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The most serious example of oil arrogance is in Libya. Last month its revolutionary government, headed by hot-tempered Muammar Gaddafi, who is 31, nationalized the local assets of British Petroleum, which is 49% owned by the British government. The ostensible reason was London's "collusion" in the recent Iranian seizure of three tiny Persian Gulf islands that Libya regards as Arab territory. BP's officers have threatened to sue any buyer of oil from its Libyan wells and have already won court detention of a tanker that was unloading Libyan crude in Sicily.
Heads of some OPEC nations are far from happy over Gaddafi's recklessness. The moderate regimes of Iran and Nigeria, for example, need a stable inflow of revenue from oil to finance large development projects, and would rather not run the risk of holding the oil companies for ransom. Yet in many poor OPEC nations, Gaddafi's militance is viewed as an exciting victory. As a top British oil executive told TIME Correspondent Roger Beardwood: "Many of these regimes have to impress on their people that they have done as well as the Libyans have."
The Libyans have done very well indeed: over the past decade, Libya has raised its per-barrel revenues by almost 200%, to $1.80. Since the Six-Day War in 1967, when the Suez Canal was blocked, Libya has enjoyed a special advantage because it is the only major producer that can supply oil to Europe without sending tankers around the entire African continent. Largely as a result, the Libyans have accumulated a nest egg of more than $2 billion in foreign reserves—enough to keep the country running for more than a year even if it should shut down all its operations. But in the long run, Gaddafi is playing a risky game with his nation's future. As Sir Eric Drake, chairman of British Petroleum, points out: "Anything that raises doubts in the minds of those who make new investments in oil would in the long run be contrary to the best interests of a producing country."
Financial Energy. Such investments will undoubtedly be huge. In the rest of this decade alone, estimates the Chase Manhattan Bank, the oil industry will need to sink some $360 billion into new exploration, equipment and plants to keep up with the fast-rising demand. Part of that money will be used to exploit recently discovered reserves in the North Sea, Canada and Alaska, all of which, fortunately, are in politically stable areas. Beyond that, the industry has a huge stake in finding an out-and-out alternative to conventional petroleum, since proven reserves are becoming harder and costlier to find and develop. Though none are yet economically feasible, possible substitutes include oil made from shale, tar sands or coal—and nuclear energy. Says John McLean, president of Continental Oil: "In the future there will be no oil companies, only energy companies."