The Boomerang Boycott

Boycotts rarely work, and the Arab effort to starve the West for oil proved to be no exception. While Europe tapped costlier supplies in the U.S. and Venezuela, three months of a some what leaky embargo by Arab countries on oil shipments to the U.S., Britain and West Germany merely robbed their own treasuries of millions in royalties and taxes. Last week, almost as swiftly as it was imposed during the Arab-Israeli war, the ban for all practical purposes ended.

First Saudi Arabia, then Kuwait, Libya and Iraq--the four major Arab oil-producing states--agreed to resume shipments in keeping with the deal struck two weeks ago by Arab heads of state at their summit session in Khartoum. Another three months of embargo, explained Egyptian Minister of Economy Hassan Abbas Zaki, would cost the West $770 million worth of oil but would deprive the Arab producers of $870 million of income. Only Algeria, the fifth-ranking producer, kept its embargo. And even that involved more symbolism than substance, since the overwhelming percentage of Algerian output goes, as it has all along, to France.

Though the crisis was over, oil companies still faced continuing costly problems. The closing of the Suez Canal not only forces tankers to sail 4,700 miles farther around the Cape of Good Hope to European markets but has also caused such a price-boosting scramble to charter additional ships that the cost of hauling crude oil from the Persian Gulf to Rotterdam has jumped from $2.90 to $18.60 a ton. Salvage experts figure that the handful of scuttled ships blocking the waterway could be cleared away in a month, but silting from its sandy banks may require fresh dredging. Oilmen glumly predict that Egypt's Nasser will keep the artery closed at least until year's end and perhaps indefinitely. He can afford to sacrifice his chief source of foreign exchange because other Arab states promised in Khartoum to give Egypt a $266 million-a-year subsidy--about equal to the canal's annual toll revenues.

Lebanon last week agreed to let oil companies resume shipments to the three Western nations from its Mediterranean ports. That oil comes via two separate pipelines from Iraq to Tripoli and from Saudi Arabia to Sidon. Both lines run through Syria, whose extremist regime opposed ending the embargo and could easily close either line by twisting a few valves. The Trans-Arabian pipeline, jointly owned by Texaco, Standard Oil of California, Standard Oil (N.J.) and Mobil Oil, has been shut since the fighting erupted. Because some 20 miles of it runs through former Syrian territory, now occupied by Israel, the oil firms at week's end still hesitated to provoke Arab sensitivities by restarting the pumps.

These lingering difficulties are too small to sustain increased demand for U.S. oil. Having stepped up its output by 12% (to a record 9,400,000 bbls. a day in August) to help meet Western Europe's needs, the U.S. now faces a problem of oversupply. One result was an order last week by the Texas Railroad Commission, which cut the maximum allowable output per well from 54% to 46.7% of capacity. By December, oilmen expect that the limit will shrink to its pre-crisis norm of 33% to 35%.

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