IMPACT OF THE GULF WAR : Glut Could Force Reverse Oil Shock, Some Analysts Say : NEWS ANALYSIS

This week’s dizzying crash of energy prices, if sustained, has raised the novel prospect of an oil shock in reverse--a development that might hurt the oil industry but give consumers an unexpected boost and ease an oppressive burden on businesses that depend on energy.

Prices have fallen steeply because Saudi Arabia and other oil producers turned on the oil spigot so forcefully after Iraq invaded Kuwait that a glut has developed. Barring unforeseen damage to Saudi oil facilities, economists and industry officials now expect oil prices to plunge until the glut is absorbed.

“I see a slide steadily downward in the spring months, reaching a low in June ofabout $15 and bottoming out there,” said Fareed Mohamedi, senior economist at Petroleum Finance Co. in Washington.

More important, the price plunge symbolizes a fundamental change brought about by the Persian Gulf War: It appears to be strengthening the hand of oil producers friendly to the United States, notably Saudi Arabia.

Saudi Arabia, analysts say, will be the primary beneficiary if war diminishes the role of Iraq, once the leading advocate of high world oil prices. Before the gulf crisis, Saudi Arabia was the leading voice for moderate oil prices and closer ties with consuming nations.

“If Saddam Hussein is deflated, a good part of OPEC, Saudi Arabia particularly, owes us something because we did it,” maintains Stephen H. Axilrod, vice chairman, Nikko Securities Co. International. “They certainly don’t owe us a big increase in the price of oil.”

Should oil prices fall too far, that could cut oil production profits and remove the financial incentive to drill for new oil, especially in the United States.

“I think $22 to $24 a barrel oil is a level the oil industry can live with, and that would stimulate production again . . . and have a leveling impact on demand too,” said George H. Babikian, president of Atlantic Richfield Co.’s refining and marketing unit.

Prices as low as $12 or $15 a barrel, as some economists project, could raise the specter of the mid-1980s, when a collapse of oil prices put 26,000 oil wells out of business and drove U.S. oil production down by 10%.

No one expects a replay of those times. And the oil industry doesn’t want to see one.

“It would be bad for this country, though it might stimulate the economy, because it would result in profligate use of energy” that would again increase dependence on imports, Babikian said.

In the months leading up to the war, increased cash flow from high oil prices led oil companies such as Unocal Corp. and Atlantic Richfield Co. to accelerate drilling projects planned for later or to boost production from wells that might have been uneconomical at lower prices.

Low prices would remove the incentive for such projects. But longer-range exploration, development and production plans probably will remain unchanged because they are based on predictions of oil prices several years from now.

In any case, cheap oil would be a boon to consumers. Some economists predict gasoline prices as low as $1 a gallon by summer.

And for industries hard hit by recent sky-high fuel prices, the crash would be a blessing.

“If oil prices are $10 a barrel lower, that would provide a $60-billion to $80-billion stimulus to the economy,” said Philip K. Verleger Jr., an economist and visiting fellow at the Institute for International Economics in Washington.

“The trend would vastly improve our profitability,” said Tim Smith, a spokesman for American Airlines. High fuel costs were responsible for the airlines’ record fourth-quarter loss of $215.1 million, compared to net income of $38.9 million a year before.

Southern California Edison Co. said a fall in crude prices would mean modest savings in fuel costs. “If (oil) goes down $10 a barrel, that’s somewhere near $20 million to $40 million in savings” out of a total fuel bill of $800 million a year, said Ken Baskin, Edison’s vice president for fuel and material management.

Lower oil prices also will help the chemical industry, said Ray R. Irani, chairman of Occidental Petroleum Corp., which derives more than half of its net income from petrochemical operations.

“They will certainly reduce the cost (to produce) chemicals,” he said in an interview. “In addition, the margin on chemicals will improve. . . . And lower oil prices will also bring more confidence into the consumer market and the spending of people, so demand will improve.”

Some oil industry critics fear that cheap oil could distract attention from the nation’s reliance on oil, about half of which is imported. “It forestalls people from investing in other fuels, from investing in energy efficiency, and deflates the effort to come up with a strong national energy policy,” said Edwin Rothschild, director of energy policy for the consumer advocacy group Citizen Action in Washington.

For the auto industry, falling oil prices in the past have led to “an increase in larger cars with more powerful engines,” said Cynthia Certo, director of forecasting at Intergrated Automotive Resources in Wayne, Pa. By contrast, rising oil prices during the last oil shock caused sales of large cars to plummet from 1.4 million in 1979 to 842,000 in 1980.

Even so, Rothschild noted, “this is the first time that it has required U.S. military intervention to preserve access to oil. . . . And I think that people realize that reliance on imported oil is not good.”

Crude Slips Again Price per 42-gallon barrel, Feburary contract light, sweet crude oil Friday close: $19.25, down $2.19