We're on the brink

The 1973 oil crisis took us by surprise, causing sudden panic. So will the coming one

Special report: the petrol war

Anthony Sampson Tuesday October 17, 2000

Are we in danger of experiencing another world oil crisis, like that of 1973 - which quadrupled the price of oil, unleashed a wave of high inflation, and turned the world upside down? The world financial markets are so far not too worried: but for anyone who studied that earlier shock closely the resemblances are still disturbing. The basic cause of the shock in 1973 was a conjunction of a world oil shortage with a confrontation between Israel and the Arabs. The western nations, particularly America, were consuming cheap oil as if there were no tomorrow, becoming still more dependent on foreign producers, led by Saudi Arabia. When the Arab-Israel war broke out in 1973 the Arab producers boycotted oil to western countries - which in turn precipitated the shortage and huge price hikes.

The crisis took the media and the governments almost totally by surprise The American government had been warned over the previous years that the Saudis would find it hard to resist a boycott, but President Nixon in the run-up to a presidential election could not risk offending Israel. Most oil companies remained complacent until the shock happened: then it created a sudden panic, generating desperate demand, queues for petrol and hectic bidding for oil which forced the price still higher.

Does that sound familiar? Of course much has changed in 27 years. Today the Arab oil-producers are less dominating and less greedy, as they realise the danger to themselves of extorting too high a price. There is no danger of a military war against Israel comparable to the threat of Egypt and Syria when they invaded in 1973. Most of the world's oil comes from countries outside Opec, including Britain; and most countries have contingency plans against a shortage. "The west is now much better able to withstand an oil shock," the Financial Times assures us.

Yet the similarities remain. The Americans have been consuming oil as recklessly as they were in 1973: their roads are full of new gas-guzzlers, the huge "utility vehicles" like mini-tanks which loom above the road, intimidating the smaller cars, and consuming a gallon every 10 miles. Stretch limos, golf buggies and speedboats compete in guzzling oil with no thought of the conservation movements of the 80s.

The American government and media have largely lost interest in understanding Arab and other third world oil-producers, which loomed so large in the 70s and early 80s. And during the presidential elections neither candidate dares either to sympathise with Arab grievances, or suggest that Americans should conserve oil, or pay more for it.

The Europeans have been less wasteful, but still complacent. The rapid increase of the world oil price in the past two years, which should have been seen as a warning of a coming shortage, has led only to a clamour to reduce taxes and bring the price down. The British have now still fewer alternatives to the private car, with a failing railway network and decaying public transport for commuters.

It is only high oil prices and the fear of potential shortage which compels countries to conserve fuel and press forward with other forms of energy and transport. But the British, like the Americans, are becoming still more dependent on cars and oil.

In the meantime Asian and Latin American consumers are joining in the demand for unlimited cheap oil, without the prospect of unlimited supplies. While huge new reserves are opening up in central Asia and Africa, they all have their own political risks, in dangerous and remote parts of the world. The most accessible new oil remains in Arab countries which have their own quarrels with the west, including Iraq which now has huge new potential oil supplies.

The key oil producer, which holds the balance, remains the most problematic of all: Saudi Arabia. While the Saudi monarchy is ostensibly pro-American, dependent on American military and security support, they are becoming more worried by their own fundamentalists and dissidents who bitterly resent their government's subservience to the Americans, all the more since they rescued them from Saddam in the Gulf war 10 years ago.

The hijacking of a Saudi plane on Saturday by Saudi dissidents was a reminder of the vulnerability of the kingdom, where the greed and corruption of the royal family and the ignoring of human rights have caused a groundswell of resentment from fundamentalists, Shi'ites and exploited foreign workers. The demonstrations inside Saudi Arabia in support of Palestinians have been a reminder of the dangers of a pro-western policy. The lack of reliable reports in the media from inside the kingdom - there are no foreign correspondents there - is hardly reassuring: in Saudi Arabia, no news usually means bad news.

It is true that America and Israel have an overwhelming military might in the Middle East. But terrorists and suicide-bombers can still lead to body-bags - which is what politicians in both countries dread most. The damaging of an American destroyer by a small rubber dinghy, killing 17 sailors, is a powerful reminder of the fragility of a superpower in the face of Arab anger and dedicated terrorists.

While the Arabs are militarily weaker, the popular Arab anger appears much greater than in previous crises: not only among Palestinians, but among Arabs inside Israel who are more threatening to the Israeli population; and among the neighbouring Arab people who feel bitterly frustrated by the impotence of their governments.

So the basic ingredients of a crisis which could extend from the Middle East to the world, remain in place as they were in 1973: a wave of Arab resentment, a hardline Israeli attitude, and American politicians preoccupied by presidential elections. They are all set against a background of a potential oil shortage which could be precipitated by a single country - whether by Iraq, Iran or eventually Saudi Arabia itself, pressed to dissociate itself from pro-western policies.

The western countries and Israel cannot afford to be complacent on the basis of their economic strength and military superiority in the face of these political dangers. For popular anger can very quickly be translated into terrorism, and into effective pressure on governments to use their ultimate weapon of withdrawing oil supplies.

The western complacency and public ignorance which were so dangerous in the early 70s are back with us again. And oil, which has been been left to the specialists and companies over the past 20 years, can once again become an arbiter of world power.

 Anthony Sampson is the author of a book about the oil industry, The Seven Sisters

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-- Martin Thompson (mthom1927@aol.com), October 17, 2000