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WORLD VIEW : SAUDI OIL: Is It Worth Fighting For? : The shiekdom is the key factor in the world's most important industry. If Hussein overruns it, he would control 45% of tthe Earth's oil reserves.

August 14, 1990|JIM SCHACHTER and PATRICK LEE | TIMES STAFF WRITERS

Thousands of American soldiers are dug in across bleak desert to defend a nation half a world--and a cultural gulf--away from home. A flotilla of U.S. warships steams toward the Arabian Peninsula.

Other Americans, innocent civilians caught in the wrong place at the wrong time, become pawns in a dangerous crisis; detained in relative comfort, perhaps, but detained nonetheless in suddenly hostile Iraq and Kuwait, hostages to an international showdown. American diplomats scurry around the planet marshaling worldwide support against an aggressor.

On U.S. shores, consumers mutter protests as gasoline prices shoot skyward. They worry that an economy already on the brink will slide into the white waters of recession. Yet they rally behind their President, seemingly ready to bear the costs of confronting Saddam Hussein.

Why do we care about Saudi Arabia, where President Bush has drawn a line in the desert sands? What is at stake for the United States? The answers revolve around the one thing that the faraway desert harbors more of than any other parcel of land on Earth: oil.

With his forcible takeover of Kuwait, the man that Middle Easterners know simply as Saddam is already in control of 20% of the known reserves of a commodity that is like blood to the global body; if he could successfully overrun Saudi Arabia, he'd have 45%. (The United States has 2.6% of the world's proven oil reserves.)

Saudi Arabia is the dominant factor in what is arguably the world's biggest and most important industry. Whoever controls its vast petroleum reserves dictates world oil prices and holds a potential whip hand over living standards from Tokyo to Tarzana, from Paris to Pacoima.

And America, whose campaign for energy independence faltered long before the goal was achieved, stands nearly as vulnerable to the vagaries of Middle East oil politics as it has ever been.

So, like it or not, the question is unavoidable: Is Saudi Arabia worth fighting for?

How Much Saudi Oil?

Saudi Arabia is an important U.S. ally in the Middle East, a voice of moderation among the Persian Gulf states and the "Guardian of Islam" as home to that faith's holiest shrines, Mecca and Medina.

Above all else, however, it is the world's biggest oil well. "Everything else--its role in the Middle East--comes from oil," said James Akins, who served as U.S. ambassador to the desert kingdom from 1973-1975.

Saudi Arabia sits atop the world's largest proven reserves of crude oil--255 billion barrels of it, constituting more than 25% of the world's total. This quantity of oil, by way of illustration, is sufficient to satisfy even the voracious appetite of the United States for 40 years. That accident of geology accounts for Saudi Arabia's singular significance not only to America but also to much of the industrialized world.

In the first quarter of this year, Saudi Arabia's production of crude oil (including its half share of oil from the Neutral Zone with Kuwait) averaged more than 5.7 million barrels a day, or about 9.5% of the world's total, according to CIA figures.

Saudi Arabia is the United States' biggest source of imported oil, now accounting for 1.3 million barrels per day--7.6% of its total needs and 17% of total net U.S. petroleum imports, according to the Department of Energy. Similarly, Saudi Arabia supplies 18.5% of Japan's net oil imports and 6% of West Germany's.

Not only is Saudi Arabia's oil abundant, it is cheap to produce--$1 per barrel versus $7 or $8 elsewhere, said Philip K. Verleger Jr., a visiting fellow at the Institute for International Economics in Washington. "They've got the infrastructure, and you just find it in such large amounts," he said.

Stability Another Factor

Saudi Arabia has one other important attribute: stability.

"Of all the oil sheikdoms of the Persian Gulf, it is more of a real country," said Fereidun Fesharaki, head of the energy studies program at the U.S.-funded East-West Center in Honolulu. "It has real industry; it has educated labor . . . it is perhaps the only Arab country that is self-sufficient in food, and it is a source of stability economically and politically."

Saudi Arabia has assumed the role of the leading "price dove" among the 13 members of the Organization of Petroleum Exporting Countries (OPEC), arguing for stable and moderate prices and stronger ties with consuming nations.

"For the most part, it has balanced the system and tended to line up on the moderate side, often as the leader of the moderate side," said Daniel Yergin, president of Cambridge Energy Research Associates in Massachusetts and author of the forthcoming book, "The Prize: The Epic Quest for Oil, Money and Power.' "

It's a matter of enlightened self-interest: With the world's largest oil reserves, Saudi Arabia wants to make sure that high prices don't encourage nations to seek alternatives to oil.

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