Results of a Lifted Embargo

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Gas Gains. Oil shipments to the U.S. would begin to pick up within a few weeks after the embargo ended because oil companies could divert some Arab-oil-laden tankers at sea away from Europe and Japan to American ports. Companies could also quickly release some of their inventories for sale on the assumption that there would be enough oil available worldwide to fill their later needs. In addition, more refined products could be shipped in from Europe, which has barely felt any supply pinch. Still, it would be several months before the flow of foreign oil was back to normal because of the time needed to charter ships, load them at the Persian Gulf and sail them to the U.S.

Most important, a resumption of Arab oil shipments would increase painfully tight gasoline supplies, especially along the hard-hit East Coast. Gasoline supplies* nationwide are now running about 15% to 20% below demand; the gap, it is estimated, would drop to about 2.5% if the embargo ended and conservation programs were maintained. Without waiting for a lifting of the embargo, Mobil announced last week that it will draw on its European inventories to import an additional 14 million gal. of gas into the U.S. in the next few weeks.

By contrast, there are few signs that the boycott's end would bring a quick drop in soaring fuel prices. In fact, prices initially could go even higher, because oil companies would be bringing in more high-priced crude from the Middle East and expensive petroleum products from Europe. Gasoline, some analysts think, could go to 70¢ per gal. in the months immediately ahead.

Long-Range Ease. Longer range, prices could ease off. Some Arab leaders such as Yamani favor reducing crude prices from their present giddy levels of $10 per barrel or more and will press their view at a meeting of the Organization of Petroleum Exporting Countries in Vienna this week. Even if they lose, the expansion of supplies that would result from a return to prewar Arab production levels is widely expected to bring crude prices down to about $7 per barrel in a year or so.

Welcome as all this would be, it still would not mean that Americans could go back to burning fuel at their old wasteful pace. Scarcities of energy were cropping up in the U.S. before the embargo; the nation is short of refining capacity to meet its needs even if it could import all the crude it might wish. And the Arabs are unlikely to increase production enough in future years to supply an unrestrained growth in world demand. Simon thus is already warning against assuming that an end to the embargo means that all limits are off. The FEO, he pledges, will be "very cautious" in lifting restraints on demand.