Alternative Sources — Venezuela, Kuwait

Abstract

In its efforts to secure, diversify and economize sources of oil supply, Delek faced several problems. The major ones were cost, quality and a dearth of potential sources. From very early on, the American market was ruled out partly due to the relatively high prices of crude and freight expenses (the fob price of US crude oil was approximately $2.50 per ton more than that of Venezuela) and partly because of the reluctance — based on political considerations — of large American oil companies such as Standard Oil of California, Texas Oil and Gulf to sell oil to Israel.¹ It should be noted that the refineries in Haifa were originally built for refining Iraqi crude oil but also suited other Middle Eastern or possibly similar light crude, albeit with reduced efficiency. Most of the alternative crude oils (such as Mexican, Colombian and Peruvian) were very heavy and thus not suitable for that operation. Furthermore, the production of refined by-products such as gas oil and kerosene could only be carried out effectively by distilling Middle Eastern crude oil. It was economically unfeasible for the refineries to operate on many types of crude oil, since such multiplicity was bound to greatly complicate the production process and to substantially increase its cost. Indeed, as noted earlier, Anglo-Iranian had inserted a clause in the Draft Agreement restricting Israel’s freedom of action in that respect.