SUPPLY: From Output Squeeze to Price Embargo

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The gloom that has enveloped the industrialized West since the Arabs unsheathed their oil weapon in October lightened last week. Arab nations announced an easing of their production cutbacks—and around the world, there was growing suspicion that they never did slash oil output as much as they had proclaimed. Europe, heavily dependent on Middle East oil, seems surprisingly well supplied, and TIME uncovered evidence that Arab petroleum has been leaking into the U.S., too, despite a supposedly total embargo.

None of this means that the energy crisis is anywhere near over; indeed, all indications are that it will become a more or less permanent feature of American life. The Arabs coupled their announcements of production increases with gargantuan price boosts that will fan inflation throughout the West. And supply is still pinched; in the U.S., the Nixon Administration felt compelled to announce surprisingly detailed—and quite severe —stand-by plans for gasoline rationing, even though it hopes that it will never have to put them into effect. Conservation measures are still necessary, but the crisis is looking less like a catastrophe than it did a few weeks ago.

Easing the Pinch

It seemed like a lovely Christmas present to an energy-hungry world. At a meeting in Kuwait, the Arab oil nations unwrapped a surprise package of moves that added up, at least in theory, to the first easing of their 2½-month-old oil offensive. They promised to raise production in January rather than slash it further as originally planned; output has supposedly been running 25% below September levels, but now the cut will be trimmed to 15%. The Arabs publicly maintained a total embargo on shipments to the U.S. and The Netherlands but added hard-pressed Japan and tiny Belgium to their list of friends. That means that these countries will now receive oil "according to their actual needs," instead of only the same amounts they had purchased during the first nine months of 1973. Saudi Arabian Oil Minister Sheikh Ahmed Zaki Yamani added some conciliatory language. "We do not wish the nations of the world to suffer," he said. "We only intended to attract world attention to the injustice that befell the Arabs."

In fact, the Arabs appeared to be making further skillful use of their oil weapon. By announcing the 25% production cuts last fall, they had stampeded some countries into lessening political support of Israel and into swallowing price boosts of about 70%.

Now, by publicly relenting on the production front, they seem to be bidding for Western gratitude—and for the acceptance of an additional, even more astronomical, 130% price hike that was announced just before Christmas. And this is being done when evidence is mounting that at least some of the production cuts allegedly being restored existed only on paper.

How much the Arabs have reduced oil output is impossible to determine, but the quantity of oil moving in world trade seems greater than could be expected after a genuine 25% slash in Arab output. Some indications:

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