All products are subject to historically
determined constraints upon upper and lower
inventory levels, available yield patterns,
maximum available imports, and feasible
interregional allocations. If no shortfall*
is forecast, the forecasting procedure has
identified one feasible means of meeting the
demand for a product. In fact, the market
place may determine a different allocation
pattern to meet a given demand: 'The allocation
pattern selected for this forecast tends to
depend heavily upon domestic production and
to depend less upon imports of products.

The Forecasts

The supply and demand forecasts corresponding to the base case and high option demand scenarios are summarized in the following two tables.

"Shortfall" identifies demand which cannot be satisfied within the constraints of the simulation. The relatively small shortfalls identified can be met by slightly higher imports or via the utilization of more flexible yield patterns than those considered for the simulation. Accordingly, the term "excess demand" is used in the summary tables to follow.

*The volume of refinery products exceeds the volume of refinery inputs due to molecular change.

**Excess demand is the difference between forecasted demand and domestic production plus historically "normal" import levels.

*The volume of refinery products exceeds the volume of refinery inputs due to molecular change.

**Excess demand is the difference between forecasted demand and domestic production plus historically "normal" import levels.

Since domestic production is relatively stable over the periods considered, the differences between the two demand scenarios can be best appreciated at the summary level by comparing the total imports of product and crude associated with each scenario. These are given below. The figures can be constructed from the preceding tables by adding together the import figures given and the estimate of "excess demand.

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Current measurements place import rates close to those given for the "high demand option." Although consumption demand may not yet have changed, higher import rates can nevertheless occur reflecting a buildup in inventory levels in anticipation of future demand. Current stock levels are high relative to both historical precedent and storage capacity. This may be explained as a contingency against the likelihood of a coal strike and a hedge against a severe winter. Uncertainty concerning foreign supplies and the memory of embargo related shortages early in the year may also play a part in the motive to attain high inventory levels. However, if the circumstances upon which the high demand option is contingent do not in fact occur, it may be expected that the current high inventory levels will be drawn down. As this occurs,

*For example, as of October 25, 1974, both the American Petroleum Institute and FEA place clean product stocks (distillate, gasoline, and jet fuels) at approximately 60 percent of the storage capacity estimated by the National Petroleum Council as of September 1973. A stock level of approximately 50 percent is usually accepted as the long-run practical upper bound.

import rates will fall towards those given for the base case demand scenario. In fact, in the absence of high demand, stock drawdown in the first two quarters of 1975 could lead to import rates below those given for the base case demand scenario. A reasonable expectation is as follows:

--high option demand import rates into
the fourth quarter 1974;

--import rates falling towards those given
for the base case demand scenario contingent
upon weather and the availability of other
fuels (i.e., coal);

--the possibility of lower than base case
import rates in first and second quarter
1975 due to lower demand and inventory
drawdown;

--base case import levels for third and
fourth quarter 1975.