After a decade of unchallenged supremacy over the oil market and unity of purpose in raising prices ever upward, the 13 members of the Organization of Petroleum Exporting Countries are now in a political battle among themselves over what to do about the precipitous drop in prices and worldwide demand.
Some OPEC states are undercutting their own fixed prices, others are desperate to produce more, and all are pressing Saudi Arabia, the biggest exporter, to save them from an unending oil glut.
There is even talk of a special meeting between OPEC and the major oil companies--the first such formal talks since 1973--to discuss the situation.
In the past 10 days, OPEC has stood by helplessly as one of its members, Iran, cut its prices about $1 a barrel in a bid to boost lagging sales to finance its war with Iraq.
At the same time, Britain, a non-OPEC exporter, dropped the price of its high-grade North Sea oil $1.50 a barrel, and Norway is expected to lower its price. This puts enormous pressure on OPEC's three African members--Libya, Algeria and Nigeria--that produce a similar light crude to follow suit.
Mexico, another major non-OPEC producer, cut the price of much of its crude oil by $2 a barrel last month, and the Soviet Union recently added to the surplus by unexpectedly selling some of its petroleum products on the spot market, where noncontract trading is done.
Industry analysts say it is difficult to translate the present cuts in crude oil prices directly into lower consumer prices since a growing worldwide surplus had already prompted major oil companies to reduce the prices of gasoline and heating oil, partly in anticipation of the producers' cuts.
Whether the price plunge is temporary or long-term is a subject of much debate among the producers, companies and outside analysts. The answer may depend ultimately upon a decision by the giant of exporters, Saudi Arabia, which alone has the ability to halt the trend.
The decision may not be entirely one of economics, however. The Persian Gulf, the heartland of the oil world, has become increasingly polarized politically by the 17-month-old war between Iran and Iraq.
Iran, once a major producer but a marginal one since the onset of its Islamic revolution, has said it must vastly increase exports this year to finance its war.
Unless Saudi Arabia, which accounts for about 40 percent of OPEC production, agrees to a major cutback, the Iranian action could deluge the market with oil and push prices further down.
The two Islamic fundamentalist gulf nations are now bitter enemies, and it is unclear whether the Saudis, who have provided Iraq with between $15 billion and $20 billion in war loans, are willing to help Iran out of its predicament.
But the Saudis are under intense pressure even from their closest Arab allies in the gulf to make a major cutback in order to prevent a total collapse in the market that could shatter the fragile unity of OPEC.
The immediate reason for the price cutting is the persistent surplus in the world oil market, despite the cold winter in Western Europe and the United States.
The surplus is due partly to the prolonged recession in the West but also to a radical change in consumer habits as a response to soaring prices of the past decade.
The result has been an acute trial for OPEC, whose members accounted for three-fourths of the total world exports a few years ago but now account for only slightly more than half. Since peaking in 1977 at 31.3 million barrels a day, OPEC's crude-oil production has dropped steadily and is estimated now to be no more than 20 million barrels a day.
Iran is now selling its oil for 80 less than the OPEC benchmark price of $34 for a 42-gallon barrel of light Arabian crude, while British oil at $35 is $1.50 to $2 less than that of its African OPEC competitors.
Some oil analysts predict prices could go as low as $28 to $29 a barrel--$5 to $6 under the OPEC benchmark price--if the glut continues through this year.
Some OPEC members called this week for an emergency session to stem the slide, and Saudi Oil Minister Ahmed Zaki Yamani expressed alarm in an interview with a Saudi newspaper at the trend of producers to discount prices. He accused some of virtually dumping oil at any price on European markets.
While Yamani said the situation "might deteriorate to such an alarming point that we have to meet to discuss it," he said he saw no need for a special meeting now.
Saudi Arabia's official level of production is 8.5 million barrels daily, but industry reports say it has dropped to less than 8 million.
In the past year, the kingdom has cut its production three times, from 10.3 million barrels a day. Yamani has said it could drop as low as 6.2 million barrels and still provide the country's immediate revenue needs. Thus there is still room for a substantial Saudi cut if the kingdom decides to do so.
The Saudis are now coming under intense pressure to do make another major cut, not only from OPEC's African members but also from its closest Arab allies in the gulf.
Kuwait's prime minister, Sheik Faad Abdullah Sabah, said at a press conference here Wednesday that it is important for the oil producers to cut production in order to maintain prices. While he mentioned no country, the only one in a position to cut back is Saudi Arabia. Officials in other Arab oil nations, including the United Arab Emirates and Libya, have also appealed to the Saudis to lower their output.
Libyan leader Muammar Qaddafi was reported here this week to have called Kuwaiti's ruler, Emir Jaber Sabah, to discuss the international oil situation. He reportedly asked the Kuwaitis to intercede on Libya's behalf to persuade the Saudis to reduce their production.
Kuwait is now exporting about 600,000 barrels daily, 50 percent below its official level. For the first time in years, it does not expect to add to its $65 billion to $70 billion in foreign exchange holdings this year and may have to cut spending.
The glut hardly constitutes a crisis for this rich nation, but it does for Iran. Iran wants to increase its exports from 700,000 barrels daily to over 3 million in order to raise $19 billion this year to finance the costly war, the gulf press reported this week.
Iran's warning that it may attempt to flood the market in the midst of a glut has sent shudders through OPEC, and there is no indication yet how the organization plans to handle it. At the same time, however, some oil industry analysts say Iran has had difficulty finding buyers for any additional oil.
Yamani seems to feel that natural market forces should be allowed to work on both production levels and prices, although he also insists that the official Saudi price of $34 be maintained.
In an interview with the English-language Saudi Gazette this week, Yamani refused to confirm that Saudi production was only 7.9 million barrels a day in January. But he did concede that "most probably there will be a decline in the level of production."
He said, however, that "market forces will be making that decision on our behalf."