The oil weapon.
In 1973, the Arab world used oil to express its displeasure with US foreign policy in the Middle East. With the balance of power now shifting quickly in the region, the question again presents itself. Will the Arab producers use the oil weapon to spur a change in the US posture toward Israel? How effective would that weapon be?
Most oil experts interviewed by the Monitor consider the probability of such an oil disruption as low. Notes Daniel Yergin, a Harvard University professor, ''I think with this kind of conflict there is always the possibility oil will be used as a weapon.'' But, he adds, ''from the viewpoint of those considering it, it might be a rather blunt instrument.''
Still, as Larry Goldstein, a vice-president at the Petroleum Industry Research Foundation, a nonprofit organization funded by the oil industry, notes, ''It's (the Middle East) a very explosive area. There is a lot of emotionalism involved.''
In part because of this explosiveness, the oil markets in the days since the Israeli invasion of Lebanon have been somewhat unsettled. Right after Israel crossed the border, prices on the spot market blipped upward, picking up between 75 cents and $1 a barrel. Later, oil prices pulled back again, giving up the gains.
But the head oil trader for a major oil company says: ''A lot depends on how long the Lebanon conflict continues. If it's the goal of the Israelis to obliterate the Palestinians in Beirut, it increases the odds of a problem.''
In Washington, a staff member on the House Energy and Commerce Committee says , ''Recent events in the Middle East have alarmed some members.'' But she adds, ''Somehow, the administration is not making a link between that and a potential supply disruption.''
In fact, Ron Winkler, deputy assistant secretary for energy preparedness at the Department of Energy, says the Reagan administration ''knows of nothing to suggest the possibility of an embargo.'' He continues: ''My general understanding is that many of the Arab countries depend on oil sales, and it would be difficult for them to reduce production below a certain point. The situation is not the same as it was in 1973.''
That's for certain. Since 1973, there have been some major changes in the oil world.
The largest and most significant change is that the Organization of Petroleum Exporting Countries (OPEC) has seen its oil production dwindle considerably. New oil production from Alaska, the North Sea, and Mexico has replaced much of the crude formerly produced by Middle Eastern producers. In 1973, OPEC was pumping 31 million barrels of oil per day. Today, it is supplying 17 million barrels per day.
Furthermore, notes Mr. Yergin, the author of a recent book entitled ''Global Insecurity: Strategy for Energy and Economic Renewal,'' in 1973 the oil markets were ''taut,'' with demand outstripping production. Today, he says, oil supply and demand are in equilibrium.
He says an oil embargo ''might undercut the efforts by moderate OPEC producers to stabilize the markets for oil and might hasten the flight from OPEC oil produced by the Arabs.''
The oil trader agrees, noting that if the Arabs did impose an embargo, in two to four years they might be selling only 10 million barrels of oil a day. ''It's not in their interest to cause a disruption,'' he says.
Another major difference between this year and 1973 is that the world oil inventories are full. There are now about 95 days of commercial supplies sloshing around the world and 15 days' worth of government-controlled supplies. In 1973, there was only a few weeks' worth of supplies in the pipelines and tanks. In the United States today, even though inventories have been reduced all year, they still remain above the amount oil companies would like. During April and May, a seasonal period when supplies normally increase, inventories were further reduced by 2 to 2.5 million barrels a day.
This reduction in inventory is worrisome to some. US Rep. Richard L. Ottinger (D) of New York, in an interview, said gasoline stocks are below 1978-79 levels and distillate stocks, representing heating oil and diesel, are at the lowest levels they have been in five years. The congressman introduced legislation recently to mandate minimum inventory levels for the oil companies, since he believes that ''the oil companies deliberately create shortages to jack up prices.'' Besides, he adds, it is a ''dangerous situation to have inventories low when there are such unstable situations in the producing countries.''
Then there is the question of oil stored in the federal Strategic Petroleum Reserve. The reserve is supposed to fill the gap left for the US in the event of any such embargo. Currently there are 260 million barrels of oil, representing about 150 days of production (if oil is drawn at a rate of 1.7 million barrels a day), filling a salt cavern in Louisiana.
But as Mr. Goldstein says, ''Even though the reserve is there, the plan to use it is vague.'' Furthermore, the administration and Congress are split over how quickly the reserve should be filled to its goal of 750 million barrels. In legislation vetoed by President Reagan earlier this year, Congress tried to mandate the reserve's fill rate.
In fact, many in Congress worry that in the event of an oil disruption, there is no legislation in place giving the executive office the ability to control US energy supplies. Such authority was included in the legislation the President vetoed.
Mr. Winkler of the Department of Energy says the administration would rather count on the free-market system to sort things out. ''I think from the 1973 experience, we learned to let the market adjust on its own,'' he comments.
If a heavy embargo were applied, Richard S. Smith, vice-president and chief economist for Northwestern National Bank, says, it would ''probably have pretty severe ramifications.'' He says any such cutoff in the near future would ''keep us in the recession and probably deepen it.'' It could increase the odds of the economy tipping from a recession into a depression, for example. And, he concludes, ''one would hope the Saudis recognize the danger of that.''