- The Washington Times - Sunday, June 27, 2004

LONDON (AP) — Violence in Saudi Arabia and Iraq have kept oil-importing nations’ worries focused on the Middle East, but a resolved labor dispute in Norway is a reminder that supplies elsewhere can be vulnerable, too.

With production stretched by the Organization of the Petroleum Exporting Countries and the world guzzling ever more oil, a significant disruption in often-volatile Venezuela or another big exporter could cause a big price spike, analysts say.

Still, they are mostly optimistic that such a scenario is unlikely and say it would have to coincide with more Middle Eastern trouble — such as a big decline in Saudi or Iraqi production — to cause a crisis.

An unforeseen supply disruption “is an ever-present threat,” said David Fyfe, an oil supply analyst at the Paris-based International Energy Agency.

Bad weather, political unrest, guerrilla attacks, labor disputes, technical problems, maintenance and accidents are always risk factors, Mr. Fyfe said.

“Random events can hold the potential to undermine non-OPEC supplies for a given year by anything up to 300,000 to 400,000 barrels a day,” he said.

World oil production hovers at about 81 million barrels daily.

On Friday, the government of Norway, the world’s third-largest oil exporter, ordered an end to an offshore oil workers’ labor dispute that had threatened to halt pumping.

Officials said they were ordering binding arbitration because a strike and lockout would have had serious consequences for the nation’s economy and reputation as a reliable supplier of petroleum.

Axel Busch, chief correspondent for industry newsletter Energy Intelligence, said Norway settles oil disputes before they cause real trouble.

In other parts of the world, the outcomes are less certain.

In Venezuela, where a general strike paralyzed oil exports in late 2002 and early 2003, President Hugo Chavez has consolidated his control of the industry, reducing the chance of another damaging walkout, Mr. Fyfe said.

But the South American nation, the world’s fifth-largest oil exporter and holder of the Western Hemisphere’s biggest reserves, remains unstable, and Mr. Chavez faces a planned recall vote in August.

Hints of labor unrest in Ecuador and guerrilla attacks on pipelines in Colombia make those nations potential trouble spots, too, Mr. Fyfe said.

Ethnic violence in Nigeria’s volatile oil delta and the potential for labor trouble are ongoing issues, although they have not had a major impact on the country’s production in recent years, Mr. Fyfe said.

Mr. Busch, the energy newsletter correspondent, said the Caucasus and Caspian Sea are also potential trouble spots, although he predicted political tensions there would ease before interfering with oil production.

Oil prices spiked to record highs earlier this month, under the combined pressure of rising demand from fast-developing nations such as China and fears about future production in the Middle East.

Sabotage and instability are hurting oil production in Iraq. Saudi Arabia is struggling with an upsurge of violence.

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