OIL: How to Lick a Shortage

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As the fighting tapered off in the Middle East last week (see FOREIGN NEWS), the oilmen of the free world faced up to a huge problem: How can the West be supplied with all the oil it needs? Some 25% of the free world's oil—and 80% of Western Europe's supply—has been coming from the oilfields of the Middle East. Last week, as a result of bombing, sabotage and plain self-defense, the flow of some 1,700,000 bbls. out of total export production of 2,600,000 bbls. a day had been cut off or disrupted, at least temporarily, and the prospects were that the flow of a few hundred thousand more barrels might be cut off.

¶ Egypt's Suez Canal, which channels 1,200,000 bbls. daily to Europe from Persian Gulf fields, has been completely closed. The hulks of at least 15 vessels (including the dredges and some of the biggest salvage ships), most of them scuttled by the Egyptians, clog the waterway. The El Firdan railway bridge also has collapsed into the canal. Most optimistic estimate for clearing the canal: more than a month. Says one shipping expert: "It all depends on who is going to do the unplugging. If it's a crash program under the Americans, it might take six weeks. If it's the British and French, it might take three months. If it's the Egyptians, the job may never be done."

¶ Britain's Iraq Petroleum pipeline, running from Iraq to the Mediterranean, has been blown up in so many places in Syria that its 500,000-bbl. daily flow has been completely shut off. If and when Britain resumes diplomatic relations with Syria, Britain may be able to pump oil at 40% capacity by using stations in Iraq; restoring the line to full capacity may take six months or longer.

¶Trans-Arabian Pipe Line Co. (100% U.S. owned), which pumps 350,000 bbls. daily from Arabian-American Oil Co. fields to the Mediterranean, is still operating. But last week the Saudi Arabian government ordered Aramco to suspend all shipments to Britain and France, thus depriving them of some 35,000 bbls. daily by way of the pipeline, another 110,000 bbls. daily loaded on tankers in the Persian Gulf.

Rations & Noses. All told, Western Europe has only enough oil on hand for five weeks. To conserve it, Great Britain has already started rationing oil by cutting consumer supplies 10% at the distributor level; France began rationing gasoline by restricting all pleasure travel and tourism. Other European nations are also feeling the pinch.

Some oilmen expect the oil-rich Arab nations to come to terms soon and get the oil flowing again, since they are losing heavily. Iraq is losing about $450,000 daily because it cannot move its oil, has had to cut production at its Kirkuk field drastically; Syria sacrifices $50,000 daily in pipeline earnings alone; Saudi Arabia gets an estimated 85% of its income from oil (some $290 million in 1955). On the other hand, as one old Middle East hand grumbled last week, "You can never really depend on the Arabs' not hurting themselves. They're always biting off their nose to spite their face."