214. Memorandum From the Director of the Office of International Trade and
Resources (Thibodeaux) to
the Assistant Secretary of State for Policy Planning (Bowie)1
Washington
,
March 30,
1956
.
SUBJECT
- Middle East Oil Situation Under Certain Changed Conditions
Attached is a preliminary memorandum showing the effects on the world oil
situation of the inability to deliver Middle East petroleum to the
Mediterranean via the Suez Canal and the existing pipe lines. It contains
the information you requested from Mr. Eakens
yesterday.
The memorandum was prepared by a small working group consisting of
representatives of Interior, Defense and State, under the chairmanship of
Mr. Hugh A. Stewart, Director, Office
of Oil and Gas, Interior. When Mr. Eakens called on Mr.
Stewart yesterday afternoon to
discuss the matter, Mr. Stewart
already was in conference with petroleum officials of Defense on the same
general subject. The attached memorandum represents a unified
Interior–Defense–State view at the oil-staff level.
The memorandum at this stage is brief and preliminary. A more thorough
analysis would require several days. The group that prepared the memorandum
could prepare a more complete memorandum if one is required. If the problem
is to be considered on more formal basis interdepartmentally, it is believed
that the appropriate body before which to lay the problem is the National
Security Council.
[Page 590]
[Attachment]
Memorandum for the Record, Prepared in the Oil and Gas Division,
Department of the Interior2
Washington
,
March 30,
1956
.
SUBJECT
- Effects on the Free World petroleum economy under certain assumed
conditions in the Middle East area
This memorandum will cover the following three cases:
-
Case 1: Suez Canal closed, Trans
Arabian Pipeline closed, Iraq Petroleum Company’s pipelines
closed.
-
Case 2: The same transportation
facilities closed and no availability of either products or
crude oil from Saudi Arabia.
-
Case 3: Same as Case 2 with the added
provision that no products or crude oil would be available from
the Middle East area.
General—The current Free World demand is
approximately 14.2 million barrels per day. About 3.4 million barrels
per day of crude is supplied from the Middle East. Europe’s consumption
of 2.6 million barrels per day is supplied almost wholly from the Middle
East. European consumption is increasing at the rate of about 15 percent
per year.
The current Free World available tanker average is 2,211 ships. The
current average demand is 2,100 ships. These figures exclude MSTS’s
tankers and the 50 tankers in the Maritime reserve fleet.
A portion of these tankers are now being used to pick up in the Eastern
Mediterranean the 300,000 barrels per day delivered by Trans Arabian
Pipeline and the 500,000 barrels per day delivered by Iraq Petroleum
Pipeline, and to move these quantities to Western and Southern Europe
and North America. Tankers are also being used on the run from the
Persian Gulf through the Suez Canal to Western Europe to move 1,200,000
barrels per day.
This study does not take into account the far-reaching political and
economic effects which would result under any of the three cases.
[Page 591]
Conclusions
- 1)
- If any of the above three cases should occur, far-reaching
adjustments would have to be made to continue to supply the
current demands.
- 2)
- Both national and international controls would have to be
introduced.
- 3)
- An appreciable amount of time would be required to make the
changes.
- 4)
- In Case 1 and Case 2, because of insufficient tankers to move
crude oil around the Cape of Good Hope, a major shift would have
to be made in crude production substantially reducing production
in the Middle East and increasing production in the Western
Hemisphere. During winter months production shortages would
necessitate rationing.
- 5)
- In Case 3, in addition, current demands could not be met and
rationing would be required, particularly in the United States
and Europe.
- 6)
- In all cases, because of the time required to make the
changes, free world petroleum stocks would be reduced to
dangerously low levels.
Discussion
-
Case 1—In order to transport the
2,000,000 barrels per day formerly supplied by the Middle East
through Suez and from the Trans Arabian and Iraq Pipelines
terminating on the Eastern Mediterranean, major shifts in
sources of crude oil would be necessary to create shorter tanker
runs. Crude oil production in the U.S. and Canada would have to
be increased 1.3 million barrels per day, production in the
Caribbean would be increased 200,000 barrels per day, and
500,000 barrels per day would continue to be lifted from the
Persian Gulf. The increases in crude oil production in the U.S.
and Caribbean are believed to be possible for 90 days if
extraordinary measures are employed. Beyond the 90-day period,
grave doubts exist whether this production could be maintained.
U.S. production for an extended period might fall far short of
requirements. Considering the new sources of crude,
approximately 160 more tankers would be required.
Since there is only an average excess of 110 tankers in the
commercial fleet, the balance of 50 tankers would have to be
withdrawn from the reserve “mothball” fleet. During winter
months, the period of peak tanker demands, there will be a
tanker shortage.
Under Case 1 conditions assuming extraordinary operations and
controls, it appears that during a 90-day summer period,
petroleum could be produced and moved to approximate free world
demands. [Page 592] Over a long
period, or in the winter, production shortages would necessitate
rationing.
-
Case 2—Under Case 2 the situation would not
be radically different from Case 1, since Saudi Arabian production
and refining capacity utilized under Case 1 could be replaced by
other Persian Gulf sources.
-
Case 3—Approximately 3.4 million barrels
per day of petroleum are produced in the Middle East, of which
approximately 0.3 million barrels per day are consumed locally.
Therefore, 3.1 million barrels per day from the Middle East would no
longer be available.
Considering a summer period of 90 days and assuming extraordinary
operations and controls, it is believed that the following additional
production could be obtained from the sources indicated:
| U.S. |
1.5 |
million barrels per day |
| Caribbean |
0.3 |
million barrels per day |
| Indonesia |
0.1 |
million barrels per day |
| Canada |
0.2 |
million barrels per day |
| Total |
2.1 |
million barrels per day |
This indicates that there would be a shortage of at least a million
barrels per day of crude oil to the free world and consequently a
similar amount of petroleum products. Expressed as a percentage, this
means that the free world demand would have to be reduced 7 percent by
rationing. Such rationing, in peacetime, would create serious domestic
and international problems.
If the denial of Middle East oil were to be extended to one year, the
additional crude oil production that could be obtained from the sources
indicated above would drop to 1.5 million barrels per day. This would
require rationing of about 12 percent. This corresponds roughly with the
degree of rationing experienced in the U.S. in World War II.
Due to the above shortage of crude oil, it is considered that the current
tanker fleet could handle the transportation involved for this Case.
