Page 443 - Arabia the Gulf and the West

440 Arabia, the Gulf and the West

variable circumstances which it would require a book in itself to examine
properly. Here we can do no more than glance at a few of them.
Reduced demand for oil after the price rises late in 1973 caused a slight drop

in production world-wide in 1974, and a bigger drop of 5.4 per cent in 1975, the
first of this magnitude since 1942. The fall in OPEC’s production in 1975’was
much larger — 12 per cent, with Venezuela (21.3 per cent), Nigeria (20.9 per

cent) and Kuwait (19.2 per cent) suffering the heaviest losses. Iraq, in contrast,
raised her output by 12.8 per cent, mainly through price-cutting. While there
has been some recovery in world consumption since 1975, it has not returned to
the average annual increase recorded in the years 1955-73, viz. 7 percent, but
has persisted at around 1 per cent. With new oil discoveries coming on-stream
(North Sea, Alaska, Mexico), the result has been a net decline in consumption,

and therefore production, of OPEC oil. So many fluctuations in the produc­
tion of Middle-Eastern oil have occurred in the past five years that it is
impossible to discern any significant pattern to them. Producers of heavy and

high sulphur crudes like Persia, Kuwait and Saudi Arabia seem to have
suffered the largest falls, though in the case of Saudi Arabia the fall has been
mitigated by other circumstances. Some of the fluctuations were caused by the
oil companies’ stock-piling in advance of expected price increases, as was the
case before the OPEC meeting in Dauhah in December 1976 when prices were

raised by 10 per cent. Others, however, can only be attributed to falling
demand. Thus, Saudi Arabia’s production in the first six months of 1978 was
down 17.5 per cent on that of the comparable period in 1977. Persia’s produc­
tion was down 7 per cent in the first quarter of 1978 on that of the first quarter

of 1977. Kuwait was 36 percent down in January 1978 on January 1977, and 40
per cent down in February 1978 on the previous February.
It would be unwise to read much into these figures: as just remarked, there is
more confusion than clarity in the recent pattern of oil production in the
Middle East. What is fairly clear is that the fall in production and the decline in

value of the US dollar means that only three states, Saudi Arabia, Kuwait and
Abu Dhabi, can count upon a continuing surplus of revenue over expenditure
in the immediate future, and even this surplus is diminishing - or it was until

the oil-price increases of 1979. What this portends is as unpredictable as most
occurrences in the Middle East, although Kuwait, as in other instances, may
well prove to be the bell-wether. Up to 1973 Kuwait’s oil production ran at
roughly 3 million b/d. By the end of 1974 it had dropped to 2.5 million b/ , an
Kuwait had become the leading proponent of ‘conservation as a means 0

extending the productive life of its oilfields and of maximizing the nanci
return on oil exports. The final nationalization of the Kuwait 1 0
(jointly owned by BP and Gulf) took place in December I975> an..p Venh/j on

then the Kuwaiti government had imposed a ceiling of 2 mi ion
production. It proved to be a flexible ceiling: late in 197 P™ Dauhah
averaging 3.3 million b/d as the companies stockpiled before