Petroworries

Unjustified calmness

More than two years have now passed since any American motorist has been forced to wait in long lines for gasoline. That, say energy experts, is only one of several reasons for a general, and probably unjustified, feeling of well-being about the U.S. energy picture as the winter of 1981 approaches.

The Reagan Administration has done little to dispel the glow. As part of his budget-cutting efforts, Reagan has proposed dismantling the U.S. Department of Energy that was set up four years ago as a watchdog of the nation's energy supplies. Meanwhile, widespread chatter about a worldwide oil "glut" has further calmed nerves, and proof of abundant supplies has been readily at hand at the gasoline pump, where prices have actually been falling.

Accordingly, the nation's thrust toward energy conservation--characterized by Jimmy Carter as the "moral equivalent of war"--has begun to abate. Demand for oil is once again on the rise. During the first half of 1981, oil demand was down 6%, compared with the same period a year earlier. But during the summer, the rate of decline began to slow markedly, and consumption in the third quarter ran only 1% lower than 1980 levels. Even before summer began, U.S. motorists were logging about 3% more miles behind the wheel than in 1980.

While demand edges upward, supplies are going down. U.S. crude-oil inventories now stand at about 19 million fewer barrels than they did a year ago at this time. No oil glut promises to come to the rescue if supplies grow tight during the winter. Indeed, the cushion of excess inventory over normal levels dropped during the summer from 500 million bbl. to roughly 200 million bbl. or so by last month. Energy Analyst Constantine Fliakos of Merrill Lynch now warns that supply and demand could be in actual balance before the end of the year.

The oil price picture only adds to the uncertainty. Since December of last year, international prices have ranged from Saudi Arabia's low of $32 per bbl. to Libya's and Algeria's $40 per bbl. Last week the 13-nation Organization of Petroleum Exporting Countries announced that it was calling a special meeting for this week in Geneva. Out of it could come an agreement by the Saudis, who pump almost half of OPEC's total production, to raise the price of their crude by $2, to $34 per bbl., re-establishing that as the new, and lower, "official" OPEC price. With overall prices lower, Petroleum Expert Walter Levy warns that the incentive to find and develop alternatives to imported oil will decrease, making the U.S. and the rest of the world more vulnerable than ever in the next oil shortage. -

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