The Organization of Petroleum Exporting Countries (OPEC) today abandoned its collective pricing system and left its 13 member nations free to seek whatever prices they can get for crude oil this winter.
The oil ministers portrayed their failure to agree on a "benchmark," the central pricing mechanism OPEC has used in driving up prices tenfold in the 1970s, as temporary and indicated they would meet again within three months to try to restore price unity.
The sharp disagreements that brought an end to the four-day semi-annual pricing conference left in place crude oil prices ranging from $24 to $30 a barrel.
Although some oil ministers themselves said that they could not be sure what prices their countries would now adopt, the range indicated an average increase for OPEC consumers of about 30 percent over the organization's July 1 prices, and a combined increase in OPEC prices from last Jan. 1 of at least 97 percent.
This would be the stiffest 12-month rise of prices on the 31 million barrels of oil a day that OPEC produces since the fourfold price jumps in 1974. The increases are certain to add to inflation in the industrialized world, intensify the trends toward recession and may contribute to another weakening of the dollar abroad.
Saudi Arabia's oil minister, Sheik Ahmed Zaki Yamani, and others cautioned against interpreting the deadlock as a sign of serious weakness with OPEC or as a gain for consumers, who will have to pay OPEC as much as $300 billion next year for oil.
Yamani predicted that a glut in world oil supplies by March would bring the ministers back together to align their prices with the $24 benchmark for which Saudi Arabia campaigned here. But ministers from Iran and Kuwait suggested that their countries would cut back production to keep prices firm if there is a glut.
Politically, the deadlock represented a clear setback for the authority of Saudi Arabia, the organization's largest producer and America's closest ally in the group. The militancy of Iran within the organization and Libya's strident advocacy of further large price increases appeared to fragment the internal balances that had produced OPEC pricing compromises in previous meetings.
The individual increases accepted here capped a decade of radical change in oil prices and in the oil business in the Third World. This has sparked a new economic nationalism that has not run its course. Despite the arguments among themselves, the oil ministers all insisted that further sharp increases are just over the horizon unless world consumption rates are cut back significantly.
Yamani and Iran's Ali Akbar Moinfar sparred repeatedly throughout the closed-door meetings that moved from a formal opening ceremony in a hotel ballroom into Yamani's suite for intense argument and then back to the ballroom for today's final drawing up of a communique. A series of individual press conferences followed.
Kuwait, Iraq and Venezuela sought to bridge the gap between the $24 a barrel that Saudi Arabia unilaterally set on Dec. 13 as its own price and as a potential benchmark for OPEC and the $30 a barrel price that Libya set on Sunday.But their compromise suggestions, in the neighborhood of $26, were evidently stymied by the radically different readings of world market conditions by the Saudis and price militants.
Nigeria signified its agreement with the Libyan assessment of the consumers' continuing willingness to pay special premiums for low-sulfur oil by announcing at the end of the conference that it was setting its price at $30 as well. Algeria is expected to seek close to that price.
OPEC officials assert that world oil stocks have reached an all-time record 700 million tons, nearly a three-month supply. Consumer nations began stockpiling this summer in anticipation of year-end price increases and continuing trouble in Iran.
Saying that he expected economic recessions in the West to depress demand for oil in the early months of 1980, Yamani predicted that "there will be a glut in the market" by late February or March if "there is no political interruption to stop the flow of oil from any member country."
The key test of the new price levels is likely to be Iran, which produces oil with qualities similar to Saudi Arabia's, but which is seeking $4.50 more per barrl than Saudi Arabia.
Iran's Moinfar, who took an indirect swipe at Saudi Arabia for "being very generous to the industrial counties by selling oil for $11 less than it should cost," said that "supply and demand" will determine the new price levels of Iranian oil. He said Iran would seek coordinated production cuts with other producers if a glut developed.
In a sharp departure for OPEC meetings, Moinfar devoted most of his press conference to reading a statement from Ayatollah Ruhollah Khomeini attacking the United States for its support of the deposed shah of Iran. He also bitterly complained that the other OPEC members had turned down an Iranian proposal for a 50 cents a barrel contribution to a fund for poor countries.
No date was set for the special session that will be called "to analyze market reaction" to the freeing of OPEC prices from any standard reference. There was speculation that the review might become part of a gathering of OPEC oil, finance and foreign ministers tentatively set for Saudi Arabia in March. The next regular OPEC meeting is scheduled for June in Algiers.
The four-day price-fixing session was the longest and perhaps the most divided in OPEC's 19-year history. One goal had been endorsed publicly by each of the ministers of the seven Arab, two Latin American and two African nations that, along with Iran and Indonesia, make up OPEC. That goal was to return to a single-price system with realistic "differentials," or premiums, allowed for high-quality oil.
But under the continuing pressure and lure of spot market purchases of small quantities of oil not committed to traditional customers at $40 a barrel, the OPEC producers could not even agree on a return to the two-tier "floor" and "ceiling" system OPEC adopted in July to try to deal with disorderly market conditions.
The first authoritative word of the conference's collapse came from its host; Venezuelan Mines and Energy Minister Humberto Calderon-Berti, who emerged in midafternoon to tell reporters, "there is no floor, there is no ceiling. Each country will set its own prices. It is better to have no decision than a multitier one."
The original Floor was set as $18, but only Saudi Arabia stayed at that level until this meeting. Nigeria, Libya and Algeria jumped their prices above the official $23.50 ceiling in early November as the Iranian crisis deepened.
While Yamani appeared to be referring to turmoil in Iran as a possible "political interruption" in oil supplies, he specified that the Arab-Israeli conflict also posed such a threat. He said it had to be resolved in accordance with United Nations resolutions "as soon as possible."
Countries demanding the highest prices "will find it difficult to stay at that level without reducing their production," Yamani said. He acknowledged that today's lack of a decision "would create some chaos in the markets."
Yamani claims that the $24 figure, which was a 33 percent rise above the $18 Saudi Arabia has charged for oil since July 1, had been chosen after the Saudis examined the profits being made by American oil companies off the lower priced Saudi crude. "We found out how much profit the oil companies were making and we mainly base our decision on this factor."
But the $24 figure also appeared to represent the price at which Saudi Arabia could continue to produce 9.5 million barrels a day even if prices for other producers begin falling. The Saudi royal family has come under criticism at home and within OPEC for producing at higher levels than the country needs for revenue.
Six countries -- Iraq, Qatar, United Arab Emirates, Kuwait, Venezuela and Saudi Arabia -- will group their prices around the $24 price that Yamani pledged Saudi Arabia will not exceed. Libya, Nigeria and Algeria will ask about $30, Iran will stay at $28.50 and other countries will be between the two extremes.