Some Non-Arab Serendipity

For the industrialized world, the slash in oil production by the Arab states has been a handful of sand in the economic gearbox. But for oil-exporting nations outside the Arab bloc, the move was pure serendipity. Almost overnight, as global shortages reached crisis proportions, the value of their oil deposits began to zoom. Yet the oil producers have resisted the temptation to try to pump fast enough to make up for the Arab cutback. Instead, they have cannily held output to roughly ordinary levels while sharply scaling up prices. That strategy is resulting in a kind of forced, massive transfer of wealth from the rich oil-burning countries that may spur economic growth in the mainly underdeveloped producing nations more than formal foreign aid ever could.

A rundown:

IRAN, a Moslem country that strongly opposes using oil as a political weapon, is the only Middle Eastern state to continue pumping at full capacity; in the past two months it has boosted production by about 700,000 bbl., to 6,000,000 bbl. a day. Iran also sweetened its oil earnings in October when, in concert with the Arab states, it hiked the price of its crude by a walloping 70%, to $8.20 per bbl.; it auctioned some oil last week at more than double that quote. Experts believe that another 20% increase is in the offing. As recently as 1971, the same crude sold for a mere $1.90 per bbl.

Under Shah Mohammad Reza Pahlavi, Iranians have been working furiously to expand and diversify their economy. Thanks to the quickened flow of oil money, the government has announced that its $16 billion budget for next year--the largest ever--would be balanced. Rumors that a 20% raise for civil servants might be in the budget, though, swiftly sent retail prices up 10%. The government promptly ordered out "anti-price-hike squads" to warn shopkeepers against inflationary gouging.

VENEZUELA, which already boasts the highest per capita income in South America, is becoming even wealthier because of soaring oil prices. Petroleum production has been held to about 3,500,000 bbl. a day for several years. But because of increases in government taxes and royalties levied against foreign firms drilling in the country, Venezuela's oil revenues have leaped from $1.9 billion in 1972 to nearly $3 billion this year. Since January alone, the price of the country's oil has doubled, to $7.24 per bbl.

Venezuela is taking a second look at an oil belt along the north bank of the Orinoco River that has huge estimated recoverable reserves of 70 billion bbl. Until the recent jump in prices, getting at this petroleum was considered too expensive to be profitable; the oil is so thick that dilutants often have to be poured into the wells to increase its fluidity so that pumps can suck it out. Now, because of the oil-price bonanza, the Venezuelan government has the cash to buy the sophisticated technology needed to exploit the find. At the same time, the government is being pressured to placate national pride by taking over control of foreign oil concessions before 1983, when most of them are scheduled to expire. Says one foreign oil executive: "We are past the point of shuddering when nationalization is mentioned."

NIGERIA, which pours most of its oil revenues into its national development program, is sitting pretty. It has held production increases to 1% a month (present output is 2.2 million bbl. a day) but nearly doubled the price of its sweet, high-quality crude, to $8.30 per bbl. The country's oil revenues have jumped from an annual rate of $1.5 billion in October to about $4 billion today. The windfall has greatly strengthened Nigeria's position as the leader of West Africa. The country is the prime force behind a move to create a West African common market. Nigeria ships about a third of its production to the U.S.

INDONESIA, a newcomer to the oil business, is only beginning to realize its economic potential, despite fabulously rich deposits of copper, nickel, tin and other minerals. For the past six years, about 40 foreign companies, most of them American, have been exploring for oil all over the vast archipelago, both onshore and offshore in the Java Sea. Indonesia now produces about 1.4 million bbl. a day, but its output is expected to grow markedly as new deposits are discovered. To cash in on the growing demand for its oil, the country hiked the price from $4.75 per bbl. to $6 last month. The government is using some of its growing oil revenues to construct a deep-sea port for tankers east of Bali and to build new roads, schools and bridges.

CANADA, about the only fully industrialized Western country that is also a major oil exporter (to the U.S.), is in a paradoxical bind. It has never bothered to develop sufficient means of transporting oil from its rich fields in Alberta to the eastern half of the country, which depends heavily on petroleum imports. Now, with imports reduced, Eastern Canada will probably have to adopt rationing. The government recently decided to build an East-West pipeline, but that will take at least two years to complete. Meanwhile, Western Canada has cut exports to the U.S. from 1,200,000 bbl. a day to less than 1,000,000, and the price is rising fast. The tax levied on shipments of American-bound Canadian oil has jumped from 400 in October to $1.90 at present. In January it will climb to $2.20, lifting the cost of Canadian oil to $6.40 per bbl.

Worldwide, the shortage has sparked more of an exploration than a production upswing. Spurred on by voracious demand and fat prices, such oil giants as Exxon, Mobil and Texaco, along with a host of smaller firms, are scouring the earth from Malaysia to Newfoundland for fresh finds. Next month, activity in Peru's Amazon River jungle will reach boom tempo as Union Oil, Tenneco, Getty, Sun Oil, Transworld and other companies begin drilling for what many geologists believe is the world's largest unexplored oil deposit. The most promising recent strikes have been under the turbulent waters of the North Sea, which has proven deposits of more than 12 billion bbl., v. 10 billion on Alaska's North Slope. Production has barely begun, but the fields are scheduled to be pumping 2.5 million bbl. a day by 1980. Britain, which controls the richest fields, expects to become a net exporter of oil by the mid-1980s (although the country is starting a drastic austerity program now). Norway's North Sea holdings are also large, and it is determined to squeeze out every benefit it can get, including big royalty demands from oil companies and use of Norwegian materials in pipeline construction. "The Arabs aren't the only Arabs," cracks one top American oil executive.

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