[Congressional Record Volume 142, Number 26 (Thursday, February 29, 1996)]
[Senate]
[Pages S1448-S1449]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     IMPORTED FOREIGN OIL BOX SCORE

  Mr. HELMS. Mr. President, the American Petroleum Institute reports 
that for the week ending February 23, the United States imported 
6,094,000 barrels of oil each day, a 6.5-percent increase over the 
5,698,000 barrels imported during the same period 1 year ago.
  Americans continue to rely on foreign oil for more than 50 percent of 
their needs, and there are no signs that this upward trend will abate.
  According to the January 30, New York Times article ``Odds of Another 
Oil Crisis: Saudi Stability Plays a Large Role,'' Saudi Arabia, which 
sits on 25 percent of the world's proven oil reserves--that's 
approximately 260 billion barrels--is politically vulnerable. There is 
increasing tension between the Sunni majority and the Shiite minority; 
tensions within the royal family have been widely reported.
  Mr. President, a power struggle could easily lead to violence with a 
disastrous effect on the price of oil. Of course, we all pray that 
Saudi Arabia remains stable, politically, economically, and otherwise. 
This is a concern that has bothered me for years.
  Mr. President, I ask unanimous consent that the aforementioned 
article be printed in the Record at the conclusion of my remarks and, 
needless to say, I hope Senators and their staffs will heed the very 
explicit warning in it.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

     Odds of Another Oil Crisis: Saudi Stability Plays a Large Role

                           (By Agis Salpukas)

       Oil Shock III. Could it happen again?
       With supplies of oil plentiful and the price of gasoline, 
     adjusted for inflation, as low as it was in the bountiful 
     1950's, the notion that the world will go through another 
     spike in oil prices like those in 1973-74 and 1979 seems 
     farfetched. And with Iraq apparently on the verge of re-
     entering the market, nothing is likely to change soon. 
     Indeed, prices may fall for a while.
       But some oil industry experts--worried that Saudi Arabia, 
     the linchpin of the world oil market, may be more vulnerable 
     politically than is generally believed--are raising the 
     specter of an oil price surge for the first time in years.
       The talk has intensified because of the possibility, remote 
     as it may be, of a battle to succeed the ailing King Fahd 
     between Crown Prince Abdullah, the King's half brother, and 
     Prince Sultan, a full brother. Both men control large armies.
       On Jan. 1, the 74-year-old King handed over authority to 
     Crown Prince Abdullah, 72, for an unspecified time while he 
     recovered from exhaustion. The Crown Prince, long designated 
     to succeed the King, is known as an Arab nationalist who may 
     be less open than King Fahd to American policies.
       Civil war between rivals for power or between the Sunni 
     majority and the Shiite minority cannot be ruled out, says 
     David P. Hodel, Secretary of Energy under President Ronald 
     Reagan. And any instability in Saudi Arabia, which sits on 25 
     percent of the world's proven oil reserves, or 260 billion 
     barrels, would have wide repercussions. The tendency in the 
     United States, he warns, has been to ``go merrily on our way 
     as if there is no potential problem to world oil supply until 
     it is too late.''
       ``Sadly,'' he added, ``the consequences can be 
     devastating.''
       Most political leaders and industry executives say there is 
     nothing to worry about. Another oil crisis is always 
     possible, they concede, but it is highly remote. The United 
     Nations World Economic and Social Survey 1995 confidently 
     predicts that the real price for oil will remain roughly 
     constant for the next 20 years.
       ``Nobody can say it won't happen,'' said Alfred C. DeCrane 
     Jr., the chairman and chief 

[[Page S1449]]
     executive of Texaco Inc. ``But an earthquake on the San Andreas Fault 
     is more apt to happen than a disruption in oil.''
       Is that confidence overdone?
       Saudi Arabia is still vital to feed the world's growing 
     appetite for oil, which now totals about 62 million barrels a 
     day. It accounts for a little more than 8 million of the 17 
     million barrels of oil that flow from the Middle East. And 
     even though output outside the Middle East has been growing, 
     there is not enough reserve capacity to fill the void if 
     Saudi supplies are disrupted.
       ``The world needs Saudi Arabia,'' said John H. Lichtblau, 
     the chairman of the Petroleum Industry Research Foundation, a 
     private research group. In the event of upheaval, the 
     question, Mr. Lichtblau said, is, ``Will you be killed or 
     just be hurt?''
       Experts like Mr. Lichtblau offer the consoling thought that 
     history demonstrates that even the most disruptive political 
     events are unlikely to keep the crude oil from pumping for 
     long.
       Vahan Zanoyan, senior director of a private consulting firm 
     in Washington, the Petroleum Finance Company, generally 
     agrees. He recently warned in an article in Foreign Affairs 
     magazine that Saudi Arabia's leaders were frozen in time and 
     had shown little inclination to respond to the decade-old 
     drop in oil prices by reining in spending by the royal family 
     and its entourage of princes, households and hangers-on.
       ``If in the next three to four years the Saudi Government 
     resists reforms,'' he said in an interview, ``you will see 
     more often the types of riots and civil unrest partly caused 
     by economic concerns and the rise of more Islamic movements. 
     The oil markets in the world will not watch this kind of 
     thing with detachment.''
       Yet even under the worst view--in which a fundamentalist 
     Islamic group seizes power in Saudi Arabia--the new 
     government will only hurt itself if it cuts off the supply of 
     oil for a sustained period. ``Sooner or later,'' he said, 
     ``the new leaders would have to export oil.''
       The best protection against a temporary cutoff in supplies 
     lies in the United States Strategic Petroleum Reserve, which 
     holds about 600 million barrels, enough to meet America's 
     needs for 90 to 120 days. But growing complacency about the 
     risk of another oil shock is leading some lawmakers to look 
     at the reserve as a source of revenue today rather than an 
     insurance policy for tomorrow. Senate Republicans have 
     proposed selling 39 million barrels from the reserve to help 
     reduce the budget deficit. And most companies have cut their 
     own inventories of oil, leaving the nation with a smaller 
     margin of protection.
       There is also little will on the part of the public, 
     political leaders or the oil industry to lessen the 
     vulnerability by increasing conservation or supporting 
     alternative energy sources.
       ``At the moment we're just letting things drift,'' said 
     James R. Schlesinger, Energy Secretary under President Jimmy 
     Carter, ``when we should be alert to finding possible 
     contingencies.''
       In the event of a crisis, the most likely outcome, many 
     experts say, will not be a complete shutoff but the risk that 
     any new leadership will decide to sacrifice maximum income 
     for a while, cutting production over time in a bid to push up 
     prices.
       But not everybody is so confident that the worst can be 
     avoided. Milton Copulos, president of the National Defense 
     Council Foundation, a conservative group in Washington, 
     raised the possibility of an oil crisis at Congressional 
     hearings last year. ``The optimists assume that the Arabs are 
     exclusively motivated by economics,'' Mr. Copulos said. ``The 
     Ayotollah Khomeini was not motivated by economics. Other 
     militants are not motivated by economics.''
       Ultimately, of course, there is always the option of 
     military force.
       Walter E. Boomer, the president of the Babcock & Wilcox 
     Generation Group and a former Marine Corps lieutenant general 
     who was involved in the Persian Gulf war, said the United 
     States had already demonstrated its commitment during the war 
     to defend Western interests in the Middle East.
       ``If the country is threatened,'' he said, ``we would make 
     that commitment again.''

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