poland. Within the next several years,illionnnually arc to be exported to Czechoslovakia on completionipeline now under construction between the Danhova deposits in the western Ukrulne and Bratislava.
Stimulated by the continued and growing need to increase Its earnings of foreign exchange, the USSR has been exporting proportionately larger shores of Its domestic supplies of cool ond oil.** Accordingly, theshare or domestic supply available for the heme market has beenfrom year to year. Analysis of recently acquired Information has revealed that ouch exports were running at levels well above thosescheduled for the Seven tear Indeed, the net export of coal and coke during these years was to hove declinedercent
of production8 to leesercentn actuality,4 exports of coal represented anercent of production.
Although exports of oil* vere to hare increased, the increase vas to have been very gradual,7 percent of production8 to9 percent In terms of actual exports, that level originally planned5boutillion at of crude oil equivalentwas achieved hen net exports reached an estimatedillion mt of crude oil equivalent, the USSR was exporting almostercent of its indigenous supply of oil. (Exports of coal and oil in relation to productionre noted ln
It la unlikely that the supply of coal has been so tight that the indicated increase in exportsercent of production would cause any limltotlons in the quantities set aside for domestic consumption. Therefore, increasingly larger shares (about l4 percentf the absolute annual growth in production of coal are being directed toward exports for the purpose of earning additional foreign exchange.
Tho very rapid rate of growth in exports of oil possibly could cause rather severe restrictions on consumption and even shortages in selected petroleum products, in fact, restrictions were placed on consumption of oilnd shortages of selected petroleum products have developed In recent years, but these short-run shortages can be traced to causes not linked with any chronic difficulties in the supply of oil. Temporary restrictions on domestic consumption were rather the result of sudden requirements for exportsnotably to Cubawhich could not have been anticipated ln planning.
Inoviet planners were forced to callercent reduction In domestic oil consumption so that export requirements could be met. The politically necessary but unexpected burden of supplying Cuba withillion mt of oil1 hod placed harsh requirements on the Soviet petroleum industry, and deliveries were mode possible onlyombination of reductions in Inventories and in supplies to domestic consumers. Allocation of the supply of oil2 was designed to restore depleted inventories and to make up for those local shortages of fuel which had persisted throughout the preceding year. Apparently the allocations to domestic consumers were quite liberal, for consumption began to exceed established norms. esult, and to protect the Soviet Imageeliable international trader in oil, the cutback In domestic consumption wok deemed mandatory.
For this and subsequent calculations, exports of petroleum products ore expressed ln terms of crude oil equivalent t of crude oilf petroleum products).
-SBC mmM I
Because Soviet marketing activities in oil in recent years have attracted considerable publicity, the USSR has been very careful toits imageeliable trader. It has long recognized thatto live up to trade commitments ln oil would Jeopardize its trading
USSR: Net Exports of Selected Fuelsercentage of Domestic
Oil Coal and Coke -1 Petroleum Products W
,
therwlai Indicated. CVl" fins been converted inirun-of-mlne equivalent by multiplying exports of cokeactor which Is presumed to account for weight losses In producing coke from raw run-of-mlne coal.
unless otherwise Indicated. Exports of petroleum productsin terms of crude oil equivalentetric ton [mt) ofis assumed to2 mt of petroleum products).
position with respect to other goods and commodities and therefore has been careful not to become overextended In oil contracts, either in quantity or in quality.
Conversely, the development of the economy In an orderly raehlon depends on adequate supplies of fuel, especially oil, and it lathat export commitments win be so expanded in the future as to Jeopardise dooestlc development. The long-run programor expansion of production of crude oil probably will be fulfilled with only moderate difficulty. This program will be adequate to satisfy domestic requirements growing at rates comparable to those of the recent past and also to permit modest increases in exports.
IV. Ishortage?
The USSR is not facedhronic national shortage* of coal, crude oil, or natural gas. Neither is there evidence to indicate
The term shortage has no significance without reference tohronic national fuel shortage is [footnote continued on
- IT -
i ir
that during the Seven Year Plan economic activity has been curtailed or cut back because of deficiencies in fuel supply. It is believed that Soviet officialsperhaps of necessityhave overdramatiicd theof the problems of fuel supply insofar as these problems wereto the time period prior. Such overdrsnatizatlon was required to insure that those problems which do exist are properly recognized and that measures are taken to reduce their long-run impact on the economy.
The public airing of fuel problems by ranking Soviet officials at the Supreme Soviet in4 laid the groundwork for further, morediscussions of such problems by experts who are concerned with the daily routine of fuel supply and distribution. ery broad propaganda effort, mounted by the Soviet press subsequent to the Supreme Sovietthese experts ln essence agreed on the following:
Responsible officials have overestimated thethat crude oil and natural gas were to make to the total fuel supply.
Because of this overestimetion, planned expansion of the coal industry arbitrarily was cut back.
3- Thererowing disproportion between fueland indigenous supply in the European USSR and in the Urals. Moreover, new sources of fuel supply are located atistance from the major consuming centers.
k. Consumers should be alert to new ways of reducingof fuel. However, the need to conserve has beenmore to good business practice and has been tied only slightly to purported shortages of fuel.
5- The solution to whatever fuel problems exist is to be found in the accelerated expansion or that sector of the fuels Industry which the speaker represented.
Just as important, perhaps, as what these experts said Is what they did not say. No consumer complaints were aired, no Instances of actual shortages of fuel were cited, and no evidence was given which wouldany slowdown ln industrial activity to inadequate fuel supplies.
defined as that situation which would exist If domesticould be met only by increasing output at increasing cost or byof exports, either singly or in combination. hort-run fuel shortage exists if domCBtic supply con be increased in the short run (for example, within an annual planning period) only at increasing costs (for example, increasing the number of hours in the workday and the number of days of operation of thc mine). An immediate fuelexists if available supplies ore not adequate to meet Immediate needs, which would call, for some form of rationing.
Only in the coal Industry have additional measures had to be token to Insure that demand in general was met. These measures for the moat port bave consistedeavy withdrawal from stocksore thanillion, to the extent that stockpiles of cool
at tbe beginning5 were less than those available This action aay be regardedhort-run adjustment possibly precipitated, at least in part,esire to increase exports.
There have been periodic reports of local shortages of petroleum fuels and lubricants in the USSR. In particular, diesel fuel and residual fuel oil have been In tight uupplyhat is, production has been inadequate, ln quantity and/or quality, to meet all requirements. It Is probable, however, that much of the difficulty in supplying the economy with these fuels could be removed if exports were cut back to lower levels. both diesel fuel and residual fuel oil ore readily and profitably marketed In Scandinavia and Northern Europe, andutback is not anticipated. Generally, shortages of fuels and lubricants ore more local in nature and are caused by transportation difficulties, lock of adequate storage facilities, and/or peak demands during the harvest and winter ountry such as the USSR, where consumers and sources ofof fuel are often separated by greet distances and where reliable transport systems are not always available, transportation breakdowns and subsequent local fuel shortanges con be expected to continue, but such shortages are not symptomatic of nationwide fuel problems.
Reports of local shortages of fuels and lubricants were conspiuous by their general absence. Moreover, the Soviet technical press was eager to point out that no difficulty was encountered ln that year In supplying the tractor and automotive park with fuels andduring the peak periods of sowing and of harvesting.
V. Probable Future Trends ln Energy Supply
During the pastonths the USSR has reappraised thc direction of future expansion of the major forms of primary energy. Reappraisal of production goals for crude oil and natural gas apparently was easy to mokeevised goals for these fuelsO were published in/ Plans for the growth of both fuelsO were reducedcrude oiloercent and natural gas byo SO percent.
For coal, however, reappraisal has been much more difficult. Despite the relatively poor performance of the industry during theears of the Seven year Plan, officials were not yet ready to discard coal ae the major single source of energy in the USSR. Based on the impliedgiven the coal industry at theession of the Supreme Soviet and on subsequent press discussions, it became clear thot nocutback in the Industry would be mode. Tbe revised goal for production of coal0 wus announced in and the newillion mtmore nearly approximated the original level of output planned0 than did the revised goals for crude oil or natural gus. 3j/ (Thc reductions mode InO levels of output for coal, crude oil, and natural gas are presented in
It is possible that thc Five Yearay embody further, but probably Insignificant, changes in these goals.
USSR: Reappraisal0 Plan for Production of Coal, Crude Oil, and Natural Gas
Million Metric Tons of Standard Fuel s/
Difference Between Original and Revised Plans
Source of Energy
Plan V
Plan
e/
to 22
to 4
oil
/
to 58
to 10
gas
d/
to 76
to 20
to
2/
Standard fuelalorific valueilocalories per kilo-gram.
b. . These goals called for the extractionillionillion metric tons (mt) ofillion mt of crude oil,illionillion cubic meters (cu m) of gas. Conversion to units of standard fuel was at the following rates: t3 mt of standard fuel; crudeat3 mt of standard fuel; and naturalu id7 nit of standard fuel.
c
On balance, the0 goals, if met,ercentin the indigenous fuel supply when compared with the orginal goals for thut year. When it is recognized that the0 goals were released inl ath Forty Congress as partwenty Year Plan carryinghe Indicatedadjustment does not seem very significant. On the assumption that similar adjustments have been nade in estljnated demand for fuelt is likely that the reduction in fuel supplies will have little detrimental impact on the economyhole.*
* Recently derived estimates 4l/ of thc capability of the USSR to export petroleum0 reflect the revised goal for output of crude oil in that year. These estimates indicate that0 the USSR may have betweenillionillion mt of oil for export. For comparison, it is estimated that such deliveriesU approximatedillion rat.
e. Based on the midpoint of the original and revised goal3.
The central problem for Soviet planners, assuming that tho revised goals are achieved and that these goalseasonableof demand, lies with the growing regional imbalances In demand and supply.* As stated very clearly by A. Petrosyants, Chairman of thc State Committee for Atomic Energy, "the USSR Is not threatenedhortage of fuel, but the reserves (and therefore production) of cool, crude oil, and natural gas ore not evenly distributed throughout Its vastb/ The issue very quicklytruggle among vested interests. Local officials in areas of new discoveries of cool, crude oil, and natural gas quite rightly see an opportunity forof economic growth through the establishment of newinduotries close to sources of fuel supply. Conversely,in areas where industryistoric base in and around Moscow and in the Urals, for exampleargue for the expansion of existing facilities and thc construction of new industry in locales of established labor supply where transportation and markets ore readily available and where construction time and costs would be lower.
Tbe scope cf the natural gas snd oil pipeline program outlined for the coming years implies that the responsible authorities have decided to enlarge transportation facilities for the movement of largeof oil and gas into the European USSR. In addition to the very ambitious gas pipeline system planned to move Central Asian gas to the Moscow area, pipelines have been planned to carry West Siberian gas
* There are very few countries which have not been faced with this problem at one time or another. The US has hod to overcome rather severe regional imbalances ln fuel demand end supply. The Atlantic northeast and the Midwest arc the principal consumers of energy, using between them perhaps as much as two-thirds of the entire requirements of the Although these areas include significant coal deposits, their actual production of energy fills only about balf their needs. The deficit la mode up primarily by the movement of crude oil and natural gas from the Gulf Coast area and frcm imports. The West Coast also is on energy-deficit area, with oil and natural gas from adjacent surplus eri'Os and imports making good the balance.
Regional Imbalances la tbe crude oil demand and supply in the US are amply illustrated by the following: Kinior. Metric Tons
per Year
Supply as a
rmmd
Atlantic
Gulf
both to thc Urals industrial region and to Moscow. Plans for oilconstruction are more vague, but the severe climate and terrain associated with the most recent major crude oil discoveries in West Siberia and the Mangyshlak Peninsula of Kazakh SSR in themselves appear to have served as adequate arguments against the development of in-dlgneous demand, at least for the subsequent plan period.
Also, authorities have taken steps to avert further decline in the relative importance of the coal industry. The Deputy Chairman of the State Fuels. Kuzmich, recently asserted that coal will remain the basic Bource of fuel in the USSRong time,hich0 goal for extraction affirms, although the relative share of cool in the primary energy balance will continue to decline. Capital Investment in the coal Industryo increase by Ih percent5easure designed to lay the groundwork for future large increases In output. Having been given the backing of rankingofficials, it is anticipated that the coal industry will fare much better in the coming years than during the early part of the Seven Year Plan.
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Original document.
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