Evening star., 1951-09-02
Reodiustment in Oil

Iranian oil crisis, affirmed on Thursday by the
British Foreign Office and by American ,Ambas-
sador Grady after another 45-mnute conference
with Iranian Premier Mossadegh, leaves i'm
portant and difficult problems facing all the
affected parties.
For the free world the problem of first
priority is that of revising the entire pattern
of petroleum production and distribution in the
countries still in business and outside the Iron
Curtain Iran represented daily supply of
more than 600,00 barrels of crude and refined
products. It's refinery at Abadan is the largest
in the world with daily capacity of more than
100000 barrels of finished products and has
been the only source of aviation gasoline in the
Near Eastern area. To distribute this combined
production great tanker feet operated east
south and west from the Persian Gulf.
The first step in correcting the diSlocation
caused by the Iranian shutdown is that of in
creasing crude production in other countries
Most spectacular progress in this regard has been
made in the near neighborhood of Iran itself
with the American operation in Saudi Arabia
and the British-American operation in Kuwait
taking the lead Other substantial increases have
been recorded in Venezuela and the United States
major producers at all times Mexico, Canada
and some Of the areas of smaller production also
have stepped up their pace.
A second step has been that of diverting
tanker operations to new distribution routes
Some units of the Anglo-Iranian feet have been
transferred from Abadan to other Persian Gulf
pickup ports; other units have been moved as
far as to the Caribbean area. Since a heavy
proportion of Iranian production moved to
Western Europe and there has been resultant
diversion of some Western Hemisphere oil to
the European markets some of the tankers
normally in Atlantic coaStwiSe service have been
shifted to tranSocean runs.
A third step, most difficult of quick execution
is that of juggling and eventually expanding
refinery production. Several large refneries are
under construction today in Europe, but the
building of an oil refinery requires minimum
of two years and considerable quantities of steel
and specialized machinery BY forcing existing
refineres in Europe and the United States into
full-capacity operation-if crude Gil supplies can
be diverted to make up the Iranian defcit-and
by bringing others which have been considered
partially obsolescent back into production most
of the Abadan loss can be offset The process
however, will have disturbing effects on es-
tablished consuming centers, principally the
United States, as their normal supplies are
integrated into a new world pattern.
For Iran itself the breakdown of relations
with Anglo -Iranian may have permanently
damaging effects both economically and polit-
icaly. In the opinion OF the Oil industry Iran
will never return to its rank of fourth largest
petroleum producer in the world. Already the
Saudi Arabian production has passed Trans pre-
crisis peak. In the highly competitive industry
reopening of new fields and expansion of facili-
ties represent commitments not lightly taken
and not lightly retracted. Furthermore, neither
customers nor geographic areas which were for
merly content to make long-term commitments
and to place sole reliance on Iranian supplies
are likely to place themselves again in such
vulnerable relationship with a country where
political uncertainties can have widespread and
disruptive effect.
Restoration of an operating relationship
between Iran and Western oil interests would be
still of great value to both, but with each day
of stalemate this value tends to decrease. 1t
has been costly crisis and the full price has
not yet been paid by any means.