ALTERNATIVES TO THE STRAIT OF HORMUZ

In this paper we study the cost of adding additional capacity to trans port oil from Saudi Arabia and Kuwait to the Red Sea. If this capacity is obtained by adding power to the existing pipelines, the cost would increase by approximately 14 cents per barrel, but would require larg e capital expenditures. If this capacity is obtained by using Drag Red uction Agents, the cost would increase by 25 to 65 cents per barrel wi th minor capital expenditures. Since Arabian oil is inframarginal, the se increased costs should have no impact on the supply of oil.