Oil Industry Persian Gulf

After Iran announced last week that it had accepted a cease-fire in its nearly eight-year-old war with Iraq, an official in Kuwait said the news has been received in his country with "an immense collective sigh of relief." The official's remark reflected opinion not only in that tiny sheikdom but throughout the Arab states, militarily weak but wealthy in oil, that line the western shore of the Persian Gulf.

Persian Gulf oil ministers have agreed to increase production of crude oil to stabilize prices around the world but have not decided how much--leaving it unclear whether consumers will find relief at the gas pumps. A senior United Arab Emirates oil official said that Gulf Arab oil ministers who met the day before in Saudi Arabia agreed to a production increase. Such a move could bring down oil prices, which have been hovering near a nine-year high.

Iraq's seizure of Kuwait's oil facilities has revived an economic specter that vanished with the gas lines of the 1970s: stagflation, a U.S. economy squeezed between rising consumer prices and sinking business activity. As was the case with the 1973-74 Middle East oil crisis, oil prices now threaten to push up inflation at a time of growing unemployment and economic sluggishness.

As equipment and experts stream into the Persian Gulf to combat the world's worst oil spill, the delays and disorganization that always mark such massive calamities are being magnified by the realities of war. "It becomes a very difficult challenge for the Saudis to fight two wars--one against the Iraqis and one against the spilled oil," said Richard Golob, publisher of Golob's Oil Pollution Bulletin, based in Boston.

The dollar fell against most major currencies Monday, despite a clear risk of military conflict in the Middle East. And that is both unusual and a potent indicator of present and future economic events, financial experts say. Normally the dollar is a "safe haven" currency, bought heavily by foreigners in times of high tension. But in this crisis it has been bought tepidly. "The dollar has been abysmal," remarks Allen Sinai, chief economist of Boston Co.

Oil traders ignored Iran's outrage Tuesday over the U.S. destruction of an Iranian jetliner, saying the aftermath of the Persian Gulf incident probably would not affect petroleum shipping or inflate prices. On the New York Mercantile Exchange, a sensitive barometer of world prices, the contract for August delivery of West Texas Intermediate crude oil rose 15 cents a barrel to $15.09 in light trading. The exchange was closed Monday for the Independence Day holiday.

Iran is considering a pipeline to floating terminals off its central Persian Gulf coast to safeguard its oil from Iraqi air attacks, a London-based newsletter says. The Middle East Economic Digest, in a report to be published Saturday, says Iran may be close to signing a $1.5-billion contract with Italy's Saipem SpA to build the pipeline.

Iran all but lost its battle Thursday to raise oil prices, and the biggest unresolved question at the year-end meeting of the Organization of Petroleum Exporting Countries appeared to be whether the Iranians will abide by the agreement forged here. Oil ministers stressed late Thursday that no agreement on prices and production was imminent, however.

A huge oil slick pushed down the Persian Gulf on Wednesday, coming ashore at a key Saudi oil installation, jeopardizing its production capability and threatening the country's coastline and wildlife for miles. U.S. Coast Guard officials said the oil, part of the largest spill in history, had moved about 3 1/2 miles during the night, reaching Tanajib, a service facility for Saudi Arabia's giant oil company, Aramco.

Lou Bacca's no soldier, but he's preparing for war. Not that the Santa Ana Chevron dealer expects any Persian Gulf hostilities to disrupt his supply of gasoline. But just in case: He's prepared to cut his opening time from 24 hours to only a few hours during the morning rush. He's even plotted where on his lot the gas lines will start. "If you're in business and you haven't planned, you better," said Bacca, a veteran of the gas lines, price hikes and fuel shortages of the 1970s.

Mike Adams was already asleep when his father-in-law rapped on the bedroom door. Something bad is happening, he said. A late-night newscast had just flashed the bulletin that Iraqi forces had crossed the border and were moving into Kuwait. For Adams, the news could not have been more chilling. He lived in Kuwait city with his wife and two children and was in Houston only because he and his family were on home leave.

The Iraqi invasion of Kuwait and the resulting Middle East standoff has disrupted the workings of the 13-member Organization of Petroleum Exporting Countries and for now has rendered it all but irrelevant, analysts said. Less clear is whether OPEC will emerge from the current crisis intact, and if it does, how it will have changed.

As tensions escalate in the Persian Gulf, the economic ripple effects are starting to take a toll in the region, with billions of dollars being withdrawn from local banks, investment plans suddenly placed on hold and hundreds of thousands of expatriate workers facing the loss of jobs.

For 30 years, the Arabs of the Persian Gulf lived a gold-plated fairy tale, awash with money that transformed their backward little kingdoms into a razzle-dazzle of desert opulence. Other Arabs called them "Gulfies," disdainful of their windfall wealth and recent Bedouin heritage. But the 4.2 million people of the gulf paid the critics no heed.

Lou Bacca's no soldier, but he's preparing for war. Not that the Santa Ana Chevron dealer expects any Persian Gulf hostilities to disrupt his supply of gasoline. But just in case: He's prepared to cut his opening time from 24 hours to only a few hours during the morning rush. He's even plotted where on his lot the gas lines will start. "If you're in business and you haven't planned, you better," said Bacca, a veteran of the gas lines, price hikes and fuel shortages of the 1970s.

Nowhere does history seem to repeat itself more quickly than it does in the turbulent Middle East. Just over three years ago, the skittish sheikdoms of the Persian Gulf watched with a concern that bordered on alarm as U.S. naval forces converged on this part of the world to protect Kuwaiti oil tankers and safeguard the shipping lanes then being menaced by Iran. The fear then was that the U.S.

Storm-tossed world markets calmed further Wednesday but showed some signs of nervousness that the continuing military buildup on the Saudi-Kuwaiti border might erupt into fighting that could set off new price gyrations. U.S. stocks rebounded, tacking 24.26 points onto the Dow Jones industrial index, while London, Tokyo and most other markets advanced. But though bargain hunters bought up high-quality U.S.