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As Cold War Ends, The Oil War Begins

ON Aug. 2, Iraqi tanks rumbled into Kuwait and initiated the most profound change in the world oil picture in decades. In the space of a few hours, Saddam Hussein raised his share of world oil reserves from 10 percent to almost 19 percent. The petroleum reserves captured amount to nearly three times US reserves and almost double the Soviet total. In a night's work, Hussein altered not only the balance of power in the Middle East, but the balance of supply and demand in the world oil market. In the short run, the world has already lost over 4 million barrels per day, or 15 percent of the oil traded on the world market. Given the military buildup in the Persian Gulf, it is unlikely that Saudi Arabia or any other country can fully make up for this loss. Future price increases are likely as long as this conflict persists.

Iraqi and United States forces now face each other across oil fields that represent about half of world oil reserves. Most of the nations that own those reserves - including Abu Dhabi, Dubai, and Qatar - possess tiny populations and military forces even weaker than Kuwait's. Even the military forces of the largest of the nearby oil states, Saudi Arabia, are no match alone for the large and battle-tested divisions that Iraq can bring to bear. It remains to be seen if the forces that the US and perhaps other countries are sending to Saudi Arabia will deter Hussein.

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An open-ended period of extreme military and political instability now pervades the nerve center of the world's energy system. Indeed, the world is already seriously overdependent on Middle Eastern oil, which accounts for 27 percent of world production and 44 percent of world exports.

The Middle East's share of world oil exports is destined to increase steadily during the '90s. Global oil demand has been rising by more than 2 percent a year since 1985, and production by the two leading producers - the United States and the Soviet Union - is falling steeply. US oil imports have increased by 3 million barrels per day in just the last five years. Already Middle Eastern dominance of the world oil market is nearing the dangerously high proportions of the 1970s.

How has such a disastrous situation crept up on political leaders as unexpectedly as Hussein's tanks? The Western world's energy policymakers slept through the 1980s, slashing many of the government programs that could have reduced oil consumption.

In the United States, for example, the federal government allowed auto fuel-economy standards to lapse at the level achieved in 1986. New cars rolling off Detroit's assembly lines in 1989 were actually less efficient than those of the year before. Meanwhile, home weatherization efforts have been gutted, as have energy efficiency R&D programs. Federal spending on improved energy efficiency fell from $700 million in 1981 to a budgeted $150 million in 1990.

President Bush, who finally discovered the words ``energy conservation'' in the midst of this military crisis, was part of an administration that attempted to eliminate virtually every program designed to reduce US oil dependence.

The folly of such moves has been evident for some time. Oil production in the continental 48 states has been declining for two decades, a trend interrupted only briefly by the massive drilling efforts of the '70s. Oil analysts have long warned that the old, depleted US fields were beginning to run dry. Yet the country's energy-guzzling habits have continued as if it were still in the oil gusher days of the 1920s. Americans' per capita oil consumption is well over twice that of Europeans.

The military confrontation under way in the Persian Gulf will result in a substantial shortfall in world oil supplies for as long as it lasts. Beyond the oil lost from Iraq and Kuwait, oil companies will be reluctant to send tankers into the region to carry oil from Saudi Arabia, Iran, or any other country. The US action, while intended to bring Iraq's economy to its knees, could soon cripple the world economy as well.

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The resting period between the cold war and the ``oil war'' of the '90s has proved shockingly short. This new conflict may well turn out to be equally tense and more difficult to contain. At stake is a sizable share of the world's energy resources. While the local players may be smaller states, the United States and other major powers will face immense pressure to get involved. Chemical and perhaps nuclear weapons are available to the combatants.

The Middle East is and will remain a dangerous place. It is reckless to rely on such a region for the bulk of the Western world's future energy supplies. Unless efforts begin immediately to reduce oil dependence, we may soon long for the economic and military stability of the former superpower standoff. Not only the industrial countries, but the entire third world is now vulnerable to a serious oil shock.

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