Gloomy Oil View

Threats to precious crude

Virtually nothing is as vital to the Western world as secure oil supplies. Yet nothing seems so far from reach. By their failure to blunt the initiatives of OPEC or develop their own energy sources, the U.S. and other oil-importing nations have left themselves vulnerable to oil-fired crises that would be havoc-wreaking. They include internal revolutions in the Middle East, war over oil supplies and financial ruin for many countries.

This gloomy scenario is not the prognosis of some latter-day Spengler but of Walter Levy, 69, perhaps the world's best-known independent oil consultant. Warns Levy in the current issue of Foreign Affairs: "A series of future emergencies centering around oil will set back world progress for many, many years."

This dark vision is all too credible.

Less developed nations have already been pushed to the brink of bankruptcy to pay higher oil bills. OPEC producers are already wary of exchanging their increasingly valuable but declining resources for inflated dollars or for overseas plants and real estate that could be seized. With importing countries expected to demand 33 million bbl. per day from OPEC by the year 2000, some 10% more than in 1978, Levy sees prices soaring, production decreasing and disaster for world economies.

Moreover, the Western nations are increasingly at the mercy of political events they cannot control. OPEC production could be sharply reduced or cut off entirely by Soviet incursions into the Persian Gulf, internal revolutions like Iran's or the disintegration of the Israeli-Egyptian peace treaty. "Nobody can predict when and how the governmental, social and cultural systems in the various countries will change," writes Levy, "but change they will, and, more likely than not, by convulsions or revolutions."

The area is fragile. More than half of the present Arab heads of state, notes Levy, have reached power by forcibly eliminating their predecessors. Also, during the past decade, Arabs have fought Arabs in numerous bloody wars. The region's stability is further undermined by the traumatic changes brought on by oil wealth, such as rapid economic development, huge riches and a massive influx of foreign labor. These have caused violent strains in Muslim orthodoxy, as reflected in the attack on the Sacred Mosque of Mecca and the Iranian revolution.

Oil is already making political patsies of some importing nations. Saudi Arabia is now using its muscle to try to buy U.S. offensive weaponry for its F-15 fighters. Denmark last month signed a contract for 20,000 bbl. of oil per day that forbids Danes to take any action that would "bring the kingdom of Saudi Arabia or any of its departments into disrepute." This could mean a Saudi veto power over something like showing the controversial film Death of a Princess, or even over Danish foreign policy.

Thus far, Western nations have been impotent in combating oil power. Levy argues that the Carter Doctrine, which calls for the U.S. to repel any attack on the Persian Gulf region, is unwieldy and potentially ineffectual. Support from Arab nations or even European allies would be questionable at best, and the first targets in any fighting would probably be the oil-producing facilities themselves.

In the past, Levy has advocated a united effort by Western nations to allocate oil supplies among themselves and negotiate jointly with OPEC. Now Levy fears that the fragility of current supply contracts and the "spirit of sauve quipent" among the allies make such a pact unlikely.

Because the development of sufficient alternative energy sources is 30 years or more away, the Western nations are captives of events they cannot control. The only solution, Levy believes, lies in an alliance among the U.S., the Soviet Union and perhaps China to prevent conflict in the Persian Gulf and to keep OPEC from raising prices ever higher. But Levy concedes: "We have not much reason to hope that the various producing countries, the importing countries and the superpowers will ever agree on such a rational course of conduct." Still, the best hope is that this dire forecast from a respected expert will spur action by the U.S., its allies and perhaps its enemies to keep the world from immolation in a pool of burning oil.

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