Shock Wave from Suez

As the Middle East crisis flared and flickered last week, the New York Stock Exchange reflected the developments hour by hour. Led by big international oils like Gulf, Royal Dutch Shell, Standard Oil (N.J.), some stocks bounced up more than two points in an hour, then slipped back. By week's end the Dow-Jones industrial average had dipped to 480.67 for a 4.68-point loss. Only steels were consistent gainers, and there the star was Lukens Steel, makers of heavy steel plate for ships. Jumping as much as 12 points a session, it shot 34 1/2 points higher during the week, closed at a new peak of 148 for a better than 300% gain since Jan. 1.

What spurred the steels was news of a huge tanker boom for U.S. shipyards. Everywhere, new orders were flooding in, old tankers going for record prices. When the Maritime Administration offered six mothballed T-2 tankers for sale last week, it got 240 bids from 44 bidders, some offering as much as $2,456,525 for ships that originally cost an average $3,000,000 to build during World War II, were worth less than $1,000,000 apiece until war broke out in the Middle East. In Chester, Pa., Sun Shipbuilding Corp. signed orders for two new 30,000-ton tankers, expected to close deals for several 45,000-ton tankers and several more giant 60,000-ton supertankers in the "near future." Said Sun President R. K. Burke, who was getting half a dozen new inquiries daily: "The market is wild, and nobody knows where it is going to go."

High Hurdle. To meet the demand for new shipping, the highest hurdle to jump is the shortage of steel. Merely counting current orders, shipbuilders will need at least 170,000 tons of steel plate this year. Yet plate is so tight that deliveries have already fallen 40% behind demand. With the new orders, the shortage is so serious that Government maritime officials are talking about some sort of priority system to allocate supplies. The problem is that so many industries are pinched for supplies that the Office of Defense Mobilization fears that special treatment for shipbuilders will bring demands from many other vital industries, force the Government to institute a complete controlled-materials program such as the one in effect during the Korean war.

The U.S. oil industry is also throbbing with a headache over the Middle East. In Texas a major argument raged between independent oilmen and the big companies over how to supply Europe with oil to tide it over until supplies start flowing freely again from Arab fields. While major companies want to boost U.S. production, the independents insist that the shortage should be filled from existing U.S. supplies above ground, argue that production increases will only result in bigger domestic surpluses once the immediate Suez crisis is past. As of last week, at least, the independents were winning. The Texas Railroad Commission, which controls some 45% of all U.S. production, boosted allowable production barely 75,503 bbls. to 3,442,952 bbls. daily, just 25% of what big oilmen wanted.

Higher Prices. Though many U.S. oilmen confidently predicted that the oil crisis would end soon, few Europeans were as optimistic, looked ahead gloomily to higher prices, short supplies, gas rationing, mounting unemployment as oil-dependent industries were forced to slow down. Britain has already asked drivers to stay off the road voluntarily to conserve fuel, expects full-scale rationing by Christmas (see FOREIGN NEWS). But despite their troubles, London's papers could still note, with a wry smile, that the Arabs had their troubles, too, were unable to ship abroad all the oil they produced.

In France, where 30% of all factories depend upon oil for fuel, the pinch is already starting to hurt. French railroads are cutting back schedules, switching from diesels to steam engines. Gasoline deliveries are down 20%, and the booming French Riviera tourist resorts are crying disaster; within a few days of the first gasoline restrictions, hotel occupancy dropped as much as 75% below normal. In Denmark and Spain there is also the glum specter of rationing, with fuel supplies down as much as 25%; Sweden and Switzerland have already banned pleasure driving on weekends.

Pool Agreement. For the short run, France and the rest of Europe looked to the U.S. to supply their needs. In Paris last week, 17 nations formed an oil-pool agreement to handle oil imports by a "collective, cooperative effort" on a governmental level. Estimated cost at current prices: $4,000,000 per day to buy about 1,000,000 bbls. of Western oil daily and ship it to Europe. It will soon cost even more; oil prices are already starting to edge up, and tanker rates, which increased 38% in the last two months, are nearly 150% higher than last year at this time and at the highest point since the Korean war.

So far, the U.S., which hopes to remain friendly with Arab nations, has no official Government program to help out. Instead, the U.S. wants Europe to buy oil on the open market and from private U.S. oil companies. To make it easier, the Justice Department last week approved a plan whereby 15 major U.S. oil companies would form a single marketing combine to supply Europe without laying themselves open to antitrust prosecution. Said Attorney General Herbert Brownell: "The plan contains features which I might well deem objectionable in other circumstances. However. I reluctantly concluded that this plan of action should be approved."

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