Arabian oil

Press, Volume CXIII, Issue 33373, 3 November 1973, Page 14

Arabian oil

It is too early to assume that cessation of the fighting in the Middle East will have any effect on the oil situation. The Arab producing countries, constantly looking for opportunities to demand higher prices from the consumer countries, will probably increase their limited embargo on oil sales to the United States and Western Europe as a lever to reduce aid for Israel. It is certain, however, that measures for reducing consumption, both in the United States and in Europe, will be kept under careful study. The United States view seems to be that the impact of the Middle East cuts, for a time at least, should be small. Domestic production could be increased to offset the 8 per cent drop in supplies imported from Arab sources. The reserved oilfields area in California alone contain an estimated 38,500 million gallons, which could be opened up for production. Wells in the United States now account for about three-quarters of market needs; and, in the judgment of the National Petroleum Council, six fields in California and lexas could immediately increase output by 3.5 million gallons a day. Probably one result of the pressure being applied by Arab producers will be a revision of planning for an oil pipeline from Alaska, where enormous reserves are known to exist. In Britain, the outlook has been transformed by the North Sea discoveries. By the end of this decade, according to the latest estimates, Britain could be producing two-thirds of its total needs; by 1985 there might be a surplus for export. Britain’s oil imports at present cost around £lOOO million a year, and that cost will continue to rise while the British market is dependent on imports.

In the meantime restraints on the use of oil for power generation in Europe are likely; the electricity authorities will probably be asked to make more use of their coal-fired plants. Europe as a whole will be inconvenienced but not seriously damaged by the first-stage cutback of Arab exports. European stocks represent about three months usage. That will at least give time for some re-examination of policy in the producing countries, if the cease-fire leads to acceptance by the Arabs of Israel’s sovereign status. The enduring effect of the present restrictions on Arab oil production will certainly be to stimulate the exploitation of reserves in areas less subject to political pressures.