Yamani gives West warning: cut oil consumption or face recession

Press, 2 June 1979, Page 1

Yamani gives West warning: cut oil consumption or face recession

NZPA

Paris

The Saudi Arabian Oil Minister (Sheikh Ahmed Zaki Yamani) has warned the West, and especially the United States, that it will face a serious recession unless it cuts its oil consumption.

At the same time Iran announced that it would increase the price of its light crude 51.30 a barrel and its heavy crude $l.lO a barrel from yesterday. Saudi Arabia will also raise the price of its higher-quality crude, a very small proportion of its total production, by $1.40 to $17.07 a barrel.

The new price rises bring the cost of Iranian light crude to SUS 18.47 a barrel and heavy crude to 5U517.74 a barrel, $3.80 above the recommended price of the Organisation of Petroleum Exporting Countries (0.P.E.C.) In Britain, it was announced yesterday that the price of North Sea crude would rise 13 per cent immediately. The increase would put as- much as £2OOM (SNZ394M) on the credit side of Britain’s accounts.

BP announced the rise after holding prices down for months in spite of increases imposed by other big producers. A barrel of crude oil will rise from SUS 1825 to 5U520.70.

Sheik Yamani’s warning came in an interview on French television. He criticised the West for failing to learn a lesson from the 1973 oil crisis, and said: “Unless you change the life-style in the West, and especially in the United States, I’m afraid it will not be a recession, it will be a very deep depression one day.

“We did our best to maintain the price of oil at a lower level, but it seems that the price of oil is going up against our will and because of the West’s behaviour as a consumer,” he said. Sheikh Yamani made a point of differentiating between the United States and the European countries.

“The United States’ per capita consumption of energy is far more than any other nation,” he said.

“Their way of life is far different from the European way of life. I’m not saying that Europe does not have to do anything, but 1 still think you have a long way in front of you to change. “But if I compare Europe with the United States, I think the Americans have a bigger duty to do more.” In Washington, President Carter called on oil refineries to produce more fuel to ease the shortages across the United States, but oil industry officials told him at a two-hour meeting that they expected

supplies to remain tight well into next year. Administration officials said that President Carter agreed with this assessment, and the Energy Secretary (Mr James Schlesinger) said: “We will be on the ragged end of supply in one form or another for five to 10 years.” Mr Thornton Bradshaw, president of Arco, said after the meeting with President Carter that America faced five years on the “knife-edge of supply.” Mr Bradshaw was one of 15 industry officials who delivered their report at the meeting, which was hurriedly arranged for President Carter to learn at first hand about rising prices and shrinking supplies of petrol. Mr Jerry McAffee, chairman of the Gulf Oil Corporation, said that the oil company executive impressed on President Carter their need for increased capital to finance production of needed oil. He said that Mr Carter’s plan for a gradual lifting of Government price controls on oil was a step in the right direction.

An Administration official said that imports for the last two weeks had been between 6.1 M and 6.2 M barrels of oil a day. In the previous four weeks imports had been about 5.8 M barrels a day, the official said. Mr Carter, frustrated by Congressional refusal to grant him standby powers to ration petrol, wants Americans to cut oil consumption from the present 20M-21M barrels a day. Almost half of this is imported. The oil industry and American consumer groups are at odds over who is to blame for shortages of domestic and industrial fuel, and queues at filling stations.

In Paris, officials of the Organisation for Economic

Co-operation and Development (0.E.C.D.) said that the impact of the soaring cost of oil on the economies of member States was the main topic of a twoday meeting of its economic policy committee. A report to the committee said that leading noncommunist industrialised nations were caught in a vicious circle of higher energy prices, inflation, and structural rigidities in their economies.

The London “Daily Mail” newspaper, referring to the BP increase, said that all other oil companies in the North Sea were bound to follow BP, which was by far the biggest crude oil producer. At least 45 per cent of the North Sea oil would be exported, the newspaper said.

Shell and Mobil have started rationing deliveries of all oil products in Britain.

Mobil will cut total supplies 10 per cent compared with last year, but petrol and diesel more severely, by 15 per cent.

Shell, which said that crude shortages were likely to persist into next year, will cut supplies 5 per cent.

The decline in crude oil supplies to Britain had forced all big,companies except BP to ration product supplies to less than last year’s deliveries, the “Financial Times” reported.

Some small oil companies, such as Burmah, have rationed oil product deliveries in Britain since February because of the loss of crude supplies from Iran. They were quickly followed by bigger suppliers such as Texaco, Gulf, and Total. , The British Energy Minister (Mr David Howell) said that oil had to be saved “urgently and immediately, and we must go on saving it because supplies will become tighter and more expensive.”