Oil Prices Could Fall Even if There’s War, Saudi Says

Oil prices could drop by as much as a third from current prices after the Persian Gulf crisis ends--even if there is a war, a Saudi oil company executive said today.

Abdullah Ghanim, a top executive of state-owned Saudi Aramco, said gulf producers can meet world demand whether the crisis produces a stalemate, a military clash or a peaceful solution.

“Whichever scenario unfolds, once the resolution to the crisis is reached, we expect prices to fall back to about $20 to $22 per barrel,” Ghanim, senior vice president of engineering and project management, told an international oil conference.

World oil prices, which rise when gulf tensions flare, now stand at about $34 a barrel, but have soared as high as $40.

Prices are more than double the level before Iraq’s Aug. 2 invasion and later annexation of Kuwait in a land-and-oil dispute.

Ghanim said he doubts that Iraq could seriously damage Saudi Arabia’s oil facilities if fighting broke out between its soldiers and a multinational force massed in the kingdom, the world’s largest oil exporter.

An attack would probably be stopped in time and Saudi oil plants are so widely dispersed that output would not be significantly affected if one well were hit, he said.

A Saudi Aramco executive said last week that the company will not shut any of its fields in a war unless they are hit.

“At this point, we can be sure of only two things--first, demand for oil will continue to grow, and, second, the gulf region will be the key supplier of the increase,” Ghanim said.

The executive predicted that world oil demand will rise by 8 million barrels per day during the 1990s. Seven million of the increase would come from OPEC states--6 million of that from gulf producers, he said.

Ghanim did not give an exact breakdown but said Iraq and Kuwait were included in the estimate, along with Saudi Arabia, Iran, the United Arab Emirates, Qatar, Oman and Bahrain.

He said Saudi Arabia would be able to act as the “swing producer” for any increases required by the Organization of Petroleum Exporting Countries over the next decade in the same way that it once cut output in the early 1980s.