December 7, 1973
Page 40168
VOLUNTARY AND MANDATORY RATIONING OF GASOLINE AND FUEL OIL
Mr. MUSKIE. Mr. President, as the Congress and the President consider energy rationing proposals it is important that we examine the Nation's experience with both voluntary and mandatory rationing during World War II. At my request, the Library of Congress has completed a study evaluating the U.S. experience with rationing during that period.
I think two of the specific findings of the study deserve special attention as we consider whether to move to mandatory rationing.
First, that voluntary rationing programs did not work during World Was II. Even the most ardent supporters of the programs agreed that they failed. They agreed as well that long delay and continuing Government vacillation made the problem of acceptance worse when finally the choice of mandatory rationing had to be made; and–
Second, that mandatory rationing played an indispensable role in achieving necessary reductions and redirection of civilian demands – although gasoline production was up during the war, civilian use dropped by one-third, down from 1,706,000 barrels per day in 1941 to 1,219,000 per day in 1944, with the biggest bite in passenger car use.
Also of interest are certain recommendations made by the report for any future rationing programs based on the World War II experience.
First, the system must be nationwide and must apply to everyone;
Second, the public must understand the real severity of the shortage in order to insure compliance;
Third, rationing should be handled by one agency. The World War II scheme was severely handicapped by the existence of several rationing authorities; and
Fourth, some form of nationwide supplier limitation is necessary to effect proper end-use rationing.
I ask unanimous consent that this informative study be printed in the RECORD.
There being no objection, the study was ordered to be printed in the RECORD, as follows:
U.S. EXPERIENCE WITH VOLUNTARY AND MANDATORY RATIONING OF GASOLINE AND FUEL. OIL DURING WORLD WAR II
I. A BRIEF BACKGROUND OVERVIEW
The United States engaged in both voluntary and mandatory rationing of gasoline and fuel oil during World War II, from May 1941 to the war's end in mid-August 1945.
It was an extraordinary period in our history, the only time the country was ever called upon so rapidly to convert its economy and whole life style so totally to a world wide war. Not only gasoline and fuel oil but eleven other important consumer products were rationed too: tires, automobiles, typewriters, sugar, bicycles, processed foods, meats, fats, oils and cheese, coffee, and shoes.
Because the energy emergency has now brought suggestions that mandatory consumer end-use gasoline and fuel oil rationing may need to be installed, it may be useful to review our own historical experience for lessons which could have some relevance today.
This section briefly reviews some of the more general problems involved in that first U.S. experiment with rationing.
A. The problem of overlapping agencies
More than thirty new war agencies and commodity "czars" were created to cope with the critical materials and manpower tasks the war emergency produced. Among these, at least eight were charged with responsibilities which often overlapped and contradicted equally valid delegated authorities, in the areas of planning and executing various petroleum fuel rationing schemes:
The War Production Board (WPB) had to decide on and allot petroleum product quotas among highest priority military needs and competing essential civilian claims.
The Petroleum Administration for War (PAW) was responsible for assuring adequate supplies for the total war effort, for determining the time, area and quantity of petroleum products available for rationing, and for programming their delivery.
The Office of Defense Transportation (ODT) held responsibility for coordinating and maintaining all domestic transportation, including all rubber-borne passenger cars, buses, taxicabs and trucks.
The Office of the Rubber Director (ORD) was given authority to allot rubber, including for tires, and to claim gasoline and fuel oil as needed to further the rubber production program.
The Office of Price Administration (OPA), in addition to its price and rent control responsibility, was assigned authority with respect to rationing control over the sale of products at the retail level to persons acquiring products for the satisfaction of personal needs.
The War Food Administration (WFA) was a claimant agent for petroleum products essential to keep agricultural production at highest possible levels. Soon after nationwide rationing was installed, WFA became the agency certifying essential agricultural mileage and off-highway agricultural needs.
The Office of Civilian Requirements (OCR) had the same claimant rights as WFA for off-highway petroleum needs, for example, for stationary and industrial engines, construction equipment, boats and civilian aviation.
The Office of Economic Stabilization (OES) was designated as the higher level agency to handle any issues which could not be resolved among these agencies. Some of these issues were never resolved, despite the high level order issued in mid-1943.
It was a turbulent, chaotic, exciting extraordinary time.
B. Some rationing problems peculiar to World War II
Many of the critical petroleum supply problems which finally required mandatory consumer end-use rationing were solely due to demands peculiar to that world-wide war.
Chief of these was the fact that, at the outset, it was not lack of gasoline and fuel oil but lack of tanker transportation to supply the East Coast petroleum deficit area. Almost immediately, a drastic shortage of rubber also emerged, so severe as to threaten paralysis of the whole economy, heavily dependent on rubber-borne transport means.
In addition, wartime overseas demands required an unprecedented increase in volume of gasoline production and a striking redirection of total use, both as between war and civilian needs and as between essential and less essential categories of civilian needs.
Fortunately, there was sufficient reserve production capacity from domestic oil fields so these priority demands could actually, almost miraculously, be filled. U.S. total gasoline production in 1945 was almost one-third above 1938, but over half the total output went to U.S. and Allied military and essential foreign civilian needs.
Furthermore, it should be kept in mind that end-use coupon rationing of consumer goods, including gasoline and fuel oil, was exercised in the context of a battery of direct and indirect economic controls designed to keep inflationary pressures in check. In addition to higher taxes on income and goods, and the promotion of war savings bonds, direct controls were imposed on prices, wages, credit and rents, reinforcing to a large degree the prospect for a successful consumer end-use ration scheme.
While these general factors were peculiar to that World War II frame, that early rationing experience still has a good deal of relevance to the present time.
All allocation programs will attract controversy. None are popular. There are still wide differences in regional production and demand for gasoline and heating fuel. Decisions on how to allocate scarce petroleum supplies for refining production schedules between estimated winter heating needs and the next summer's gasoline demands must still be made months in advance of retail sales. This makes any allocation scheme necessarily complex.
Since at least some sources of controversy are avoidable and some errors of administration need not occur it should be useful to review the history of our own precedent, and to identify, at least, any remediable mistakes.
C. Principal sources used
The background information and specific details included in this review have been drawn primarily from the following accounts:
The United States at War: Development and Administration of the War Program by the Federal Government, U.S. Bureau of the Budget, Committee on Records of War Administration, June 1946, Reprinted by Da Capo Press, New York, 1972, hereafter cited as BOB.
A Short History of OPA, by Harvey C. Mansfield and associates, Historical Reports on War Administration, Office of Price Administration, 1946, hereafter cited as OPA.
A History of the Petroleum Administration for War: 1941-1945, John W. Prey and H. Chandler Ide, editors, Office of the Petroleum Administration for War, U.S. Government Printing Office, Washington, D.C. 1946, hereafter cited as PAW.
An Analysis of Selected Rationing Programs in the U.S. During World War II, unpublished PHD thesis by Carolyn Shaw Solo, Harvard University, October 1950, Chapter Five, "Gasoline Rationing", hereafter cited as Solo.
Additional references are listed in the footnotes in the text.
U.S. EXPERIENCE WITH VOLUNTARY CONSUMER END-USE RATIONING:
MAY 1941 – DECEMBER 1942
Many different forms of petroleum allocation and distribution controls were practiced during World War II: voluntary and mandatory supplier limitation orders and voluntary and mandatory end-use consumer controls.
The scope of this report is limited to a comparison of World War II experience with voluntary and mandatory consumer end-use rationing and no attempt is made to evaluate the relative effectiveness of the various voluntary and mandatory supplier allocation schemes which were tried.
As indirect constraints on end-use consumption of gasoline and fuel, supplier allocation schemes substitute for direct consumer end-use controls. During World War II, many of these limitation schemes, both voluntary and mandatory, were the main forms, other than petroleum conservation rhetoric, through which "voluntary" consumer end-use limitation was pursued.
Supplier limitation measures, in general, applied to any one who (a) produced or manufactured motor fuel, kerosine, range and heating oil or residual fuel oil; (b) imported such products from other areas for sale or resale and/or (c) distributed such products for retail sale. This included refiners, wholesale marketers, jobbers, intermediate distributors down to the service station or fuel oil dealer who transferred the fuel into the end-use consumer's oil or gasoline tank.
"End-use" or "ultimate" consumers were considered to be the final consumer of the product, including a dealer or distributor who needs gasoline and heating oil for his own end-use.
The distinction between voluntary and mandatory measures was technically clear – mandatory controls carried stiff legal penalties for non-compliance and voluntary controls did not. There were widely differing consequences in actual practice, however; depending on the completeness of the compliance. An obvious example was the pleasure driving ban: the pleasure driving ban, which was unenforced and really unenforceable although "mandatory", was less effective in reducing pleasure driving than a voluntary gasoline station Sunday-closing rule in any area where nearly all gasoline stations compiled.
In any case, as the account below describes, if there were any possible variations on the mandatory-voluntary and supplier-consumer themes that could be tried, this country tried them then.
This section describes the measures tried between May 1941 and December 1942, when nationwide mandatory consumer end-use controls were finally introduced.
A. The opening scene
Energy requirements of World War II presented the United States as a whole, and the petroleum industry in particular, with production and distribution problems without precedent. To a far greater extent than in World War I, the outcome of the conflict depended on timely and adequate supplies of oil, delivered to supply and combat areas throughout the world.
Between December, 1941, and August, 1945, Allied requirements totaled seven billion barrels of crude petroleum, of which the United States supplied four-fifths.
The major challenge during this period for the Federal Government was to shift its policies from curtailment to promotion of oil production. From 1924 to 1939, efforts had been geared largely to restrict production and to maintain a semblance of stability in the industry. Now the war required new efficiencies in drilling and in the exploitation of new wells. By grants of subsidies and favorable tax provisions, and by careful allocation of scarce machinery and drilling supplies, Federal and state authorities were able to boost the nation's total oil output.
The achievement was possible only because there was cooperation between government and industry, a cooperation which included both suspension of anti-trust provisions to permit maximum pooling of supplies and distribution facilities and joint financing for new refineries.
The Federal Government provided nearly two thirds of the billion dollars expended over four years in developing new petroleum facilities, including assistance to 43 aviation gasoline refineries and related installations.
Within a few months after its outbreak in September 1939, the European war caused fuel oil and gasoline shortages in the Northeastern United States. As German submarines cut down the flow of Allied tanker traffic in the Atlantic, crude oil shipments from California and the Gulf of Mexico region to the Northeast were seriously disrupted. Available rail and truck facilities to provide overland transportation were insufficient to move oil products needed in the large eastern cities. Pipelines connecting the Atlantic Coast with the midcontinent and Gulf oil regions were too small to take on the added load. The Atlantic Coast, which received 95 percent of its oil supply by sea, faced serious fuel oil and gasoline shortages during the fall of 1940 and again in the winter of 1941.
The country's response to such problems was slow and haphazard. Throughout 1939 and 1940, the President urged Congress to enact legislation that would empower the Secretary of the Interior to allocate oil production and distribution. In 1940, the House Committee on Commerce held lengthy hearings on a bill designed to confer broad powers on the Secretary of the Interior, Harold Ickes, to control production and distribution of oil. But Congress, distrusting Ickes, refused to enact the measure. In the meantime, the loan of fifty American tankers to Britain further aggravated the problem of East coast supply.
B. The Petroleum Administration for War (PAW)
Growing shortages led President Roosevelt to use his executive powers. Soon after the European war broke out, Roosevelt had delegated his authority to deal with many of the oil problems to Interior Secretary Ickes, including responsibility for trying to establish voluntary rationing programs for fuel oil and gasoline in the Northeast and for developing arrangements for alternate transport facilities.
In May 1941, the President designated Ickes as Petroleum Coordinator for National Defense and gave him as his main assignment the job of enlisting the full partnership of the oil industry in the war.
At this stage, his powers were to be largely advisory in promoting cooperation within the oil industry. As Coordinator, he was to make an inventory of available oil reserves and to facilitate pooling of scarce resources and equipment. He was also to organize advisory committees composed of industry representatives and to coordinate petroleum policies of various Federal agencies.
While this approach may seem reasonably sensible, at the time it was, in terms of Federal Government relations with the oil industry, unprecedented. Secretary Ickes, in particular, was greatly distrusted and with perhaps good reason since his views on what was wrong with the oil industry and how it should be brought to heel were widely documented. The feud had been running between them a full eight years when this new partnership tentatively began. As for coordinating Federal agencies, even before the dozens of new war agencies proliferated, there were already some thirty government offices with interests and activities in some aspect of oil.
Ickes' plans for closer cooperation within the oil industry were based in part on suspension of the antitrust laws. Obviously, close cooperation in the oil industry would be difficult if the Justice Department discouraged such "collusion," especially the formation of regional industry committees. In June, Attorney General Biddle acquiesced very reluctantly and only under White House pressure. Oil companies were allowed to enter upon voluntary agreements, including pooling of production and distribution of supplies.
The Department of Justice also agreed temporarily to suspend its antitrust suits against oil companies pending on appeal, although Biddle promised to keep the activities of the various petroleum corporations under close surveillance.
Thereafter, consolidation and coordination of federal agency policies and activities moved rapidly and concurrently with the consolidation and coordination within the oil industry itself.
Successive administrative reorganizations replaced the Petroleum Coordinator for National Defense, with the Office of the Petroleum Coordinator for War, and finally the Petroleum Administration for War, formally created December 2, 1942. However, the structure and policies and basic industry-government understandings under which the PAW operated throughout the war were in fact agreed to at this early stage and remained essentially unchanged. The official PAW history described the underlying concepts of organization which governed the war-time petroleum industry-government relationships in these terms:
1. So far as possible, all governmental activities and responsibilities relating to oil for war would be brought together and centralized in one effective agency.
2. The agency would be organized along functional lines paralleling the principal functions of the petroleum industry itself, would be staffed by men possessing practical experience in oil.
3. Industry committee organization would be created to advise and assist Government and the full resources of the industry would thus be enlisted on a cooperative basis; at the same time, orders and regulations would be kept to a minimum, and the greatest possible reliance placed upon voluntary compliance and support.
As a result, during the war the whole process of production allocation and ultimate distribution of supply of all petroleum products was so closely coordinated as to rate the description of the process as one single oil company operating nationwide.
While this close identification was often hotly criticized, far from being clandestine or undercover, it was, as the record clearly shows, deliberately, legally, openly intended, sought for and achieved.
C. Voluntary rationing of petroleum fuels:
First phase, July 1941– December 1941
By June of 1941, the East Coast which has historically consumed a large share in total U.S. gasoline supplies – 37 percent in 1939 – was already feeling the pinch of the interruption of its sea borne supplies. The first effort to achieve voluntary reduction of consumption in an effort to alleviate the summer gasoline and the approaching winter fuel oil shortage was launched.
Throughout the summer of 1941, PAW and the oil industry tried to convince the gasoline-using public on the East Coast of the necessity for voluntary curtailment of their driving. PAW Recommendation 1, issued July 20, 1941, asked for a voluntary reduction in gasoline consumption by 33 percent. The larger Eastern oil companies footed the bill for a $250,000 advertising campaign featuring windshield stickers which announced "I'm Using One-Third Less Gas."
Additional conservation measures promoted by this campaign called for lower car speeds, proper care of tires, and organizing carpools.
Appeals were made to service station owners, too. Recommendation 3, issued August 5, 1941, asked for a curtailment in commercial delivery services. Recommendation 4, effective August 3, 1941, asked for the closing of service stations between 7 p.m. and 7 a.m.
When these failed to produce desired cutbacks in consumption, PAW sought to curtail the volume of use by a cutback in the supplies to the retail distributors. PAW Recommendation 6, of August 18, 1941, recommended to the East Coast oil companies that deliveries of gasoline to service stations and other outlets be restricted to 90 percent of deliveries during the previous month, and a week later lowered the recommendation for September to 85 percent.
Soon afterward, at PAW's request, this recommendation was replaced, on September 30, by a formal War Production Board limitation order, L-8, which as of October 1, restricted deliveries at all levels of distribution to suppliers according to a formula based on previous sales, with various provisions to adjust for inequities.
While consumption did in fact begin to drop with the first curtailment of deliveries to suppliers, the WPB order produced thousands of requests for adjustments as it applied to specific suppliers, jobbers, and service stations. Before the Marketing Division of PAW, with its small staff, could work its way through these adjustments, the continuance of the limitation of gasoline consumption was made temporarily unnecessary when more tankers became available for East Coast deliveries in October and November.
At the end of November 1941, these early limitation orders were all suspended for a while.
A major reason why the public failed to respond to these appeals was that they lacked credibility. The gasoline shortage, real as it was on the East Coast, was known to be regional. Gasoline stocks in other areas were in fact in surplus. To ask drivers in the East to curtail their gasoline consumption because the German submarines were sinking tankers in the Atlantic ocean seemed a non sequiter. The subsequent argument that all citizens should give up gasoline because rubber would be short made the public, for whom the war was still very far away, skeptical at best. Nor did the report of a Senate Special Committee to Investigate Gasoline and Fuel Oil Shortages, the Maloney Committee, increase PAW's credibility. The report concluded that: paradoxical as it sounds, the shortage as we see it, is a shortage of surplus – not a shortage of products or lack of transportation.
Not surprisingly, the public felt the claim of shortage was a "phoney" one.
In any event, this first effort to curtail consumption by voluntary methods did not succeed. Even the officials who were the strongest supports of voluntary means agreed it failed:
Voluntary rationing, although tried but for a short period, had proved something of a failure in its first test, and, even though there were many who believed it could have been made to work successfully, the fact remained that it had failed, and this colored official thinking about rationing and other consumer restrictions throughout the war.
D. Voluntary rationing of petroleum fuels:
Second phase, December 1941 to May 1942
Even after the full scale entry into the war in December 1941 when the United States Naval Bases at Pearl Harbor were bombed by the Japanese, no formal action concerning the distribution of petroleum products was taken for about two months. Shortages of oil by industry or by consumers that were reported to PAW were handled on an individual ad hoc basis.
Despite a clearly deteriorating supply, leading East Coast members of the Petroleum Industry War Council on February 11, 1942, recommended only that, in addition to trying to increase overland movement of oil: Steps be taken to curtail the total east consumption of petroleum products to the extent of approximately 15 percent from current levels during the period February 15 to April 1. It is impossible to predict whether or not curtailment will be necessary beyond that date.
The industry group urged the restoration of service station curfews and Sunday closing, an appeal to the public for economy in their use of gasoline and heating oil, and concluded that, if these steps were not sufficient, "positive rationing will be necessary."
Simultaneously, starting in February 1942, an elaborate industry sponsored petroleum products conservation campaign was developed and carried out nationwide at a total direct cost of $6,050,000. Involving 94 oil companies and using all media forms then available, at least 10 separate conservation promotion programs were developed, including tire conservation, scrap rubber, farm equipment maintenance, anti-black market gasoline conservation and fuel oil conservation. The latter included the currently familiar recommendations:
Weather-stripping of windows and installation of storm doors and windows.
Cleaning and inspection of oil burners for maximum efficiency.
Closing off of unused rooms in homes and stores.
Holding thermostat control at 68 degrees in daytime.
Reducing heat at night by lowering thermostat to 50 degrees.
Cooperation with the oil supplier by consideration for his transportation problems, and by filling home oil tanks, during the summer months.
As further steps the PAW concluded two things had to be done: (1) Industry committees needed to be given authority to collect data and to use their knowledge and experience in planning how to arrange the distribution of products for maximum efficiency and to carry approved plans into effect; and (2) consumption needed to be limited by restricting deliveries and preventing the movement of products out of shortage areas. These were the original objectives of PAW Recommendation No. 33, issued February 6, 1942, and WPB limitation order L-70, which, when issued March 14, 1942, set deliveries of gasoline to distributors at about 20 percent less than normal gallonage. Less than a month later, on April 8, L-70 was amended to curtail deliveries to gasoline retail outlets by one-third.
Concurrently, the Office of Defense transportation tried to institute similar nonmandatory efforts with respect to the commercial transport vehicles for which that agency was responsible. In May of 1942, ODT had begun a program to secure more efficient commercial transport with the objective of reducing rubber consumption by commercial vehicles some forty percent. It issued orders (which lacked enforcement sanctions) restricting deliveries and requiring an increase in loads, and in July of 1942 issued General Order No. 17, which required (or requested) commercial vehicles to effect a twenty-five percent cut in mileage over the corresponding months in 1941. These had virtually no effect.
All during these first curtailments there were complaints from distributors in areas where burgeoning war plants expanded demands out of line with the historical demand pattern on which the limitations were based and from large groups of gasoline users who requested preferential status.
The distributors were directed to give preference to "essential users". Doctors, Government cars, truckers from war plants, workers traveling long distances to essential war production plants with no public transportation available obviously had to have enough gasoline to keep running. The individual service station operator found it almost impossible to do this selective rationing without laying himself open to the charge of favoritism, yet it was left up to him to decide who got the gasoline.
With supplies getting more limited every day, a third reduction in gasoline was ordered by WPB on May 13, 1942, this time down to 50 percent of normal, and some kind of consumer end-use rationing could no longer be postponed.
E. Stop-gap punch cards and east coast mandatory gasoline consumer end use rationing, but no nation-wide controls: May 15 – December 1, 1942
On May 15, 1972, the Office of Price Administration (OPA) issued its first rationing order, limiting for the first time the actual consumption of gasoline by consumers.
The Office of Price Administration (and predecessor agencies) had been created and reorganized by a series of executive orders dating from April 11, 1941, with special responsibilities for price and rent control in addition to the task of assuring adequate supplies of essential consumer goods to the civilian sector. Its rationing authority derived from powers delegated by the Chairman of the War Production Board under Directive No. 1, issued January 24, 1942. This gave OPA full authority with respect to rationing control over retail sales to "ultimate consumers". This term is described as meaning "a person acquiring products for the satisfaction of personal needs as distinguished from one acquiring products for industrial or other business purposes."
Like the area covered by WPB's L-70, the rationed area included all of Petroleum Administrative District 1, except 93 counties along the western edge of New York, Pennsylvania, Virginia, and West Virginia, where local gasoline manufacture was said to be sufficient to satisfy normal demands.
Under this plan of rationing, users were divided into five classes, who received their rations upon presentation of cards, like meal tickets, which the dealer was supposed to punch when he delivered the gasoline. This card system, containing no possible check and depending, as it did, entirely upon the conscientiousness of dealers and users, was merely a stopgap. It was replaced by the OPA consumer end-use coupon system on July 22, 1942.
The attempt to establish and hold a boundary line between rationed and unrationed areas along the East Coast proved untenable. Pittsburgh resisted rationing because Allegheny refineries could supply adequate amounts, if not siphoned off to deficit areas. Bristol, Tennessee, and Bristol, Virginia, were cut in two. Motorists from rationed Syracuse, New York, just drove next door to unrationed Rochester.
As for the prohibition against moving products out of District 1, this, too, ran into difficulties because certain Allegheny refiners had developed outlets in agricultural eastern Ohio for low octane gasoline which was not considered suitable for the steep grades of western Pennsylvania. Consequently, low octane gasoline was permitted to move into eastern Ohio. Florida constantly maintained that rationing was not necessary there and the fact that the boundary line was the Appalachicola River only complicated matters. The boundary location problem never was solved to the satisfaction of everyone.
Adoption of a nationwide rationing system finally reduced the problems it had caused.
By the fall of 1942, the rubber shortage was so grave that the President appointed a committee, headed by Bernard Baruch, to investigate and make recommendations. The report of that committee, issued September 10, 1942, predicted disastrous consequences unless the use of existing rubber tires was limited, and recommended Nation-wide gasoline rationing as the most effective method of doing this.
The Baruch committee recommendations led to Nation-wide gasoline rationing, although more than 100 Congressmen, reflecting anguished protests from the West, staged a demonstration in November 1941, when Nation-wide gasoline rationing was formally announced.
On December 1, 1942, mandatory gasoline rationing through the consumer end-use coupon scheme began.
F. Early efforts to limit consumption of heating fuel oil:
February 1942 to October 1942
Mandatory consumer coupon rationing of heating fuels did not begin until October 22, 1942, but the need for reduced consumption on the East Coast and in the Pacific Northwest was evident in the first months of the year. PAW Recommendation 33, on February 6, 1942, established a system of minimum deliveries to all types of consumers and distributors.
Later, March 14, WPB Order L-56 prohibited new installations of oil-burning equipment; called for fullest possible use of standby equipment and use of other fuels; and encouraged the conversion of heating equipment from oil to coal. Less than a month thereafter, on April 6, with fuel oil consumption still exceeding the supply in these areas, PAW asked the oil companies to cut deliveries of fuel oil to consumers in the East and Pacific Northwest to 50 percent of the deliveries during the same month of 1941.
However, despite the well organized campaign to promote voluntary conservation, neither advertising rhetoric nor the dealer delivery limitation to consumers worked any better with heating fuels than they did with gasoline. In the words of the official PAW history:
It was too difficult a problem for the dealers. Consumer coupon rationing was a necessity and the WPB finally authorized OPA to introduce it.
III. NATIONWIDE MANDATORY GASOLINE AND FUEL OIL CONSUMER END-USE RATIONING: DECEMBER 1942 TO AUGUST 1945
Eighteen months after the first alarming East Coast shortages, and one full year of war, but only after trying almost every possible variant of indirect controls to limit end use consumption, the United States at last reluctantly took on nation-wide mandatory consumer rationing through an end-use consumer coupon system for both fuel oil and gasoline. While technically fuel oil rationing was launched in October 1942, it took at least three months to shake down at all and for all practical purposes the coupon system for both products can be said to have been launched at the same time.
No one liked it. There were shortcomings in the basic management which, in retrospect, one would have thought remediable. There were black markets too. But for all its faults, it worked.
The overall achievement, in gross quantitative terms is discussed later in this report. But first a look at the system as finally installed and operating nationwide.
The mandatory consumer end-use rationing system which was in force during the last eighteen months of the war had the following interacting features, some desirable, others not:
An end-use consumer coupon ration scheme, based on the principle of differential essential use, with rations issued through 5,600 local price and ration boards,
Multiple, overlapping ration authorizing agencies,
A nationwide supplier limitation control system, self imposed by the petroleum industry and PAW, and operating concurrently with the consumer end-use coupon control scheme,
A serious problem of program credibility, and
A black market, small in relation to the program's total size, but flourishing.
These are discussed, in turn, below.
A. The consumer end-use coupon ration scheme
The World War II gasoline coupon system provided for six different categories of rations, for all gasoline-using forms of transport plus some off-highway uses.
Four of these categories were designed to take care of private passenger transport need.
All private cars (or motorcycles) were allowed basic rations fixed at a level sufficient to permit 5000 miles of travel a year, or a reduction in private gasoline consumption of about 50 percent. Supplementary rations to take care of any additional occupational or other special needs were issued on a case by case basis.
The other two categories provided essentially unlimited supplies for commercial and agricultural needs, the rationing system being used mainly as a means of recording amounts used, whatever they might turn out to be.
Local ration boards – 5,600 of them, supplemented by commodity or functional price and ration panels and largely staffed by volunteers – had the final responsibility for actually issuing the various types of ration coupons or coupon books allowed in each ration class.
A nationwide system of ration banking, enlisting 14,000 commercial banks, was set up to handle the very large total volume of surrendered consumer ration coupons.
The ration banking system was needed then because, in addition to the gasoline and fuel oil coupons, there were millions of coupons and rationed sales certificates from five of the other commodity ration programs which were managed by OPA, for which at least some kind of system to account for issued and used coupons was essential simply for coupon inventory control.
It was the intent of the OPA coupon ration program planners that the reflow of surrendered gasoline and fuel oil coupons would be not only a way to closely regulate consumption but would also be the only and sufficient control to govern changes in civilian consumer petroleum products supply and demand.
Termed the "coupon reflow" concept, the rationale was described by former Deputy Director Paul O'Leary in these terms:
"The over-all blanket delegation of authority to O.P.A. to exercise the priorities power on sales of consumers' goods at the retail level (Directive No. 1, W.P.B., January 24, 1942) was O.P.A.'s original charter of rationing authority. But it very quickly became clear that the rationing authority must extend back of the retail level, at least to the point in the distributive channel where the market was narrowest. At such "choke point" or "bottleneck," controls could be made most effective; in fact, unless some such narrow "bottleneck" could be found, it was very debatable whether any really tight rationing program could be enforced.
Where the number of distributive units was fewest would clearly be the best level at which to impose close auditing controls, and the strategic point at which to withdraw ration currency from the market as it flowed back upstream from retailer to his supplier, etc. Only by requiring that there be no flow of goods downstream toward the retailer unless he sent ration currency upstream to his supplier, could a rationing system be made anything but a loose "honor system." All O.P.A. rationing programs except the first, temporary East Coast gasoline program of May– June, 1942, were built upon the principle of a rigidly closed system in which goods could flow forward in the market only against coupons flowing back from the point of retail sale, the cutoff and auditing point being where the market was narrowest, that is, where tellers were fewest. Ordinarily, this would be at some processing or fabricating level. Thus, in the case of tires it was the tire manufacturer, in sugar it was the refinery, while in coffee it was the importer. The significant point is that it was always behind the retailer level. Consequently, O.P.A. had to insist that Directive No. 1 always be supplemented by additional delegations of power for each commodity rationed, these supplementary directives extending O.PA.'s authority to exercise the priorities power as far back in the market as was necessary to enable it to "close the system."
The concept may have been reasonably sound administratively as a post sales audit technique but it was questionable on economic forward planning grounds.
While the flowback system presumed that distribution would (and should) be governed by the pattern of spending of customers using their coupons in the petroleum industry post sales indicators of demand shifts would come far too late to permit adequate advance planning. The exchangeable nature of petroleum heating fuel oil and gasoline refining requirement demands seasonal decisions on allocations to refineries many months ahead of estimated end use consumer sales. It seems at least questionable that the coupon reflow system could ever work as its designers thought it would and should.
In any event, it did not function in this intended way during World War II. As described in Section C below, this concept never really became operative, and therefore the details of the reflow system are not elaborated in this review.
1. Private passenger transport needs
Four types of rations – Class "A", Basic; Class "B" and "C", Supplementary; and Special rations – applied primarily to private passenger cars, including those needed for occupational use.
"A" rations provided a minimum basic allowance, permitting 150 miles of occupational driving a month plus 90 miles of essential personal driving (e.g., to the doctor, church, for groceries), calculated at a flat 15 miles per gallon, regardless of the fuel consumption rate of the car. Each of 48 coupons in the ration book was valued at four gallons in the beginning of the program, later lowered as gasoline supplies became shorter. Each "A" coupon was valid for a strictly limited period of time, initially two months, to help regularize take-off of gasoline and prevent hoarding of coupons. Motorcycles received similar mileage based allowances, "D" rations, calculated at 40 miles to the gallon.
"A" rations were awarded to all owners of licensed cars who asked for them. The decision to make an across-the-board allotment was mainly one of manageability: with some 27 million cars believed eligible for "A" rations, individual screening of each case would have delayed nationwide controls almost indefinitely. In January 1943, a month after the system was introduced, 25,000,000 cars had been issued "A" rations.
"B" and "C" rations provided additional occupational mileage for private vehicles, on a showing that no alternative means of transportation was available and that carpooling was being adopted as far as possible. "B" rations permitted additional gasoline sufficient to increase travel to 470 miles a month. "C" rations were issued to those who had occupational requirements of over 470 miles a month, and in addition fit the category of a "preferred user": Government officials using personal cars on official business, mail deliverers, public school teachers and officials, doctors and nurses, morticians, ministers, farmers, labor organizations, workers and travelling salesmen in occupations essential to the war effort. "B" and "C" rations were intended to be tailored to the individual application and need.
Special rations covered such cases of transport needs as taking voters to the polls, transport for candidates on campaign, scientific expeditions justified in times of national emergency, soldiers on furlough exceeding three days, and other special demands including motor boat uses not covered by other rations. These were intended to be one-time allowances issued for periods of not to exceed six months.
While the list of "preferred users" might appear to be so broad as to be almost infinitely expandable, comparatively few "C" rations were issued. In January 1943, 6,400,000 car owners (out of the 25,000,000 "A" ration holders) had been awarded "B" ration supplementals and only 3,600,000 – about 15 percent – were awarded "C" rations.
2. Commercial and agriculture needs
The next category, Service rations ("S-1" and "S-2", later changed to "T" rations) was designed for commercial users, covering about 5,000,000 vehicles in 1943. These included the large number – about 3,500,000 – of commercial buses and trucks transporting passengers and goods; about 250,000 official civilian government vehicles; public rental vehicles (80,000) including taxis and rent-a-cars; and over one million trucks owned by farmers. In general, all of these required Certificates of War Necessity, issued by the Office of Defense Transportation, before they qualified for gasoline along with other requirements such as tires, spare parts, replacements. Once these certifications of essential occupational use were received, gasoline coupons were issued by the local Ration Boards to these candidates in whatever amounts were requested.
Non-Highway rations (Classes "E" and "R"), which went primarily to owners of gasoline-using agricultural machinery, were also issued by local Ration Boards in any amount requested. These rations also covered stationary and industrial engines, construction equipment, boats and civil aviation needs.
The service categories provided, in effect, privileged unlimited ration use, in combined volume well in excess of that authorized under the "C" supplemental rations for preferred users.
Privileged, even unlimited, access to supplies is a concept not unusual in any rationing system based on differential essential use. While it may cause some serious inequities if the volume of rations authorized for preferred users uses up virtually all available supplies, this problem can at least be foreseen if the ration issuing agency knows ahead of time both its probable quota of supplies for the next ration period and the outstanding volume of probable consumer claims.
During World War II, this was not to be the case.
B. Multiple gasoline ration authorizing agencies
Perhaps the single greatest handicap in the gasoline rationing program during World War II was the fact that several agencies besides the OPA exercised authority over certifying essential end-use consumer gasoline needs.
There were, of course, also many jurisdictional disputes over policy and program control, and there were many rival claimants for scarce supplies. These are common to any program, though, and need not be belabored here. Not rival claims but the authorization for access to ration coupons in amounts greatly exceeding available supply was the key problem.
As mentioned earlier, the Local Ration Boards were assigned authority and responsibility for physically issuing all six types of consumer coupon gasoline rations. In practice, their control over deciding on and limiting the amounts to be issued was restricted to the four rations classes applying to private passenger vehicle use: "A", "B", "C" and Special, which amounted to less than half of the total civilian gasoline consumed.
The Office of Defense Transport had authority over issuance of "Certificates of War Necessity", needed to give any commercial truck or bus owner, including agricultural truck owners, preferential treatment in obtaining tires, spare parts, vehicle replacement and gasoline. Beginning November 15, 1942, under ODT General Order 21, ODT undertook to issue nearly 5,000,000 such "Certificates of War Necessity", accepting the claimant's estimate of mileage need as equivalent to justification and, at the offset, accepting virtually all commercial vehicles as being by definition essential to the war effort.
The administrative procedure adopted by ODT, which lacked a large field organization, was unfortunate. Descriptions and criticism of its operation make lively reading. A lengthy form of some 32 pages, requiring three year quarterly records of actual past mileage and gasoline consumption, was mailed out by one office located in Detroit, allegedly selected because the firm had a mailing list for all the owners of the 5,000,000 trucks and buses which would be involved. All forms were to be mailed back to this firm, to be reviewed there. Certificates of War Necessity authorizing access to scarce supplies, including gasoline, were then issued by ODT. These Certificates had longer periods of validity than the Service class coupons subsequently issued by the Local Ration Boards against the total rations authorized by the Certificates.
The complaints were deafening. In March of 1943, approximately 320,000 complaints had been received from 3,500,000 truck owners. Particularly outraged were the one million farmers owning trucks, unable and unwilling to separate commercial use from personal requirements and already accustomed to top priority treatment and award of gasoline on demand, even in the gas-short East Coast district 1.
Backed by the Department of Agriculture County War Boards, ODT backed down on farmer trucks. District offices of ODT which handled appeals on Certificates of War Necessity were instructed to accept the County War Board's recommendations for farmers' needs except in case of obvious error. The net result was to leave authorization of volume of gasoline ration needs for farm vehicles in the hands of the Department of Agriculture.
With Service rations issued in large amounts valid for twice the period of time allowed for basic "A" ration coupon holders, even ration boards familiar with the volume of available supplies had no way of knowing how many legitimately issued Service coupons were still outstanding at any point in time. Nor, in fact, did the OPA itself.
During the Maloney Committee investigations of gasoline and fuel oil shortages, the following exchange took place between the Chairman and the Director of the Automotive Supply Rationing Division of OPA:
The Chairman: But there could be twice as many coupons out as there are barrels of oil in the tanks?
Mr. Phillips: It is conceivable that is correct.
The Chairman: Does that give you any worry about a black market?
Mr. Phillips: If they were outstanding, I would be very definitely worried about that.
The Chairman: But they may be outstanding, so far as you know?
Mr. Phillips: The point is, we do not have records at this moment which would allow us to say one way or the other that that is correct.
Subsequently, the ODT reviewed its criteria for essential commercial users, found many of the initial applicants to be less essential than they had originally been certified to be and disqualified a large number of its original essential occupation categories.
The damage was, however, already done. Large numbers of not yet used Certificates, as well as Service coupons already legitimately issued, were outstanding at the time the initial Certificate of War Necessity criteria were changed.
Compounding the problem, was the fact that all coupons were issued for varying periods of time.
Even in areas where the coupon issuance was not excessive or where there were no counterfeits or other black market, the coupons were good over a relatively long and varying period of time and could be cashed on the first day, or any other time in the period. Consequently, even if the total number of legitimate ration authorizations outstanding had been known, there was no way to adjust each day's changing supply to the day's actual demand.
The following table illustrates the variety of time periods or validity for the various coupon ration classes:
Type of ration coupons and time period of validity:
"A" Basic, Two months.
"B" Supplemental, From three to 12 months, depending on occupation and total mileage needs.
"C" Supplemental, Three months.
Special rations, Up to six months.
"D" Motorcycles, Two months.
Service: Commercial and Agricultural, Four months.
Non Highway Rations: mainly Agricultural, Six months.
Far from being the "closed system" contemplated by the OPA economists, from the beginning to the end of the gasoline consumer coupon ration program, there were always many more "legitimately" issued coupons outstanding than there were gallons of gasoline to be supplied. The initial major error could never be entirely reversed and this high volume of over-issued coupons – nearly all "legitimate" according to regulations governing the multiple authorizing authorities at the time – was a major source for the large black market in gasoline which quickly grew.
Given these great administrative gaps and fissures in the system, it is surprising that the rationing scheme could work at all. For a clue as to how it did, it may be useful to examine the next feature of the system: Continued supplier limitation controls.
C. Supplier limitation controls
While the overall administration of the mandatory consumer coupon rationing system involved many agencies, the two principal participants – and strong contenders for more power over redistribution of supply – were the PAW and OPA. A mid-1943 high level executive decision divided the task roughly between them, assigning PAW responsibility for controlling availability of supplies in each of the five districts. OPA was handed the responsibility for administering coupon rationing.
This did not stop the argument. As earlier described, the OPA contended that the pattern of demand reflected in surrendered gasoline coupon rations from consumer back to the original supplier – "coupon flowback" – should be sufficient to determine the continuing or changing pattern of petroleum supply and flow. PAW argued that it simply wouldn't work, because to have any chance of meeting estimated fuel oil and gasoline demands, allocations to refineries must be decided months ahead of end use sales.
Then, as now, the heated battles over supplier limitation methods vs. consumer rationing obscured a most important fact:
Some form of nation-wide supplier limitation was practiced throughout the war and was the reason consumer coupon rationing was possible at all. Although not sufficient in itself to curtail and redirect private civilian gasoline consumption to any considerable degree, supplier limitation was an indispensable component of that war-time coupon ration scheme.
Some kind of supplier allocation control, self-imposed and administered by the petroleum industry itself, has always been a part of the peacetime domestic petroleum distribution system, particularly during periods when supplies were plentiful but demand was low.
The need for this is reasonably clear: The nature of the petroleum production and distribution process, coupled with the great volume of demand which each year shifts seasonally between large amounts of gasoline and fuel oil, makes buffer storage stocks on any significant scale impractical. Hence the industry has regulated itself through various means, including regional industry committees and commissions, cutting back production at the well head, ordering shifts from gasoline to fuel oil as needed, essentially "storing" its gasoline and fuel oil as crude oil underground or in the distribution and refining "pipelines" along the way. In the case of East Coast requirements, future needs were "stored" in projected import orders scheduled to arrive in time for processing and delivery from refinery to consumer, with little or no time lost in inventory tanks.
Intelligent forward planning required that decisions on how much oil should be refined as heating fuel and how much as gasoline needed to be made at least six months ahead of ultimate consumer sales.
After nationwide rationing was installed in December 1942, the War Production Board revoked all former official supplier limitations and quotas, whether voluntary or mandatory, which had earlier been laid down, on the grounds that the OPA planned "flowback" of the consumer ration coupons would now govern petroleum flow. On the basis of shifts in demand revealed by such "reflow" patterns, the OPA would issue new directives changing amounts to be allowed for each class of ration coupons and for each coupon in each class.
Whatever else the rest of the government thought had been accomplished by the rescinding of the WPB controls, PAW and the petroleum industry ignored the revocation and continued practicing some form of supplier limitation throughout the war.
With few exceptions, the only place the ration coupon governed supply was at the consumer level. Any consumer with a coupon might call on any outlet to honor the coupon, and if the outlet had any of the product it was technically bound to supply the amounts authorized.
But from that point on, industry supplier limitation quotas governed petroleum flow.
Under PAW Directive 59, issued September 25, 1942 and PAO-1, issued December 12, 1942, every original supplier in each of the five petroleum districts received his proportionate share of all available supplies in each of many zones within each of the five districts, based on his historical sales in that zone. Distribution of total supplies among the five districts was not based on that district's historical sales, however, but was adjusted to meet war-brought changes in demand.
Promising so far as possible a system of proportional allocations to suppliers and distributors in which the levels of reduction asked for still equitably preserved prewar competitive status, PAW and the industry secured voluntary cooperation among the principal suppliers in accepting and distributing reduced supplies.
The elaborate set of industry committees which had been set up within each district was continued, with supplier participation. Quarterly forecasts of supply and demand with seasonal adjustment were elicited from each original supplier. District 1 alone had more than 70 original suppliers to be placated, cajoled, enlisted and supplied. Inevitably, there had to be changes from the prewar historical pattern of deliveries, but these were also agreed upon and managed through the system of many regional and nationwide petroleum industry supply and distribution committees.
The essential interdependence of systems of supplier limitation and consumer coupon rationing in situations of severely reduced gasoline and fuel oil supplies was acknowledged by PAW and, at least by implication, by OPA.
By the end of 1942, PAW and the petroleum industry were urging consumer coupon rationing as protection for gasoline station owners and fuel oil dealers too, for whom the task of deciding equitably among regular consumers which were more essential than the others became impossible.
OPA, on its part, had never argued that no supplier limitation system would be needed, only that consumer coupon reflows through dealer, and distributor to the original supplier points – the "choke points" in the system – would provide a sufficient and early enough index on which to base its own changes in supplier allocation orders and force tight rationing controls. During World War II, it was not OPA but PAW and the industry who, through their continued system of supplier limitations, controlled the key "choke points."
As confused by partisan debate as the historical record is, a careful reading makes it very clear that while no equitable consumer rationing system can depend on supplier limitation efforts only, neither can it survive on consumer coupon rationing alone. Both are needed for successful control of any very scarce essential national consumer needs.
D. The credibility gap
It would be hard to overestimate the problem of achieving credibility which the World War II gasoline and fuel oil consumer rationing programs faced.
The skepticism with which the public viewed the appeals for gasoline rationing, based on shortages of entirely different natures – a shortage of tankers sunk by German submarines which interrupted East Coast supplies, not enough rubber for tires – has already been remarked.
In addition to these, however, the program faced both the public's negative reaction to overissuance of coupons against announced supplies, which has just been described, and two other impractical and unrealistic components of the consumer gasoline and fuel oil curtailment program attempts.
These were the fuel oil criteria exercise and the pleasure driving ban.
1. Fuel Oil Rationing Criteria
With so long a period of clear warning and with some experience under their belts, one might have thought that deciding on fuel oil use criteria would be a fairly simple task for OPA, particularly since the estimated fuel oil shortfall was, by then, already calculated to be at least 25% during the 1942– 43 winter heating period.
A straight line reduction along this basis, applicable to all previous consumers of record, with exceptions including new consumers, to be awarded on a case-by-case basis seemed by some to be a practicable approach.
As the Chairman of a Special Senate Committee to investigate the national defense program, the then Senator Harry Truman reported:
“Lack of confidence between business and Government wherever it arises is a serious handicap in our war effort. Lack of confidence by the people generally in the intelligence, reasonableness, or integrity of their Government can mean disaster.
“In all except rare instances home owners knew or were able to ascertain how much fuel oil they used last year. Since it must be assumed that they did not desire to waste their own money by purchasing fuel oil they did not need, the Office of Price Administration should have assumed that they purchased it because they needed it.
“Consequently the committee is of the opinion that if the Office of Price Administration had concluded that a straight-line cut could be made without rendering the home uninhabitable, it should have proceeded in the first instance to make a flat percentage cut in each area with provision for application by individual home owners for more fuel oil where they could prove a necessity by reason of special circumstances and with provision for review by local boards of those situations where by reason of special circumstances less fuel oil would be sufficient.
“Instead of doing that the Office of Price Administration, through its experts, has examined the temperature statistics for the last 43 years in each of the thousands of counties involved to ascertain an average temperature for each county; has then determined the number of square feet that its experts think should be allowed for each individual, which number differs with the number in the family, and then has determined the number of gallons of fuel oil which its experts have determined should be consumed in heating that many square feet to the temperature which the experts expect to have prevail in that particular county. All of these figures have been reduced to complicated tables which are consulted by volunteer clerical workers to determine the amount of fuel oil which each householder is to receive.”
As he pointed out, these formulas ignored actual house size, differential insulation, wind exposure or window size.
In defense of OPA, logically these kinds of calculations would appear to be essential for any kind of really rational rationing plan. To award fuel oil deliveries solely, or primarily, on an across- the-board reduction from last year's use would be to penalize last year's efficient energy conserving user or the owner of an old and drafty house. In addition, if the prospect for a warmer winter can be pinned down, failure to allow for this might involve a disproportionate allocation of winter heating fuel at the expense of the following summer's essential and rising gasoline requirements.
Conceptually, the shortening of the approach would seem to be one of timing.
These kinds of calculations could very usefully have been made, not as criteria for use by Local Ration Boards in estimating an end-use consumer's 1942– 43 personal household heating ration issue needs, but as a forward planning input to calculate the following year's probable and essential minimum civilian demand for heating oil. For this purpose, an estimate by U.S. geographical area based on actual floor space, fluctuations in winter temperature and number of persons in the families involved, would need to be provided well in advance, in time for crucial decisions to be made between how much oil should be allowed for refining gasoline after essential civilian heating and other winter fuel oil needs are covered.
In practice, the formulas proved less time-consuming or damaging to equitable distribution than they might have been because the Local Ration Boards' largely voluntary recruits developed their own rule-of-thumb calculations for initial allocations: So many gallons to a square foot of floor or "what did you use last year?" The following year, being a milder one, adjustments to the previous year ad hoc allotments were comparatively easy.
Nonetheless, the publicity which was, not surprisingly, profuse about the complicated fuel rationing criteria damaged the credibility of the whole mandatory consumer coupon ration allocation scheme.
2. The Gasoline Pleasure Driving Ban
A great deal has been written about the gasoline pleasure driving ban during World War II and why it failed. The OPA account is especially detailed on this subject.
The crux of all the narrative accounts is that the reason for the first imposition was that reduction in gasoline coupon values failed to bring gasoline consumption down in the East Coast District 1 to the allotted figures of supply. To correct this, a "pleasure driving ban" was announced January 7, 1943, then was revoked March 22, 1943, reinstated May 1943; relaxed July 14, 1943, and revoked entirely September 1, 1943.
None of the arguments appear to focus on the basic logical inconsistency, and therefore the large credibility gap, which contributed to its non-observance:
The original estimate in basic coupon "A" private passenger allowances for gasoline was made on the basis of an estimated essential use covering about 5,000 miles per private car per year. This cut the personal use of the average driver from 9600 to about 5400 miles a year.
Considering the fact that all the differential essential use criteria employed in the coupon ration system gave preferential allowances to both car pooling and public mass transportation uses, it was wholly inconsistent to try additionally to cut back on the use of the meager basic weekly gasoline allowance of the man who had extended its effectiveness by joining car pools and using mass transit.
Any public view of program credibility assumed that the overall 50% reduction in mileage of gasoline allowances for private civilian use was also based on an assumption that, however severely civilian use was reduced, supplies would at least be programed so as to be able to cover this drastically reduced level of basic civilian demand. Within this severe limitation, any one should be allowed to reprogram his personal uses of his ration, however drastically reduced.
Hence, the fundamental conceptual basis of the whole gasoline ration plan as conceived during World War II was undercut by the "pleasure driving ban."
During World War II, the American public, even though the majority complied with its inconveniences and stringencies, disliked the gasoline rationing system. However, they disliked even more the feeling they had been "had."
Any time gasoline and fuel oil shortages – however real – are thought to be contrived, or criteria for rationing allowances are considered to be illogical, public compliance with any kind of rationing regulation is likely to be poor.
E. Some comments on the World War II black market
No one disputes the fact that during World War II a flourishing black market in gasoline coupons took place. Some of the historical details are very well summarized in the previously cited "Highlights of Gasoline Rationing in World War II". According to that report, about 5 % of rationed gasoline was misused as a result of "Counterfeit and stolen coupons."
Given the multiple ration issuing authorities, described in Section III-B above, which gave rise to a very large volume of legitimately authorized coupons outstanding in excess of supplies at any point in time, what is astonishing is that no more than 6 % of the gasoline found its way into black market channels. It should also be remembered that during that period perhaps the only method of gasoline and fuel oil allocation control which was not tried was to allow prices for fuel to rise to a market equilibrium.
Throughout the war, prices rose less than 1% after nationwide coupon rationing was installed, despite the very short civilian availabilities, another reason to be surprised that the black market got only 5%.
As to adequacy of enforcement personnel: During World War II, OPA's thinly spread enforcement personnel covered not only eleven different end use consumer rationing programs but also the nationwide rent and price control regulations, and their infringements, too.
Today, the energy crisis, great as it is, is a singular, peacetime challenge. To the degree that non-compliance with any of the prospective consumer end use restrictions may need extraordinary enforcement measures, the nation's regular enforcement agencies are already in place: Police, IRS and FBI. There may be no need for any separate enforcement cadre. If gasoline and fuel oil consumer end use controls are made mandatory, the ordinary regular policing agencies could well be adequate to cope with any practical rationing program. They could be expanded to the extent necessary.
IV. CONCLUSIONS
Consumer end use rationing during World War II had a stormy course throughout its life.
Coupon values and their periods of validity were in almost constant flux, varied frequently in an attempt to match regional and seasonal shortages or just to keep on top of burgeoning and shifting war industry demand.
Some of the problems which plagued its history, in hindsight seem avoidable; many are inherent in any mandatory consumer end use ration scheme.
Nonetheless, despite coupon overissuance, the frictions of administrative overlap, the gap in program credibility, when the war ended eighteen months after the system was installed, one fact was clear. The system was working well enough to actually achieve its intended goals:
Petroleum supply had been redirected from surplus areas to the deficit East Coast in volume sufficient to meet rising military demand and basic civilian needs.
The pattern of overall civilian demand had been greatly changed to achieve redirection of supplies to the most essential civilian use.
A. The overall accomplishment
The redirection of supply to the East Coast was not so much a consequence of consumer end use rationing as it was of improved petroleum product transport systems and effectively applied supplier allocation controls. However, the consumer ration program reinforced these supplier limitation controls and was itself reinforced by them.
The redirection of civilian demand took place only after the nationwide end use consumer ration system was applied. While mandatory consumer end use rationing of fuel oil and gasoline was of course not the only factor in achieving this reduction and redirection of civilian demand, most observers of the time agree that it played an important – even indispensable – role.
While the total supply of fuel oil rose from 662,900,000 barrels in 1941, to 830,000,000 barrels in 1944, most of this went to war needs. Civilian supply was down 18% below the 1941 level and many households absorbed cuts of even more, to permit essential users such as hospitals to have additional supplies and to allow for the increased numbers of new homes, apartments and trailers using fuel oil.
Although total gasoline supplies also increased, gasoline for civilian use dropped sharply by almost one-third, down from 1,706,000 barrels per day in 1941 to 1,219,000 barrels per day in 1944, with the biggest bite in passenger car use.
Figure 1 shows the dramatic increase in total gasoline production during the four wartime years, also illustrates the significant reshaping of the pattern of civilian gasoline demand. When the offtake for military needs is subtracted from the chart, it is easier to see how sharp the drop was in personal passenger car use, enabling the increased allotments for agriculture and essential commercial use.
The record speaks well, too, for the automobile conservation effect of the stringent gasoline restrictions: At the end of 1944 there were still some 24,000,000 civilian passenger cars on the road, 10,000,000 of which were still being driven carefully on the same tires they had in 1941, creeping along at 35 miles an hour.
For all the errors and shortcomings of the system, awkwardly and painfully, most of them were either corrected or contained. For the War's last critical year, a gasoline and fuel oil end use consumer rationing system was in being that served the country's needs.
B. Some comments on the experience
Among the many options now being studied, even among those who agree that some system to limit use of both gasoline and fuel oil is unavoidable, the major issue still seems to be whether equitable distribution can be achieved without recourse to mandatory consumer end-use controls.
The lesson of the U.S. experience during World War II was that – for that emergency, at least – it could not be done. Voluntary and indirect controls on consumer's end use demands were tried. Even the most ardent partisans of voluntary means agreed they failed. They agree as well that long delay and continuing vacillation made the problem of acceptance worse when finally the choice of mandatory consumer end use rationing had to be made.
The question naturally arises as to whether, since the situation was so different, can anything be learned? Actually, there would appear to be more similarities in the two situations than might first meet the eye. There are several aspects of the current energy emergency – despite its peacetime matrix – that are almost the same:
There is a shortage of refineries.
The East Coast still depends on imports to augment its petroleum needs.
The East Coast still consumes most of the country's total petroleum supply.
Existing surpluses in some districts still give rise to the cry of "phoney" shortages, even after two winters in which many areas have felt the fuel oil pinch, and a summer when gasoline ran short and prices per gallon of gasoline in some cities soared up to a dollar.
A carefully balanced arrangement between the oil-rich Southern and Western sources of supply is managed through the industry's own internal distribution system which adjusts and allocates surpluses to deficit areas of great demand.
The nature of the storage problem has not changed. Storage capacity is still small in relation to the volume of demand.
And the current energy emergency's duration is seen by many as likely to extend into the future just about the same amount of time: Up to four years, and perhaps more.
It is also true, of course, that there are obvious differences today. There are four times as many passenger cars and much less domestic margin for increased production in relation to the extraordinary levels of demand. But because there is no worldwide war, many of the administrative problems need not be quite as chaotic as before.
Should a mandatory consumer rationing program appear necessary once again, the following general considerations drawn from our own experience may usefully be kept in mind:
1. The system was only effective when extended nationwide, suggesting that even if regional differentials are allowed, the system as a whole must apply to everyone.
2. Compliance was seriously eroded by the gap in credibility. To have a reasonable chance of good compliance, the public must be persuaded that gasoline and oil shortages are not contrived, but really do exist.
3. The World War II ration scheme was severely handicapped by the existence of several ration allowance authorizing authorities. The ration issuing authority (OPA) never knew how many coupons were outstanding at any point in time. To fuel a black market with a large volume of "legitimately" overissued ration coupons seems an unnecessary complication to be imposed on any scheme.
4. The different categories of gasoline rations were issued for varying periods of time.
The result was that even for the categories for which OPA controlled both authorization of amount and actual ration issuance, it could never be determined how many coupons were still outstanding in any region at any time. While this problem can never be completely overcome, it can be reduced in scale if all categories are issued as valid for a strictly limited period of time and for the same period of time. In addition to helping to regularize inventory control, it would permit periodic reviews of probable changes in supply and in demand, so the volume and the value of the ration currency can be more rationally adjusted from time to time.
5. Some form of nationwide supplier limitation was practised throughout the war and was the reason end-use consumer coupon rationing was possible to apply at all. Since petroleum product allocation decisions had to be made long before the point of sale, the supplier limitation scheme allowed the degree of forward program planning without which end-use consumer demand cannot equitably be served. Conversely, supplier limitation required end-use consumer rationing before consumer demand could be controlled.
Even with all its shortcomings and the extraordinary wartime problems peculiar to that time, the World War II mandatory end-use consumer ration program worked primarily because there was extremely close government-industry cooperation based on the understanding that it should.
Ideally, responsibility for planning and mobilizing petroleum supply and controlling all end-use demand should be vested in one agency which also has access to continuing feedback information on changes in demand and estimated future changes in supply.
While at no time during World War II was this management ideal achieved, given all the handicaps, we came astonishingly close.
APPENDIX
EXHIBIT 15
WAR PRODUCTION BOARD,
Washington, D.C,
July 1, 1943.
Hon. HAROLD L. ICKES,
Hon. PRENTISS M. BROWN,
Hon. JOSEPH B. EASTMAN.
GENTLEMEN: The purpose of this letter is to summarize our mutual understanding as to interagency relationships with respect to the problem of petroleum supply and distribution. It will be understood that existing arrangements are modified only to the extent specified in this letter. In all other respects, existing delegations of authority and the correspondence between Mr. Ickes and myself dated December 11, 1942, and January 7, 1943, will remain in effect. All provisions of existing Executive orders remain unaffected.
1. Supply.– The maintenance of an adequate supply of petroleum products in the amounts, and at the locations, necessary to meet rationed and other allocated demands will continue to be the primary responsibility of the Petroleum Administration for War. This responsibility shall extend not only to the production of petroleum but shall also include the distribution of petroleum within the industry, including retail outlets, up to the point of transfer and delivery to consumers. In setting the quotas for the various rationed areas, PAW will follow the pattern of the rationed demand as shown by returned coupons.
Pursuant to Executive Order 9276, PAW's authority with respect to supply shall be exercised subject to the direction of the Chairman of the War Production Board. In addition, the authority described in this letter shall be exercised subject to the authority of the Office of Defense Transportation over transportation under existing Executive orders.
2. Distribution procedures other than rationing.– Pursuant to my letter to Mr. Ickes of January 7, all orders relating to the distribution of petroleum products other than rationing orders will be issued in the nature of, and administered by, the Petroleum Administrator, subject to the clearances, approvals, and other procedures specified in that letter.
3. Requirements and allocations.– The Petroleum Administrator or his nominee will serve as chairman of a Petroleum Requirements Committee, functioning within PAW. As chairman he will divide the available supply of petroleum products among the various claimant agencies, after obtaining the advice of the committee. The committee shall consist of representatives of each of the various claimant agencies having substantial requirements for petroleum, and in addition shall include one representative of OPA and one or more representatives of WPB.
The ODT representative on the Petroleum Requirements Committee will present all requirements for petroleum products for the Nation's transportation system, including passenger cars. The WPB representatives will present industrial and civilian requirements for other petroleum products.
All allocations shall be made as long in advance of the period covered as is practicable and shall be promptly transmitted in writing to each claimant agency and to the chairman of the WPB Requirements Committee.
In the event of a dissent, any agency may appeal to the Chairman of the WPB, through the WPB Requirements Committee. Pending such appeal, if requested by the dissenting agency, no action to put the decision into effect will be taken.
4. Petroleum rationing.– OPA, acting under existing delegations, shall have the primary responsibility for developing and executing petroleum rationing policies, plans, procedures, and operations. In particular, OPA will be responsible for devising and administering a system under which the rationed demand is kept within available supply.
Pursuant to Executive Order 9276, the Petroleum Administrator will "determine, after advising with the War Production Board, the areas and times within which such rationing should be effective and the amount of petroleum available for such purpose."
With respect to petroleum products needed for transportation, ODT will determine, within the quotas so established, in what relative volume such products should be distributed by classes of transport facilities, for example, passenger cars, trucks, busses, etc. In addition, present arrangements under which ODT determines the amount of gasoline to be rationed each operator of commercial vehicles and certifies such determinations to OPA will be continued. Such determinations shall be binding on OPA only if and when the total amounts thus certified by ODT are not in excess of the total gallonage allotted for this purpose. WPB will continue to determine the relative essentiality and priority of the various competing industrial and civilian uses of all petroleum products, including gasoline. OPA will promptly notify WPB if it believes any of such determinations to be impracticable from an operating or administrative standpoint.
In determining and revising the policies of rationing, OPA will operate with the advice of a Petroleum Rationing Policy Committee, consisting of representatives of OPA, ODT, WPB, WFA, and PAW. The Price Administrator, or his nominee, will be chairman of this committee, and all decisions on matters presented to the committee will be made by him after obtaining the advice of the committee. In the event of any dissent from his decision, the dissenting agency may appeal to the Chairman of the WPB. If requested by the appealing agency, no change in policy will be put into effect pursuant to the decision for 2 days, unless earlier action is permitted by the Chairman of the WPB.
5. Public information.– Because of the public confusion caused by the issuance of conflicting and duplicating information, the following decision by the Office of War Information is to be followed in handling information problems relating to petroleum supply and distribution.
(a) Information regarding petroleum supply will be issued in the name of the Petroleum Administration for War.
(b) Information regarding rationing policies, plans, and procedures will be issued in the name of the Office of Price Administration.
(c) Information regarding transportation aspects of the petroleum situation will be issued in the name of the Office of Defense Transportation to the extent that ODT bears the principal administrative responsibility for the matter with which the information is concerned.
(d) The Office of War Information will clear all government information relating to petroleum with the Petroleum Administrator.
(e) The Office of War Information will also make such cross clearances relating to petroleum information with other agencies involved as may be necessary to reflect their respective responsibilities and to effect a consistent, accurate presentation of petroleum facts and figures, so as to make public all information that can be issued within the limits of military security.
(f) All releases relating to petroleum will be cleared by and issued through the Office of War Information.
This decision by the Office of War Information is in accord with a directive letter issued by the Director of the Office of War Information on December 15, 1942. The intent of the foregoing statement is to see to it that the issuance of petroleum information is generally carried out in a way which will reflect the various administrative responsibilities involved.
I am requesting each of the agencies to indicate its acceptance of this outline of relationships by signing and returning to me the enclosed five copies of this letter. Duplicate originals will then be distributed to each of the agencies with the expectation that copies will be circulated among the operating staffs of all of the agencies.
Very truly yours,
DONALD M. NELSON.
Approved.
PETROLEUM ADMINISTRATION FOR WAR,
By HAROLD L. ICKES, Administrator.
OFFICE OF PRICE ADMINISTRATION,
By PRENTISS M. BROWN, Administrator.
OFFICE OF DEFENSE TRANSPORTATION,
By JOSEPH G. EASTMAN, Director.
Dated July 1, 1943.