Word: bbl
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Even though the Saudis stayed inside their OPEC quota of 4.3 million bbl. a day, they could not help creating a huge surplus that angered many of their colleagues in OPEC, notably, the Libyans, Algerians and Iranians. Yamani, defending his country's action, has blamed non-OPEC producer Britain for contributing to the glut and has called on London to cut output. Britain stoutly refuses...
Another strategic question is how the Soviet Union will respond to the loss of revenue from its oil exports to Europe and Japan. Sales of about 1.3 million bbl. a day last year provided the Kremlin with about 60% of the currency it spent on Western grain and technology. The Soviets could retaliate by trying to increase their influence over troubled oil producers like Libya. Soviet spokesmen now routinely characterize the oil-price decline as a conspiracy by "Western monopolists...
...concern is that low prices have erased the profit margins of many U.S. producers, forcing them to shut down their wells. While Persian Gulf countries can pump oil for less than $5 per bbl., many U.S. wells cost $12 or more per bbl. to operate because much of the easily accessible crude has already been tapped. Some oil analysts believe that one goal of the Saudi price-war strategy is to bankrupt many of these high-cost producers, wipe out the glut and then boost prices once again when the competition is gone. Most forecasters think that oil prices below...
...meantime, though, the unnaturally low prices can cause plenty of havoc. Small U.S. oil companies have already shut down thousands of so-called stripper wells, which individually produce fewer than 10 bbl. a day but collectively supply the U.S. with about 15% of its total production of 9 million bbl. a day. If most of those wells close, the country could lose a sizable portion of its reserves. Says Allan Martini, a senior vice president at Chevron: "Once some old wells stop pumping, it's almost impossible to get them producing again. It isn't a question of turning...
Another backstop against an OPEC-induced shortage is the strategic petroleum reserve started in 1975 by President Ford. By the end of May, the U.S. will have filled a series of hollow salt domes in Louisiana with about 500 million bbl., enough to meet U.S. oil-import needs for 100 days. The Reagan Administration has proposed stopping short of the final goal, 120 days' worth, as a way of cutting the federal deficit. But at these oil prices, the Administration is now thinking of continuing to stock up before the discount binge ends...