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The Oil Embargo: Winners and Losers
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18308 |
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Section : |
CURRENT ISSUES
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Date : |
10 / 1990 |
2,011 Words |
| Author
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Thomas R. Stauffer
Thomas R. Stauffer, a consultant to OPEC and several
governments, has taught Middle East politics and energy at
Georgetown, Harvard, and Johns Hopkins universities. He is
currently writing a book on economic warfare in the Middle
East. |
The U.S.-led oil embargo of Iraq and Kuwait implies far-reaching economic repercussions, even without further escalations. Amid this crisis, however, there are both economic winners and economic losers.
So far the embargo is quite simple. The United States has effectively interdicted all significant exports of oil from either Kuwait or Iraq. The U.S. move results in a gross shortfall of about 4 million barrels per day (b/d) of oil, or 17 percent of total OPEC production. The embargo of oil exports is bolstered by a blockade of most imports to both states.
This is a large loss of oil out of the world market. The cutback is comparable with that which triggered a tripling of oil prices in 1979-80. It is also larger than the oil losses that the United States suffered in retaliation for its rescue of Israel during the 1973-74 war. Then, in contrast to the present, the United States was the victim and not the perpetrator of the embargo.
There are two cases to consider. The first is “containment,” meaning there are no further cutbacks in supply and no damage to the fields. The second and much more serious case involves the possibility of international or unintentional escalation. Scenarios could include extension of the oil embargo to Iran if it supports Iraq against their common enemies (the United States and Israel) or if oil fields are damaged or destroyed.
The stakes are enormous, even if the oil cutoff is confined to exports from Iraq and Kuwait. In the worst cast scenario - for example, if the embargo is extended to include Iran or
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