In a new oil pinch, divvying up would shift

When OPEC imposed an oil embargo in 1973, the ''seven sisters'' of the oil industry were stuck with the task of allocating limited world oil supplies among nations. With long lineups at gas stations, it proved a thankless and unpopular role.

Should a world oil shortage occur again, the major oil companies will not be able to ''divvy up'' the world's oil supplies, according to Roger Bexon, deputy chairman of British Petroleum Company (BP).

''It has got to be said that it is up to the governments and not up to the oil companies,'' he says. ''We are not in the business of allocating the world's oil.''

In the decade since the first OPEC oil crisis, the oil giants, such as BP with a $45 billion turnover last year, have become more international dealers in oil, rather than owners of oil. They are more likely to explore under contract, acquire ''rights'' to buy a certain portion of the oil they find, sell it under contract, and often even lease their tankers.

Mr. Bexon held that in an oil shortage the oil companies would have to meet their commercial and contractual obligations. ''We cannot be looked on to carry a national interest. We don't have those kinds of resources anymore. The oil companies are not able to meet any oil discontinuity.''

In an interview, the oil company executive indicated he does not expect an oil shortage, despite the Iran-Iraq war with its threat to Gulf oil supplies. The Gulf, he notes, supplies a smaller proportion of the world oil supplies than it did eight or 10 years ago.

''The world has a more flexible system to handle it (an interruption in Gulf oil flows),'' he said. Inventory levels are much higher. And there is surplus production capacity in countries outside the Gulf, such as Nigeria, Venezuela, and Mexico.

Nonetheless, Mr. Bexon was not sure whether or not a worse crisis in the Gulf might produce panic buying of crude, resulting in a run-up in prices. It hasn't so far, he pointed out, with prices remaining rather steady for the last few months.

Moreover, so far there have been enough tanker owners and crews willing to risk the dangerous waters of the northern Gulf to take away oil offered by Kuwait, Saudi Arabia, and even Iran.

Mr. Bexon does not expect an interruption in Saudi oil supplies. Should a shortage develop, though, he advocates that governments sell oil from their national reserves. ''Governments must be prepared to use their stocks and use them quickly,'' he said.

''Let the market mechanism and pricing play its role,'' he said. ''If there is a shortage, you will get rationing by prices.''

Mr. Bexon charges that during the second OPEC oil crisis in 1979-80, government regulation rather than a shortage of oil messed up the oil markets. In the United States, the allocation procedures ''compounded the problem rather than easing it,'' he said. ''The whole thing was a nonsense.''

The BP executive does not expect the Strait of Hormuz to be closed. ''It does seem to me that the practicality and probability of that have diminished very considerably,'' he said.

Mr. Bexon's comments were made at about the time BP issued its annual statistical review of world energy. It shows that additional oil resources are continuing to be found at a greater rate than the fuel is being used.

Because of this and anticipated modest growth in world demand for oil of 1.7 to 2 percent a year, BP's chief corporate planner, James Ross, figures the real price of oil (after removing inflation) is unlikely to rise in real terms before 1990, ''and it probably won't rise much in nominal terms.''

The study showed that oil demand dropped more than 3 percent in 1980, '81, and '82. But consumption in '83 fell only 1.1 percent to 2.794 billion tonnes (long tons), the same level as in '73.

However while oil consumption in the USX Western Europe, and Japan has dropped since 1973 - mainly because of reduced fuel oil demand - consumption in the rest of the noncommunist world has grown significantly, from 494.1 million tonnes in 1973 to 649.2 million tonnes last year. BP calculates that the ratio between reserves of oil and production last year was 33.4 - that is, at the 1983 rate of consumption, proven reservLs would last 33.4 years. That's up slightly from the year before.The US ratio is only 9.1 and falling. The Soviet Union has 13.9 years of proven reserves; Saudy Arabia, 86.9; and the United Kingdom, 15.3. Britain's estimated gas and oil reserves were upped this spring by the Department of Energy. Its annual ''Brown Book'' pegged recoverable reserves at 1 .41 to 5.28 billion tonnes. Last year's report had them estimated at 1.22 to 4. 22 billion tonnes. The wide ranges reflect the uncertainty of oil prospects thousands of feet under the land or the ocean. North Sea productzO -o expected to peak in the next year or so, then decline slowly. But the UK should remain self-sufficient in crude into the 1990s, if not beyond 2000.''We have changed our vIew considerably in terms of the potential available in the North Sea,'' a government oil expert noted. He figures future fields will be generally smaller, more faulted structures, involving higher costs. But oil output - and thus government revenues - should remain high for years to come.That was good news for Britons. It was also a good report for the world, since essentially the oil market is global.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.




Save for later


Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items


Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items


Failed to save

You have already saved this item.

View Saved Items