It's the same old story, but the oil markets and the media keep falling for it: the OPEC cartel gets together, furious because oil prices are plunging, and solemnly swears that prices will be raised.

In the end, OPEC cannot sustain higher prices because there is too much oil in the world at a time when many forces are holding down demand. But learned journals in the main have a knee-jerk response, keyed to 1970 and 1979 when the OPEC cartel did have power it can no longer assert.

However, there is an extra, and significant, ingredient to consider: President Saddam Hussein of Iraq cocked a gun as the enforcing weapon against OPEC ''cheaters'' who exceed sales ''quotas'' set by the cartel. To show he meant business, Hussein sent nearly 100,000 troops to the border with Kuwait, a small country that has only a small military force. To avert an invasion, Kuwait will pay a cash ransom to Iraq to settle claims relating to a disputed oil field on the border.

But Hussein's outrageous tough-guy act is unlikely to upset the basic economic forces of oil supply and demand. And he will be sure to fail if the United States does not sit meekly by.

Hussein bulldozed OPEC into raising its reference price of $18 per barrel to $21 (his first demand was $25), asserting his country had lost $14 billion because oil prices were deliberately depressed by overproduction from Kuwait and the United Arab Emirates. Until Hussein began to threaten other producers around the end of June, oil had been selling as low as $14 -- a plunge from $18 in January.

What I find disturbing is the willingness of some Americans to excuse Hussein's strong-arm tactics on the grounds that other OPEC countries are producing ''too much oil.'' Who has the right to decide how much is ''too much oil''?

On the MacNeil/Lehrer NewsHour last week, Charles Maxwell, an energy strategist for Morgan Grenfell, said: ''Several members of OPEC were producing too much oil, and the markets couldn't absorb it and adjusted by bringing the price down. Those two perpetrators of cheating were really Kuwait and Abu Dhabi {the largest of the emirates}. And everyone continued to warn them, 'Don't do this. You are taking the bread out of the mouths of our children.' ... Last week {Hussein} became the enforcer. He said, 'Stop cheating, live up to your quotas, and we will all benefit.' ''

That sympathetic analysis elicited a reinforcing comment from host Jim Lehrer: ''So no matter what anybody thinks of Hussein, the fact is that he is right on this issue. Is he right?''

To which Maxwell responded: ''Well, he is right on his merits. If you were paying for oil at the pump, you might have a different view. But I think that on his own system and OPEC's system, he is correct.'' Later, Maxwell justified Hussein's action because, ''You know, in cartels there is always a need to allocate the market. ... We need somebody to come along and knock heads.'' Maxwell asserted that, in any event, some increase in oil prices would be healthy for the West because, in the long run, it would dampen reliance on oil.

The underlying assumptions in these exchanges should not have gone unquestioned. The fact that Hussein conducted a terrible war with Iran that piled huge debt on the Iraqi economy is no justification to threaten other, weaker nations or to impose artificially high oil prices on consuming nations.

Nor does America have to pay a bounty to Iraq to encourage the shrinkage of oil use. If that is our policy goal, we could slap on an import tax and let the money go to the U.S. Treasury instead. Or we could respond to Hussein's military muscle with other economic measures. We could increase the tax on gasoline. We could establish competitive quotas for imports. These steps might have uncomfortable side effects. But they'd be preferable to allowing Iraq to rig global oil prices.

An optimistic note struck in a new study by Yeshiva University oil expert Eliyahu Kanovsky is that Hussein will not be able to dominate the world oil market, which today is large and diversified. Oil prices in the '90s are likely to be stable or lower, he says. All oil producers with excess capacity -- including Iraq -- have been ''cheating'' (which is to say, following their own basic needs for revenue) and are likely to continue to do so. ''There are many forces tending to hold down consumption, including environmental considerations, and increased energy efficiency and substitution,'' Kanovsky told me. ''In addition, the United States is in a semi-recession that holds down demand.''

Kanovsky's views on oil demand attention. A scholar with dual American and Israeli citizenship, he was on the money as far back as 10 years ago, when he countered the view of most of the establishment ''experts.'' They had predicted that both the price of oil and the power of OPEC would continue to increase throughout the 1980s.

Time will again sort out who is right, and my bet is on Kanovsky.