Once again, Arab hardliners are threatening to cut oil supplies to force the world to take action in the Middle East. The price of oil, which is usually volatile at such times, jumped sharply in response. But, unlike 1973 or 1979, there is little prospect of concerted action so a real shortage is unlikely. That does not mean that all is well in the energy markets. The developed world continues to consume too much energy and is overly reliant on imported supplies of fossil fuels. Those governments need to develop more diversified energy strategies; most important, they should be developing policies that encourage conservation and less energy use.
Unrest in the Middle East always nudges oil prices higher. The sharp increase in violence and the growing unease that has been created in the face of mounting international attention to the situation there have produced a sense of expectancy: It seemed inevitable that some government would play the oil card. Earlier this week, Iraq obliged. President Saddam Hussein said his country would halt production for one month to show solidarity with the Palestinian people. Iraq exports about 2 million barrels per day, some 4 percent of world supplies. Some conservatives in Iran have called for similar action, but the government of President Mohammad Khatami has pointedly declined to use oil as a weapon. His country needs the revenue generated by exports. Moreover, the United States -- the ultimate target of any such strategy because of its influence on Israel -- imports almost no Iranian oil.
Other moderates in the Arab world have rejected Baghdad's tactics. Saudi Arabia, the world's largest producer, does not like to use oil as a political weapon. Its recent, troubled relations with the U.S. have only reinforced the kingdom's instinct to calm turmoil in the market. It has traditionally absorbed any downturn in supply by picking up production. Russia, whose oil production has periodically rivaled that of Saudi Arabia, is also eager to earn export revenues and would be likely to compensate for any temporary shortfall in supply. Other members of the Organization of Petroleum Exporting Countries have reportedly pledged to help out. OPEC has the capacity to do so; when that is combined with high inventories, the world should be able to weather any short-term dip.