ROBIN & MORRIS
MARGULIES

Adam, Jeffrey and Alex

Heartily Wish Everyone
The Very Utmost In
Health, Happiness and Prosperity
For A
Joyous And Peaceful

PASSOUth

58

Friday, April 10, 1987

THE DETROIT JEWISH NEWS

ANALYSIS

Oil Price Rise Spells
Trouble For U.S., Israel

VICTOR M. BIENSTOCK

Special to The Jewish News

T

he failure of the United
States Government to
act energetically to
prevent a new energy crisis
threatens return of the condi-
tions which gave the Arab oil-
producing states a
stranglehold on the world
economy in the '70s and an in-
creased ability to place Israel
in grave jeopardy.
The energy crisis of the '70s
and the recession which fol-
lowed it were overcome
through a combination of Arab
greed and, in this country, a
comprehensive program to re-
duce our dependency on Middle
East oil. This was accom-
plished by a rigid program of
energy conservation, more ef-
ficient methods of using
energy, intensive development
of alternative sources of oil and
development of energy sources
other than oil.
It is the Reagan Administra-
tion's scrapping of this pro-
gram that has given the oil
sheikhs another chance to
dominate the world economy,
exert powerful pressures again
in the western capitals and iso-
late Israel.
Artificial shortages created
in the '70s by the Organization
of Petroleum Exporting Coun-
tries (OPEC), then dominated
by Saudi Arabia's oil minister,
Sheikh Ahmed Zaki Yamani,
had sent the price of crude oil
soaring to $40 a barrel — a
major cause of the economic re-
cessic,n here and a significant
factor in the ruinous inflation
suffered in Israel.
Yamani, however, could not
enforce restrictions on the ex-
traction of crude oil and his
greedy OPEC partners ' satu-
rated the world's oil market. At
the same time, American
counter-measures reduced our
dependence on imports by a
million barrels a day. The price
of oil nose-dived at the end of
1985 to a low of $8 a barrel.
With the loosening of the
OPEC strangehold, there
began a new era for Israel as
nations which had shunned
her for fear of Arab retaliation
reached out to establish rela-
tions.
Economically, OPEC's loss
of control of their market had
enormous impact on Israel. In
1980 imported crude oil to be
processed at the Haifa refinery
cost Israel $2.2 billion, in 1986,
it is estimated that the coun-
try's oil bill was under $1 bil-
lion — a savings equal to ten
percent of the budget.
Israel's main suppliers are
Egypt, Mexico, Norway and
the spot market. At the current
OPEC price, it will have to pay

$18 a barrel for the estimated
38 million barrels of oil it will
need this year, or nearly $5 a
barrel more than last year's
average. This added cost of
nearly $200 million is bound to
have an effect on the Israeli
economy, now struggling to
maintain control over inflation
and to increase productivity,
especially in the export area.
A new factor that may influ-
ence Israel's energy situation,
however, is the promise by Dr.
Armand Hammer, octogena-
rian head of Occidental Oil, to
invest $1 million in oil explora-
tion in Israel. Geologists be-
lieve that a recent Egyptian oil

The number of
working oil rigs in
this country
dropped from
1,880 to 916.

strike near El Arish tapped
large reserves which extend
into southern Israel. It is in
this area that Hammer's ,,(
exploration crews are expected
to concentrate.
Unlike the United States,
N
where the Reagan Administra-
tion has been curtailing search
for alternative sources of
energy, the Israelis continue to
develop them. Solar energy
now provides about two per-
cent of their energy needs and
a pilot plant is being built to
extract oil from shale, of which
Israel has a virtually un-
limited amount. And Israel is
importing coal.
CN

If OPEC can keep its mem-
bers to the production quota
they accepted late last year, it
might be able to reduce the
millions of barrels of oil now
flooding the market and which
are, for the time, the best de-
fense consumers have against
sharp price increases. The
prospect of higher prices has
induced non-OPEC nations
like Mexico, to reduce output
three percent in the hopes of
getting increased revenue in
the near future.
OPEC set its primary goal as
an $18 per barrel price and it
has reached it. But, as in the
past, if it can keep the lid on
production and maintain a
seller's market, it will press for
the highest price the market
will bear. It will take years for
the United States to set in
place the counter-measures,
initiated originally for security
as well as economic reasons,
which were so effective in
breaking the cartel's grip in
1985.
We did that by cutting im-
ports down to the 1973 level
when they accounted for 43

