Two years ago, the Organization of Petroleum Exporting Countries had the world on the run, puffing after rapidly rising oil prices that helped push Western economics into another recessionary slump. o
Today, what was once a powerful cartel has been reduced to a muddled club of 13 bickering and backbiting states, some of them now forced to beat a price retreat under the pressure of slack demand and a world oil surplus.
Just how muddled they are became clear during the five days of intensive consultations among OPEC oil ministers that ended here yesterday without agreement on how to being down prices in an orderly and dignified way.
As might have been expected, OPEC was much better at pushing oil prices up than it is at managing their slide. No one likes to back down, especially oil-producing countries accustomed to having their way. Retreating might be seen as cowering to someone -- in this case, Saudia Arabia, one of their own.
Saudi Oil Minister Ahmed Zaki Yamani has dropped his earlier boast about engineering the world glut in order to impose more moderate prices on his OPEC partners. That only enraged the hawks.
Yamani now says the glut would be around even if Saudi production were lower, and advises that the best way to solve the problem if for the higher-prived OPEC producers to lower rates and agree with the moderates on a unified price. This, he says, would automatically bring a drastic reduction in Saudi production.
That is more diplomatic. But OPEC this week still got stuck on finding a way to minimize the loss of face that some organization members would incure in cutting prices.
The search for a workable compromise concentrated on a proposed benchmark of $35 a barrel, slightly higher than the current OPEC weighted average price of $34.25. The fact that OPEC would consider raising prices during an oil surplus struck observers as surrelistic.
It also struck the Saudis that way. Iran, for a different reason, also refused to go along. It simply did not want to lower its price. Instead, Mohammed Gharazi, Iran's oil minister, complained of "Western imperialist pressures to break OPEC."
A sense of economic rationality appeared to return to the OPEC talks yesterday when three-fourths of the members were said to be willing to accept Yamani's original offer to unify prices at $34 a barrel, up $2 from the current Saudi price, and freeze there until 1983.
But that was too much for Iran, Iraq and, most important Venezuela, whose oil minister, Humberto Calderon Berti, had been telling reporters that the voters back home would never accept a drop in Venzuela's current price of $36.
In a secondary dispute that complicated the main price debate, the three high-priced North African producers could not agree on premiums for their high-quality crudes. Nigeria, especially hard-hit recently by export losses, was willing to settle for about $2.50 above the benchmark, while Algeria and Libya wanted $4 to $4.50, which would have amounted to a price near the $40-per-barrel figure they now officially offer.
For all the divisiveness in OPEC, talk of the cartel splintering is likely to remain just talk. Experienced observers saw the current dispute over prives as among the most serious in the organization's 21-year history. But OPEC has shown itself able to accommodate a wide diversity of nations and even a one-year-old war between two of them, Iraq and Iran.
OPEC has never been a homogenous group. It combines Arabs, Africans, Asians and Latin Americans in a setting that Yamani once described as resembling a bazaar rather than an economic body.
In the 1960s and 1970s, OPEC was bound together by the struggle against the oil companies and their monopoly in all phases of the oil business. But now that OPEChs members have achieved nearly total control of production, pricing and sale of their oil, their various national interests are coming more into play.
The differences in interest can be sharp, like those between the heavily populated OPEC states of Iran and Nigeria, with their negligable financial reserves, and the sparsely populated states on the western side of the Persian Gulf.
In addition to conflicting national concerns, there can be differences in economic outlook. The key question for OPEC now is: how much of the drop in the oil market is purely temporary?
OPEC saw a similar softening of prices in 1975 that did not last long. But the Saudis are convinced the current glut is not a simple repeat of 1975. Structural changes have occured in the energy market, including a switch from oil to other energy forms and greater conservation, the Saudis maintain.
Also, OPEC has greater competition now from other oil sources, notably Mexico and the North Sea. OPEC's share of world production has dropped from 63 percent in 1973 to less than 50 percent. Its own production is down to 21 million barrels a day from 31 million just two years ago.
Saudi Arabia has emphasized the need for stable and predictable OPEC prices to give the world confidence in oil and keep oil a competitive energy source. But more hawkish OPEC members are not yet convinced that their days of calling market tunes have passed.
Saudi Arabia miscalculated this fact in agreeing to this week's special meeting. Not all the other nations have yet been sufficiently humbled by the downward pressure on oil prices lately to accetp Saudi terms for price reunification. The cost of the meeting was thus another public display of OPEC disarray.