Reserve Stocks of Oil Would Cover 2-Month Persian Gulf Tie-Up

The world probably could draw on reserve stocks of oil to smooth over a two-month interruption of shipments from the Persian Gulf if buyers were confident any disruption would be short, the head of the American Petroleum Institute said Thursday.

“Most of the world has some strategic petroleum reserve--ours is probably the biggest,” said Charles DiBona, institute president, at a news conference.

The problem is “you never know how long it’s going to last,” and a stoppage of exports from the Persian Gulf could set off a scramble for supplies on the world oil market, he continued.

The slowly growing U.S. reserve is about 524 million barrels, equivalent to 95 days of total current imports of 5.5 million barrels a day.

DiBona also pointed out that the growing dependence of Japan and Western Europe on oil from the Persian Gulf region is an added threat to U.S. supplies as well.

Only 1 million barrels a day currently come to the United States from Persian Gulf producers, but if other countries aggressively sought oil in the market to replace their gulf supplies, the experience of past oil shocks suggests that the shortfall in U.S. imports could be 2 million or 3 million barrels per day, DiBona said.

This is true, he suggested, because Japan depends on the Persian Gulf for more than half of its consumption and Western Europe’s dependence is nearly 30%.

“Because a sizable disruption of such an important source would threaten great economic damage, Japanese and European buyers would rush to buy oil wherever they could find it--from Mexico and Venezuela, for example, which many people have considered secure sources of oil imports for the United States,” he said at a news conference.

The U.S. reserve could supply 175 to 262 days at those rates. A shortfall of 600,000 barrels a day in 1979 produced gasoline lines in many parts of the United States, which DiBona said were the result of price and allocation controls.

DiBona said this would cause prices to rise rapidly everywhere and supplies from such sources to be redirected to other countries, leaving the United States to “feel the effects of the disruption along with Japan and Europe.”

DiBona also cited the likelihood of a disappearance of a “cushion of surplus world production that protects us today against sudden price jumps.”

Gulf states currently supply 9.2 million barrels a day to world markets, of which 2.6 million barrels are shipped by overland pipelines and presumably could continue if the Iran-Iraq war cuts off tanker traffic. The world uses more than 58 million barrels a day; the United States about 16 million.

Total excess production capacity in the world is only about 10 million barrels.