Fears, Again, of Oil Supplies at Risk

THEY are the nightmares, the worst confluence of misguided decisions and startling violence, that politicians and oil executives ponder briefly and then shoo away:

That sympathizers of Osama bin Laden sink three oil tankers in the Strait of Hormuz and choke off the narrow, bow-shaped channel that funnels 14 million barrels a day from the Persian Gulf to the rest of the world. That the United States attacks Iraq, and Israel launches a huge strike against the Palestinians, driving them from their camps and staking out more land -- all of which spurs the Persian Gulf states to cut off oil for the West. Or perhaps that a popular uprising, led by sympathizers of Mr. bin Laden, topples the ruling Saud family in Saudi Arabia, by far the world's largest oil producer.

''If bin Laden takes over and becomes king of Saudi Arabia, he'd turn off the tap,'' said Roger Diwan, a managing director of the Petroleum Finance Company, a consulting firm in Washington. ''He said at one point that he wants oil to be $144 a barrel'' -- about six times what it sells for now.

The attacks on the World Trade Center and the Pentagon and the subsequent battering of the global economy have stretched the edges of imagination. Most Western politicians and oil industry experts say they believe assurances from the Middle East that oil supplies will stay stable as the American-led attacks on terrorist groups continue. But in such a profoundly changed world, they concede, anything is possible.

If there is a serious disruption of oil supplies, it will probably not be in Venezuela or in the North Sea, but in the countries of the Persian Gulf. Those countries have taken the politically risky position of siding with the West, however quietly, in the campaign against Mr. bin Laden, thereby alienating many of their own citizens. And the proof of their support for the West is in the oil that OPEC nations continue to ship, recently forgoing a production cut even as they faced falling prices that rob them of revenue.

By attacking oil supplies or the Middle East regimes themselves, Mr. bin Laden's supporters would strike a powerful blow against the West.

The United States' own oil production and that of its allies in the Western Hemisphere could not take up the slack. The Strategic Petroleum Reserve, a stockpile created in 1975 to deal with such emergencies in the United States, could cover the lost oil for a time, but its efficacy would depend on the length and size of the disruption. Congress is looking for ways to add to the reserve, but it remains unclear whether the money could be found to acquire the oil quickly. New oil fields could not begin pumping fast enough to make up for the shortfall, and they would not produce enough anyway. The United States has only 3 percent of the world's known oil reserves.

The country's ability to navigate such a rocky period, industry experts said, ultimately depends on how much American society scales back its prodigious consumption of oil. High prices and lower supplies pushed the United States to trim its use of oil in the 1980's, but the country now relies more than ever on imports. Imports account for 60 percent of daily American oil consumption, up from 47 percent a decade ago. ''We can't just blame Detroit for higher oil consumption,'' said Jay Hakes, the former director of the Energy Information Administration, the analytical arm of the Energy Department. ''We're all in this. We have met the enemy, and the enemy is us.''

As far back as the Truman administration, when automobile use started to soar, the United States has grappled with where to get oil and how much to pay for it, Mr. Hakes pointed out. The nation has always faced a choice. It could rely on its own small output but pay much higher prices for it and for alternative energy sources. Or it could open itself up to imports from places like the Persian Gulf, increasing its economic and political vulnerability. It chose the latter.

The United States gets only about 13 percent of its daily dose of oil from the Persian Gulf states, and that is down from 23 percent a decade ago. But those countries produce 18 percent of the world's oil, and a significant disruption in their output would set off price spikes, if not outright shortages. The turmoil in the region during the last three decades frequently aroused fears, sometimes well-founded, of oil supply disruptions.

BUFFETED by repeated wars, the Persian Gulf states have long been aware of the need to protect their pipelines and oil fields, and industry experts familiar with the region say those countries, particularly Saudi Arabia, have heightened security since Sept. 11.

No system, however, is impregnable. Terrorists in a dinghy in the Persian Gulf could launch missiles at offshore rigs or Saudi fields, some of which are just a few miles inland. They could rupture a pipeline. They could attack the string of oil loading docks along the Persian Gulf, or on the Red Sea to the West, from which 500,000 to 6 million barrels a day are shipped. An attack could disable an oil processing facility, which separates the hydrocarbons from other liquids, and remove 200,000 to 400,000 barrels a day from the market.

But while a successful attack on the Middle East's oil infrastructure could rattle the markets, most analysts say it would have little impact on global supplies. ''They are likely to be nuisances rather than major disruptions because there are multiple redundancies in the system,'' said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation, an industry-supported group that runs a consulting business in New York. ''There are other loading, storage and shipping possibilities to get oil in and out. The real trouble would be only if countries cut off oil supplies, and that won't happen.''

The chances are slim -- for now. But Mr. bin Laden has long made clear that his ultimate goal, more than wreaking havoc in the West, is toppling the Saud family. And Saudi Arabia would be a crucial target for anyone seeking to cut deeply into the world oil flow.

''The Saudis are the linchpin,'' said Ronald E. Minsk, an energy adviser to former President Bill Clinton. ''It's because they have so much more oil than anybody.''

Saudi Arabia exports about eight million barrels a day and is the biggest single supplier of oil to the United States, accounting for 1.7 million barrels a day. The world's No. 2 exporter, Russia, which is not a member of OPEC, exports only 2.9 million barrels. The Saudis are the only ones with enough spare oil-field capacity to call on if there is a severe disruption elsewhere. Although Saudi Arabia led the 1973 oil embargo to protest American support of Israel in the Yom Kippur War, it later stepped in to make up shortfalls of millions of barrels a day caused by conflicts in the Middle East, including the Iranian revolution, the Iran-Iraq war and the Persian Gulf war.

Even over the past year, as Iraq intermittently curtailed its exports of two million barrels a day to demand changes in the United Nations sanctions against it, Saudi Arabia acted as the ''swing producer,'' making up much of the difference.

Short of withering in the grip of a coup d'état, Saudi Arabia's oil exports could be cut if its rulers decide that they no longer can afford to support the United States-led campaign against terrorism. If the bombings kill many civilians or if the war expands quickly, the Saudis may feel that they have no choice but to veer away from the United States and reduce the flow of oil.

''The only way I see that happening is if the U.S. would continue to pick targets that would include Middle Eastern oil-producing countries -- and how many it picked -- and if it were done in a unilateral way,'' said Marianne Kah, chief economist at Conoco. ''But if it continues its multilateral approach, and includes friendly Arab countries, that won't happen.''

Even in the case of state overthrow somewhere in the Middle East, she said, the flow of oil would be likely to continue. ''Usually anyone in power wants oil revenues,'' she said, ''though that may not be true for Osama bin Laden, who wants to live in a cave.''

If oil supplies from the Middle East dwindle, the impact on the United States would not be acute shortages, at least for a few months. Less of its oil comes from the Persian Gulf now, and more from Canada, Mexico and Venezuela.

Instead, a sharp drop in oil supplies would set off a steep rise in prices. How long they stay high would depend on the length and the severity of any cuts. The United States has few options to increase supply and damp a price surge. Oil fields in the United States and most of the rest of the world are running close to full capacity, except, as luck would have it, in the Persian Gulf. New fields, regardless of the promise they hold, take several years to bring on stream.

''There is a big lag time between when you drill exploratory wells and when you get production,'' Ms. Kah said. Although the Bush administration and the oil industry have long pushed to open the Arctic National Wildlife Refuge to drilling, delivering oil from there would mean ''expanding the oil pipeline in Alaska to handle the extra volume, and then you would be sending the oil down at the soonest in three or four years.''

DURING the Persian Gulf war, the government tapped the Strategic Petroleum Reserve to make up for expected shortages. The United States now has less oil in the reserve than it did then, and it would not go as far in the event of a supply disruption, explained Mr. Goldstein of the Petroleum Industry Research Foundation. In the early 1990's, the reserve, stored in underground caverns in Texas and Louisiana that can hold up to 700 million barrels, contained about 590 million barrels. At the time, that would have lasted about 82 days with no imports.

The reserve has nearly as much now -- about 545 million barrels -- but today that would last just 53 days, according to the Department of Energy. That is because the United States consumes more oil now, and imports much more of it. Elsewhere in the industrialized world, including countries like Germany and Japan that have no oil fields, imports have remained flat, largely because of conservation and high fuel taxes, Mr. Diwan of the Petroleum Finance Company said.

The United States, with just 5 percent of the world's population, has an enormous appetite for oil: it goes through 19 million barrels a day, or nearly one-quarter of the world total of about 76 million barrels. Imports increased about 4.5 million barrels a day in the last decade. To put it in perspective, Mr. Diwan pointed out, Germany and France together consume 4.7 million barrels a day.

The dependence on foreign oil and the lack of a backup plan, either in the form of a bolstered reserve or conservation, evolved in large part because the United States thought Saudi Arabia would again make up for any supply disruption. ''In the 90's, we let a lot of things slide,'' said Mr. Hakes, the former Energy Department official. ''We quit improving the efficiency of automobiles. We quit buying oil'' for the reserve.

''It's not anything that would have made us fully independent,'' he said, ''but every little bit helps, so you get a full slap in the face.''

The price shocks from a serious disruption in oil supplies would course through every quarter of the United States economy. Prices for gasoline and jet fuel would jump, hamstringing commuters and businesses alike. Heating-oil prices would climb. The drain on people's incomes and companies' revenue would further sap a weakened economy.

Most major oil companies, like Exxon Mobil and Royal Dutch/Shell, and large independent refiners like Valero Energy get substantial amounts of oil from Saudi Arabia. Oil companies declined to comment officially on the impact of a disruption, but some industry executives said privately that if the Saudis continued to ship oil elsewhere, American oil concerns could buy it through third parties, although at higher prices. If an embargo turned global, American companies could get some oil from the petroleum reserve before that ran out.

The House of Representatives recently passed a nonbinding resolution that urges the Energy Department to procure more oil for the reserve, but it appropriates no money for the effort. That, in effect, will do nothing to fill the reserves fast. Mr. Goldstein estimated that if Congress allocated about $1.5 billion for buying oil for the reserve, an additional 60 million barrels would flow into the caverns by April -- on top of the 20.7 million the reserve already expects to receive by the end of the year. Oil prices are lower than they have been in two years, and as the global economy stalls and demand drops, they could go even lower.

''We could buy the oil from OPEC, and because it is not a commercial sale, the members would not be violating their production quotas,'' Mr. Goldstein said. ''It wouldn't push up prices, because oil demand is so low. It buys us flexibility, because none of us know what tomorrow will look like.''

IF prices surge in response to a break in oil supplies, American political leaders and consumers will have to think about lifestyle changes needed to cope with supply disruptions. Most fuel used in the United States is for transportation, as people buy bigger cars and travel farther daily. If the pain is bad enough, the government may dust off old ideas like enforced carpooling or a return to the 55-mile-an-hour speed limit.