SAUDI ARABIA got about half of what it wanted at OPEC's meeting this week in Vienna. The Saudis coolly announced, as it ended, that they would leave their high production rates unchanged for the present. In other words, they will maintain that slight glut of oil to exert a downward pressure on every other exporter's price until they get the rest of what they want.
And what do they want? The Saudi view is that OPEC needs a unified schedule of prices, based on their oil, that will rise gradually and predictably. The Saudi's opposition within OPEC are the radical nationalists -- above all, Iran and Libya -- who want to use the price of oil to settle old scores. They see the oil as a device to redistribute the world's wealth in their favor and, to their minds, the faster the better. Ayatollah Khomeini's government, approaching oil in the same spirit that it approaches everything else, whooped its price up to $35 a barrel earlier this year. Since the Saudis have been selling precisely the same grade of oil for $28 a barrel, only the most desperate of buyers have been going to the Iranians. Iranian exports have fallen precipitously this year. That painful experience underlies the extraordinary vehemence of the Iranian attacks on Saudi Arabia at the Vienna meeting.
The outcome at Vienna was a temporary compromise under which the Saudis will go up $2 a barrel to $30 -- rather than the $4 originally in view -- while the others, including the resentful Iranians, stand fast. It is reasonable to expect that from now to the end of the year the Saudis will work continuously to close further the remaining gap between them and their OPEC partners, while restraining severe leaps in price.
The Saudis, with their huge reserves, are playing the long game. They want higher prices, but they do not want to scare their customers away. They do not like to have their customers think of dependence on oil as politically and financially risky. The Saudis know that there is an inherent limit to world oil prices. That's the price at which synthetic fuels become profitable. Nobody knows yet what that price might be. But the American energy industry is about to invest $20 billion, under federal guarantees, in finding out. That's a serious effort. The Saudis, excellent tacticians that they are, would probably prefer to keep the world price of oil just a little below that of the synthetics, to keep alive all those uncomfortable questions about the economic viability of a synthetic fuels industry. That's the way for the oil-exporting governments to maintain their market power into the next century. But since that logic is foreign to the theologians and romantics running Iran and Libya, the internal strains within OPEC are not likely to diminish.