When Arab petroleum ministers recommended in Tunis last week that their countries consider using the "oil weapon" to force withdrawal of Israeli forces from Lebanon, the possibility caused barely a tremor in the United States.
The Reagan administration has not forgotten the 1973 Arab cutoff that introduced Americans to long gas lines and soaring petroleum prices, but the threat of a rerun is greatly diminished at the moment. The reason: the world is awash in oil.
The surplus today is so great that on the oil spot market--where panic buying at the first hint of any possible supply disruption usually sends petroleum prices soaring--the price of Arab light crude actually fell in the past week. The closing price Friday of $32.60 a barrel was nearly $1 below the previous week's--and well under the benchmark price of $34 set by the Organization of Petroleum Exporting Countries.
This is not to say that declaration of a new Arab petroleum embargo would have no impact. The psychological reaction to a disruption would certainly send oil prices soaring on the spot market, where refiners would scramble for supplies. An Arab embargo also would be a trauma for Europe and Japan, which are more dependent than the United States on imported oil.
U.S. crude-oil imports for the past month have averaged 4.1 million barrels per day--only about one-third of this from the Arab states.
But government and private oil industry experts feel the price impact would be far less severe and more likely to be reversed than it was nine years ago, when the Arab boycott that followed the Yom Kippur war quadrupled crude-oil prices in just three months. And while experts speculate that a new embargo might send spot-market prices up 50 percent in the short term, they discount the likelihood of any major shortages.
"The situation has changed dramatically since 1973," said Michael Cosgrove, a broker at the international oil brokerage firm Amerex. Britain and Mexico have become major oil producers as a result of spectacular finds, and both countries are producing more petroleum than such traditional oil countries as Libya, Kuwait and the United Arab Emirates.
"There is an awful lot of crude oil in the world today outside Arab OPEC," Cosgrove noted.
In fact, Henry E. Thomas, assistant secretary of energy for international affairs, recently reported that "the amount of excess productive capacity existing throughout the noncommunist world is probably greater than at any time in history."
Energy Department analysts estimate that the world's petroleum exporting countries have more than 12 million barrels a day in idle production capacity.
This excess capacity includes 3 million barrels a day outside the Arab world, these government analysts said. Nigeria, which would desperately like to increase oil exports to finance its ambitious development program, and Venezuela are pumping 900,000 barrels per day less than capacity each, and Indonesia has 400,000 barrels a day of capacity idle.
"This tremendous excess capacity in large part explains why market reaction to the present unstable situation in the Middle East has been minimal to nonexistent," a government expert said. "Even if the Arab OPEC nations decided they wanted to do something, it is highly unlikely the other petroleum producers would. And in 1973, not even all the Arab oil states went along with their own embargo."
The worldwide oil surplus stems in large part from a dramatic decline since 1979 in the major industrial countries' petroleum consumption. The decline is a result of a combination of factors, including a sharp rise in prices, increases in energy efficiency, the development of conservation measures, and the recession.
U.S. petroleum consumption in the United States in January, according to the most recent Energy Department figures available, was down by almost 3 million barrels of oil a day from the level three years earlier.
Adding to pressure on the petroleum-exporting countries was the decision by many of the world's major oil refiners early this year--in the face of weak demand and high interest rates--to cut back on imports and draw down their inventories.
The result was that U.S. oil imports, which averaged more than 6.5 million barrels a day in 1979, fell to a low of 2.8 million barrels a day in the first five months of this year. A similar pattern of sharply reduced consumption and imports was observed in most other industrial countries.
A spring glut ensued that saw spot-market petroleum prices sink to $28 a barrel in March before the OPEC nations managed to restore some price stability by cutting back production. Now, with many oil companies starting to increase their imports to rebuild stocks, the spot market price has increased, though it remains under OPEC's target of $34.
Some members of Congress have charged the major oil companies with increasing the nation's vulnerability to a new cutoff of Middle East supplies by drawing down their supplies so sharply, and they have noted that private oil inventories are about where they were before the Iran crisis sent prices soaring.
The administrator of the U.S. Energy Information Administration, J. Erich Evered, told Congress June 9 of the need to increase imports by more than 50 percent for the rest of the year in order to meet gasoline and home heating-oil requirements.
The major difference, however, is that in addition to lower demand, the nation's Strategic Petroleum Reserve that Congress established in 1975 as insurance against disruptions holds 260 million barrels of crude oil compared with only 91 million gallons in 1979.
While the White House has never disclosed what would trigger the declaration of national emergency that would permit the stocks to be used, the strategic reserve gives the administration added flexibility.
Energy Department officials expect that if economic conditions improve and demand continues to strengthen in the second half of the year, U.S. oil imports will rise to about 4.3 million barrels a day and other industrial countries will also increase their imports.
"This increased demand later this year and in early 1983 will soak up some of the downward pressure on prices," a government analyst said. "But nobody is looking for a price increase at this point. The more rational bet is that the price per barrel of petroleum will remain stable for the remainder of this year and possibly move up a couple of dollars in 1983."
That does not mean, however, that the retail price of gasoline--which has been rising steadily in recent weeks--will not continue to climb. Energy Department analysts expect the average price of gasoline nationwide, which has risen 6.4 cents a gallon in the past three weeks, to climb at least 5 cents more and hit $1.30 a gallon by the end of the summer.
Gasoline prices will still be below the peak of $1.378 per gallon reached in March, 1981, however.
Gasoline prices dropped to a recent low of $1.18 per gallon earlier this year because with demand low, "there was a price war of sorts among refiners," a government analyst explained. "Now with gasoline demand quite strong and expected to increase through the summer, I anticipate that the refiners will try to get some of that back."