Oil Demand Off in ‘90; Supply Plan Established

U.S. demand for oil dropped for the first time in seven years in 1990, depressed by higher prices after Iraq’s invasion of Kuwait, the slowing economy and warm weather, the American Petroleum Institute reported Friday.

Meanwhile, the International Energy Agency unveiled an emergency supply plan Friday in Paris aimed at cushioning its members from oil shortages in the event of war. Under the plan--which would be set into motion as soon as fighting broke out in the Persian Gulf--an additional 2.5 million barrels of oil daily would be released onto the world market, or about 6.6% of the West’s daily consumption of 38.1 million barrels a day.

The American Petroleum Institute, the U.S. industry’s trade group, said in its year-end report that for 1990 as a whole oil deliveries fell 2.1% after being nearly flat in 1989.

In releasing the 1990 figures, institute officials expressed confidence that the industry could meet U.S. petroleum needs even in the event of war in the Mideast.

“There will be adequate supplies of fuel,” API President Charles DiBona told reporters.

The API reported that the loss of Kuwaiti and Iraqi oil shipments was placing a huge drain on U.S. commercial oil reserves. It said inventories were being drawn down at a rate of 900,000 barrels a day in the last three months of 1990--roughly three times the normal rate.

But DiBona said total U.S. crude oil and refined product stocks were 25 million barrels above last year’s levels. In addition, he noted, government officials had promised to tap the 590-million-barrel federal Strategic Petroleum Reserve to meet shortages that might arise.

They also said higher oil prices would continue to dampen U.S. demand, further easing any strain on supplies.

Under the International Energy Agency plan, up to 80% of the additional oil would come from stocks already built up by members, agency Chairman Geoffrey Chipperfield told a news conference in Paris. Member nations would use other measures, such as steps to restrain oil demand, to meet the target. The plan does not depend on boosting oil output in the Persian Gulf.

In Washington, the White House quickly welcomed the plan, saying the United States would be a “major contributor” through the Strategic Petroleum Reserve.

“The United States welcomes this prompt, decisive action on the part of the IEA,” White House spokesman Marlin Fitzwater told reporters. He added that the U.S. contribution would be announced when the IEA’s plan is completed.