Concern for Gulf Must Be Long-Term : Soviets Prepare for Lean Energy Days Ahead, U.S. Doesn’t

When you look at the Persian Gulf and the related global oil situation, you are reminded of the old saw about good news and bad news.

The good news is that things are different from the Middle East oil crises of the 1970s.

We and other major Western countries should be able to ride out an interruption of Persian Gulf oil supplies, if it should come, with much less economic disruption.

The bad news is that:

--Even a little disruption is bad for the deficit-plagued U.S. economy.

--Looking a few years down the road, Persian Gulf oil will become much more vital than it is now.

--The Soviets, perhaps looking to the day when they will need Middle Eastern oil to supplement their own supplies, are moving astutely to establish a permanent military presence in the Persian Gulf and to improve relations with Iran.

But Washington, meanwhile, is doing an unimpressive job of coping with the strong Soviet political offensive in the area.

--The Administration, though agonizing a bit over reliance on imported oil, has no meaningful energy policy to ensure the U.S. economy of plentiful, affordable energy supplies as oil becomes scarcer.

The Arab oil embargo of 1973-74 caused a quadrupling of oil prices, which doubled again when there was another disruption of supplies five years later. The massive increase in this country’s oil-import bill was a major factor behind the high inflation rate of the 1970s and the emergence of huge U.S. trade deficits.

The jump in oil prices that followed the recent dispatch of American warships to protect U.S.-flagged Kuwaiti tankers now seems to be abating. But it showed the continuing sensitivity of world oil prices to events in the Persian Gulf.

About 6 million to 8 million barrels of Persian Gulf oil pass through the Strait of Hormuz each day. Although the United States relies on foreign oil for a hefty 41% of its petroleum supplies, its dependence on gulf oil is a relatively low 6%. However, Japan relies on gulf oil for 61% of its needs; Italy, 47%; France, 32%, and West Germany, 8%.

Experts believe that the industrialized nations could cope with a six-months-long cutoff of Persian Gulf oil because of the buildup in strategic petroleum reserves and the existence of surplus production capacity outside the gulf.

Looking a little way down the road, however, the picture is different.

Writing in the Geopolitics of Energy, Joseph P. Riva Jr. of the Library of Congress points out that the first 200 billion barrels of the world’s oil were produced and consumed in the 109 years ending in 1968. By 1988, after just 20 additional years, the world will have used up 400 billion more barrels.

Since countries belonging to OPEC control “well over half of the world’s remaining conventional oil,” Riva says “they will be able to provide an increasing proportion of total world oil production and oil trade.”

The world probably has enough oil left to continue production at current rates for a half-century, at which time output would drop sharply.

However, remaining oil reserves are not evenly distributed.

U.S. oil production is peaking already. By 1995 the list of countries unable to sustain present production rates will include Canada and the Soviet Union, according to Riva. But Kuwait could sustain current oil production for nearly 200 years, and Saudi Arabia and Iran wouldn’t face declines until the dawn of the 22nd Century.

Such alternative suppliers as Mexico and Venezuela can soften the growing reliance on Persian Gulf oil, but not avoid it unless consuming nations are willing to pay heavy subsidies for the exploitation of Venezuela’s huge resources of heavy crude oil and/or the liquefaction of U.S. shale and coal.

No such moves are in the offing.

Thus U.S. reliance on Persian Gulf oil appears destined to rise, with ominous effects on our balance of trade.

(Economists figure that, even if prices stay around $18 a barrel, America’s oil-import bill will rise by $12 billion in 1987 alone.)

The dispatch of U.S. warships reflects an appreciation of the Persian Gulf’s importance. But the Soviets are playing their hand with greater subtlety and skill than Washington is.

The Soviets established diplomatic relations with Kuwait in the 1960s, and more recently have set up formal ties with Oman and the United Arab Emirates. Contacts with staunchly anti-communist Saudi Arabia also are increasing.

Now, despite its role as the chief arms supplier to Iraq in its war with Iran, the Soviet Union may be on the verge of a breakthrough in relations with Tehran, which feels more threatened by the U.S. armada in the gulf than by the handful of Soviet minesweepers on station there.

Moscow reported last week that the Soviet Union and Iran have agreed to cooperate on large-scale economic projects.

Iranian sources said that the agreement includes a railroad from the Soviet Union to the Persian Gulf--a project that would give the Soviet Union a direct link to the gulf for both industrial products and military equipment--as well as pipelines through which Iran could transship its oil to the West as an alternative to the tanker route through the Strait of Hormuz.

Despite the general Arab enmity toward Iran, Moscow’s togetherness with Tehran does not seem to be preventing the Soviets from improving their image among the Arab states in the gulf area, where they are now viewed as an essential participant in the Middle Eastern peace process.

Considering the anticipated strain on the future adequacy of its own oil production, the Soviet Union may be interested less in causing trouble for the West than in establishing its own bona fides in preparation for the day when it will want large-scale access to Persian Gulf oil for its own economic reasons.

That remains to be seen.

Meanwhile, there is mounting concern in official Washington over the prospective increase in U.S. reliance on Persian Gulf oil. But the sense of urgency obviously hasn’t reached the White House, where President Reagan didn’t bother to put energy policy on his priority list for the rest of his term.

Unfortunately, the President is right in tune with the American people, who, as one underling said not long ago, “are very happy right now. They are not concerned about the long term.”