Word: bbl
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Oilmen are fearful that Iran will soon go a step further and simply cut back its production by a flat 700,000 bbl. With the world market tight, any such reduction would push up prices sharply, especially for single shipment cargoes that are sold on the so-called spot market, where more and more of the world oil trade now takes place...
Escalating spot market prices are, if anything, a bigger threat to the world economy than is the ever present danger of a cut in supplies. With spot prices now hovering at $40 or more per bbl., nearly twice the maximum official OPEC price of $23.50 for oil sold under contracts of three months or more, OPEC members are clamoring for a hefty new increase when the cartel meets in Caracas on Dec. 17. Notes a top Carter Administration official: "Spot prices are the locomotive now dragging OPEC prices along." Adds Data Resources' Eckstein: "Our present forecast has OPEC prices...
...fact, an interagency White House task force last week reported that there is a "substantial risk" of a drop in OPEC output of as much as 3 million bbl., an amount just about equal to total current Iranian production. The drop would be caused by expected cutbacks early next year by Saudi Arabia, Kuwait, Iraq, Nigeria and Libya. Thus oil prices stand to rise considerably even if Iran does not reduce its current production...
...prices go as far as $35 per bbl., the impact on oil inflation and the world economy would be severe. U.S. consumer prices would continue rising at a dizzying double-digit pace, forcing the Federal Reserve to stick by its anti-inflation policy of sky-high interest rates much longer than expected. The almost inevitable result: a deeper recession than so far forecast. Despite slumping growth, the nation's oil import bill, which is projected to total $61 billion this year, would leap to $96 billion in 1980. That in turn would keep the dollar's value dropping...
...dependent on foreign oil. Under the circumstances, there is no guarantee that economic disruption can be avoided no matter what steps the nation takes. But the best hope for avoiding real trauma is to cut consumption, conserve supplies and, at the very least, make do with 700,000 bbl. less of crude per day. Such an effort would put some slack in worldwide petroleum supplies and help restrain prices. More important, it would also show Iran and the world that the U.S. can start breaking its addiction to the demon...