OIL PRICES rose again at the turn of the year and, everybody says, OPEC did it. Relentless and remorseless OPEC has unlimited power to raise oil prices as high and as fast as it pleases because it has a highly disciplined cartel's deadly hold on the world's oil supply. Right?
Hardly. OPEC, as an attempted cartel, has had very little influence on oil prices for the past five years. It had no influence at all on oil prices during the great rise in 1979, and it is having none now. Instead, the highly diverse nations that export oil are now following their own highly diverse pricing strategies. There is no difference between the behavior of the oil-exporting countries that belong to OPEC and those -- Britain, Mexico, Norway and so forth -- that do not.
The idea of a great conspiratorial cartel, highly organized and all-powerful, is a total illusion -- and a destructive one, because it leads people to the wrong remedies. If OPEC really were an operative cartel imposing oil price increases, it would make sense to think about cartel-busting. But since the cartel cannot, in fact, control pricing, the talk about busting it up is merely a diversion from the kind of countermeasures than can make a difference.
The world might well be better off if OPEC really were an effective cartel, since it would probably choose a far more cautious course than its more euphorically radical members are now pursuing. The OPEC meeting in Bali last month was actually a process of feeling out the various members' different intentions and then writing a communique that accommodated all of them. Since the various member governments would not bend to a single policy, the policy had to be bent to the members. As usual, it was Libya that wanted to go furthest. And the other extreme, Saudi-Arabia, with the most at stake, continues to be the most restrained.
The Saudis have for some time sought to return to a unified OPEC pricing schedule. They continued their high rate of production into 1980 apparently for the purpose, among others, of flooding world markets and discouraging the radicals from leapfrogging the prices upward again.By last summer, that tactic was showing signs of succeeding. The Iranians, in their revolutionary fervor, were charging $5 a barrel more that the Saudis for the identical grade of oil -- and they were having great trouble selling it. Price, not mismanaged production technology, was the essential reason for the severe drop in Iranian exports.
Then came the war between Iraq and Iran. That wiped out the world's small surplus of oil, and with it the Saudis' hopes for a unified OPEC price. Now prices have gone up again, each government charging whatever it judges the market will bear.
When will prices rise again, and how much? If the high flyers -- like Iran last summer -- begin to have trouble finding buyers, prices will slow down. If not, they won't. It depends on the customers, not OPEC.
The incoming Reagan administration needs to think carefully about that. American economic growth has twice created surging demand for imported oil. In a tight worldwide market, any disruption can bring a leap in prices, which in turn throws the industrial countries into inflationary recession. It happened once under President Nixon and again under President Carter. The pattern is evident. The test of the new administration's energy policy is to prevent it from happening a third time under President Reagan.