Spectre of an oil crisis close to home gives Bush another reason to drill in Alaska

Middle East

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America is becoming increasingly fearful of a half-forgotten side-effect of the Middle Eastern turmoil – a domestic oil and gasoline crisis that could halt the economic rebound in its tracks.

Already this year, crude oil prices have risen 40 per cent, propelled by Opec production cuts and gathering economic recovery in the United States and other industrial economies. But Iraq's announcement that it will halt oil exports for 30 days in support of the Palestinians has kindled memories of the 1973 Arab oil embargo that caused queues and rationing across the world.

Nothing as dramatic is likely this time around. Opec has distanced itself from the Iraqi move, while global supply still outstrips demand. But, experts warn, that margin could disappear if two other radical oil-producing states, Libya and Iran, fulfil their threats to follow Baghdad's lead, and if current disruption in Venezuela's oil industry continues.

Yesterday, President George Bush warned of the risks for America, which relies on imports for more than half its oil needs. "We're dependent on unstable countries," Mr Bush told The Wall Street Journal, saying it was one reason "we're not out of the economic woods yet", despite the recent upturn in output, employment and consumer confidence.

If oil – and thus petrol – prices do rise, it would hit the American market just when the summer travel season begins and demand for petrol surges. In 2002, the jump could be particularly sharp, after a year in which for the first time, sales of gas-guzzling pick-ups sports utility vehicles have outstripped those of cars.

Petrol prices have already climbed to $1.50 a gallon. Equivalent to £1 a gallon, that would have British motorists cheering in the street but American motorists and transport industries are squealing, clamouring for "something to be done".

That "something" of course is far more likely to be a cut in gasoline taxes than any measure to reduce consumption – indeed, only last month Congress defied the pleas of environmentalists and conservationists by refusing to impose more rigorous fuel efficiency standards on SUVs.

Instead, Mr Bush is using the energy squeeze to press his controversial plan to open up the Arctic National Wildlife Refuge in Alaska for production.

Alaska, the White House claims, could provide as much oil for the American market as Iraq, where about 10 per cent of current US oil imports are believed to originate.

The immediate risk that most worries markets is the disruption in Venezuela, a bigger supplier than Iraq.

* Iraq has accused America and Britain of blocking supply contracts worth $8bn (£5.5bn) under a UN humanitarianprogramme.

The scheme is supposed to ease the suffering of ordinary Iraqis, under sanctions since the 1990 invasion of Kuwait. Iraq can sell oil to buy food and medicinebut many of the asked-for supplies have been deemed ineligible by the two countries.