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normal tirnes direct military oil consuroption averages a bout 2-3% of a nation's total dernand. In a crisis military dernand would (due to rnobilisation, reinforcement of Europe, increased readiness and - possibily hostilities) increase considerably. The total volumes involved rnight still he rnanageable. However, the dernand would he concentrated in only a few products, in the first place jet fuel and rniddle distillate. Especially the military jet fuel de mand would be immense. Military fuel demand could also he characterised by: - short notice (changes in) requirernents; - very specific timingIlocation of delivery; - non-commercial fuel specifications. In a crisis situation available oil supplies would he reduced, while military de mand would he up. Consequently eivil dernand would have to be cut, probably drastically. Such a dernand restraint would certaily not irnply one unique overall restraint percentage. Certain essential industries and transport sectors would need their normal quantities of oil, or even more. The reduction would therefore have to fall on the non-essential use. And this is increasingly difficult, for two reasons: - Many oil consumption sectors
which in crisis time would he considered non-essential (home heating, sorne power generation) have switched to other fuels. - Certain savings (e.g. motor gasoline) would nothelp tomeet crucial shortfalls in kerosine. Forthese reasons the supply and distribution of oil in a crisis will be difficult and complex. Nevertheless, the success thereof will he essential for the defence (preparations) of the Alliance. No guarantees can be given, but chances for an adequate supply will increase when: - national crisis plans are in place; - sufficient product stocks (eivil and military) are held in well choses storagesites; - eivil-military co-operation is ensured; - nations will work together in the frarnework of the NWOO.
Recent developments 1986 will he known in the petroleum history as the year of the price collapse. For conternporary observers it is difficult to forecast the duration and to estirnate long-term impact of this price-fall. The economie advantage of below 20 dollar oil to consuming countries is evident. In terros of energy security the verdict will he lirnited. Energy dernand elasticity is notoriously low. The benefits of past energy conservation and fuel switch will not easily he lost. But sorne extra de mand will occur. On the supply
A worker in the pipe-storage yard near Fairbanks in Alaska.
side the impact will - very likely -he more drastic. Most oil cornpanies have already cut their exploration / developrnent budgets by 30 or more percent. New high cost offshore production has becorne unappealing. The existing fields- where the investrnents already have been made - will he depleted. But thereafter extra imports will be more attractive financially than high cost, high risk fields west of Norway. The most serious consequence of continuing low oil prices would he that an increased dependenee on OPEC oil will corne earlier and will he more drastic. A positive side of low prices is that the expectation will generally he one of rising prices. In such a market situation it is attractive to build up sizeable stocks. This is true both for cornpanies and for govemrnental stockholding organizations. It would he a happy developrnents if the low price period would he used to build up stock levels, especially ernergency stocks. Oil is a very important cornrnodity. lts role in a East-West conflict would be crucial. In view of the West's supply position - lirnited production, even lower reserves - it is essential that (ernergency) stocks are built up and that crisis plans are developed. Only that will rninimize the risks of our oil supply vulnerability.