OIL: Waves from Suez

All over Europe last week, the shortage of oil from the Middle East clamped a squeeze on consumers and industry alike. With only enough oil for about two months, the French government watched helplessly as panicky Parisians besieged gasoline stations—and prudently began hoarding every other commodity, from coal to soap (see FOREIGN NEWS). Britain, which announced that official gas rationing will start in two weeks, is little better off. Estimates are that oil reserves will last through January. Then Britain will have to reduce consumption 25% or more, depending on how much oil it can import from the U.S.

Oil austerity in Britain will reduce 3,750,000 private motorists to a maximum 10½ gals. (200 miles) per month. Taxis will have to do with 33% less gas, trucks with 25% less, farmers with 10% less, and home owners with 25% less fuel oil. While Britain’s industry uses less oil than most, oil-fueled steelmakers must cut production 10%, and the auto industry, which was already in trouble and hoped for a comeback, faces severe cutbacks. Cars slated for export are piling up on the docks because of the shipping shortage, and gas rationing at home has knocked the bottom out of the domestic market.

For Britain’s finances, the Suez crisis will cut two ways. Not only will Britain lose the money it makes selling oil from its Middle Eastern fields, but it may also have to shell out as much as $500 million to $600 million from its slim $2.2 billion gold-and-dollar reserves to buy oil in the West. Though Britain’s treasury hopes to muddle through, its reserves will probably tumble to a new postwar low.

Across Europe the pattern was the same :

¶ Germany, which at first regarded the shortage with hearty optimism, has taken a second look and clamped on unofficial rationing by cutting gasoline and fuel-oil deliveries by up to 20%. Despite earlier reports of big reserves, Germany’s actual crude oil in storage probably totals no more than one month’s supply; some steelmakers, iron foundries, chemical and glass firms have only enough for two weeks’ production.

¶ Spain, Belgium and The Netherlands are all in trouble with short supplies, are trying to reduce consumption as much as 20%. In Spain, gas hoarding has drained Madrid’s gas pumps dry, and all three nations expect industrial slowdowns and price rises.

¶ Norway, Denmark and Sweden are cutting deliveries to dealers by 10% to 20%, are talking of formal rationing soon. Swedish industry depends on oil for 44% of its total fuel; production has already been cut back at the Volvo auto factory by 30%.

¶ Greece, which is cutting fuel-oil consumption, will also ration gasoline by the simple expedient of banning all cars with odd-numbered licenses from the road on odd days of the week, all even-numbered cars on even days.

The Suez Canal closing was also beginning to pinch the Arabs. With its markets cut off, Kuwait, the biggest Middle East producer, cut back production to an estimated 75% of its normal 1,200,000 bbls. daily; Iraq’s Kirkuk field is down to 200,000 bbls. daily from a normal 700,000 bbls. daily, and in Saudi Arabia, Aramco has reduced production 30% from its usual one million-plus barrels daily.

The big question on which all oil calculations depend is: How soon will the Suez Canal be open again? By last week the first optimistic predictions of three months’ work had turned to talk of six months’ or more. Once the work is under way, salvage experts hope to clear a shallow channel for ships of 25-ft. draft in a few weeks. Then tankers plying the cape route to Europe from the Persian Gulf could take a short cut through Suez on the empty return trip, cut their time by 25% and costs proportionately.

Even so, Europe still looks to the U.S. to supply much of its oil in the immediate future. Yet, the U.S. Government, which is considering an emergency fuel plan to supply Europe with possibly as much as 750,000 bbls. of oil daily, has made no official move except for okaying a combine of U.S. oil firms to help supply the oil privately (TIME, Nov. 26). For one thing, Britain has got to make its fuel-oil needs known to the U.S., is awaiting an improvement in relations (see NATIONAL AFFAIRS). For another, the U.S. is anxious to keep the American-owned Trans-Arabian pipeline from Saudi Arabia to Syria in operation, is going slow so as not to provoke Syria into blowing up that line as it did the line from Iraq. The U.S. was also, obviously, not willing to rush to the aid of Britain and France while their troops remained on Egyptian soil.