Politics Threaten World Oil Supply

But present prices reflect too much oil, not too little

OIL buyers beware: Higher prices could lie ahead.

Though abundant now, oil can become scarce and expensive in tumultuous times. The potential for political upsets was recalled anew by events last week in two major oil-producing nations.

No supplies have been lost yet. In fact, too much oil is the challenge facing today's meeting in Vienna of the Organization of Petroleum Exporting Countries. It is that expectation of oversupply, ironically, that analysts say increases the exposure of consumers to unforeseen disruptions, despite protective steps that followed previous troubles.

''We're going to have to live with greater market volatility,'' says James Placke, a director of Cambridge Energy Research Associates in Washington.

One British oil expert foresees supply exceeding demand by 800,000 barrels per day in 1996. That's a recipe for an oil-price collapse. His forecast, however, assumes no political or natural disasters. ''Those are two ... big ifs,'' he says. ''Our numbers have never been right.''

Trouble, if it comes, could begin in Nigeria. Last week its military rulers hanged nine human rights activists. In reaction, angry calls for a global boycott of Nigerian oil were heard from the European Union to the United Nations.

That idea draws objections from Shell Nigeria, which produces half of the country's oil. Though its own ''quiet diplomacy'' on behalf of the activists failed, company spokesman Jim Grapsi in New York says a boycott would hurt average Nigerians. But the executed activists had charged that average Nigerians see only environmental damage from oil, not profits.

''Maybe they don't. Maybe they do,'' Mr. Grapsi answers.

In Saudi Arabia, last week's car bomb did not target oil-production facilities. But the possible threat is troubling to analysts. ''You can't afford to lose Saudi Arabia,'' Mr. Placke says. ''That's the one thing you can't prepare for.''

Saudi Arabia is the world's largest oil producer. What's more, it is home to two-thirds of the excess production capacity that the world could call on, Placke says. Oil consumers, he adds, need to diversify suppliers.

The immediate buffer against disaster is stocks of crude oil and petroleum products in consuming countries. But heeding price-collapse scenarios, oil companies are keeping their inventories as low as possible. ''Inventory costs you money to hold,'' says Andrej Remec, inventory management coordinator at Chevron USA Products Company in San Francisco.