An oil price freeze through the end of the year appears nearly certain as oil ministers from the Organization of Petroleum Exporting Countries along the oil-rich Persian Gulf prepare for their semi-annual price-fixing meeting in Geneva this weekend.
Despite continuing concern over the decline in the dollar's purchasing power, officials in the Gulf producing countries have conceded privately in recent weeks that it is likely prices will be frozen through December.
One key petroleum minister, the United Arab Emirate's Mana Saeed Otaiba, said on the eve of his departure for Geneva, "There won't be an increase in the price of oil till the end of the year."
Otaiba said in an interview oil prices should not be increased, because of the world oil glut. The glut, which has depressed demand for OPEC oil and provided a politically inconvenient backdrop for President Carter's effort to enact an energy bill, is the result of new oil supplies coming from the North Sea and Alaska's North Slope.
Coupled with conservation measures and flagging economic activity in some of the industralized countries, the oil glut has not only forced some OPEC producers to curtail their production but to shave prices.
The benchmark oil price has stood at $12.70 per barrell for the last year, although prices vary depending on the quality of the oil.
Moderate price increases in the future, however, are inevitable, Otaiba said fingering one of the slender reed canes carried by the sheikhs and leading United Arab Emirates policy makers and business leaders.
"The pricing issue is a live issue, it must be kept open and elastic and it has to respond to the world's economic changes," Otaiba said. "it is wise to wait till the end of the year. We can wait another six months, the world will not end," he added.
The oil minister said that the Emirates and other OPEC countries favoring price moderation, including OPEC's leading producer Saudi Arabia, argue that the world economy can ill afford the effects of even a moderate price increase now.
The erosion in the dollar's value in international financial markets - estimated by OPEC's secretariat at up to 15 per cent since prices were last increased - has affected all the OPEC countries, including countries such as Saudia Arabia, Kuwait and the Emirates which have continued to add billions of dollars yearly to their accumulated surplus funds since oil prices quadrupled in 1974.
Earlier this week Kuwaite Oil Minister Khalifa Sabah said his country would press for a price increase because of the fall in the dollar. Kuwait is expected to be joined by Libya, Iraq, Algeria and other states in the 13-member cartel generally considered "price hawks."
Oil analysts in neighboring Gulf producing states have suggested that Kuwait's demand for a price hike to compensate for the decline in the dollar is focused more at pressing for an increase in December rather than at Geneva.
OPEC's most recent meeting held in Caracas, Venezuela, last December was dominated by Saudia Arabia and Iran which, along with the United Arab Emirates, account for more than half of OPEC's daily production. While not outspoken, it was clear that their call for a continued freeze in oil pruces was heard by other countries. Moreover OPEC members are seeking to avoid repeating the split at their meeting 18 months ago when Saudi Arabia and the Emirates broke with the other members calling for a 5 percent rather than 10 percent price increase.
At an informal meeting of OPEC oil ministers held by Saudi Arabia's Zaki Yamani last month in Taif, the Saudias' summer capital, there was a discussion of whether the dollar should be replaced the pricing mechanism for oil.
No final decision was made then, Otaiba said, and it was unlikely that a shift away from the dollar would result from the Geneva meeting.