Saudi Arabia, which joined other oil producing countries in reducing production over the weekend, has left open the door to further cuts if prices continue to decline in world markets, its top oil official said yesterday.
Speaking from Vienna, where the Organization of Petroleum Exporting Countries decided to slow production by 1.5 million barrels a day to prevent an oil glut from forcing down prices, Saudi Oil Minister Ahmed Zaki Yamani said he expected to see "a new trend in the market as of next week." At the same time, he indicated his country was prepared to reduce its output beyond the half million fewer barrels per day it will produce in April if prices do not stabilize.
Yamani was interviewed on "This Week with David Brinkley" (ABC, WJLA).
OPEC's first formal agreement to establish production limits as a means of keeping prices up in the midst of an oil glut has led some observers to contend that the cartel is breaking up. Economist Milton Friedman said yesterday on "Meet the Press" (NBC, WRC) that "OPEC is definitely on the way to disintegration," provided the political situation in the Middle East remains relatively stable.
Returning from his weekend at Camp David, President Reagan said that while his decision to decontrol oil prices had not broken the back of the OPEC cartel, he did not envision oil prices going back up for the time being.
Energy Secretary James B. Edwards, who appeared in a separate segment of "This Week," said that Saudi Arabia and OPEC were getting "a lesson in supply-and-demand economics. OPEC will have to do a lot of adjusting to keep prices stable."
Edwards predicted that gasoline prices would continue to fall for a month or two before rising again gradually, but said the country will never again have to face the emergency situation it faced during the Arab oil embargo, thanks to contingency plans, strategic petroleum reserves and conservation.
He predicted the cartel would continue, "but in a very much weakened position than before," on the premise that non-OPEC members, particularly underdeveloped countries, will in the next few years increase their production as a percentage of the total market.
Yamani was asked what would happen to OPEC if some countries broke the newly set quota of 17.5 million barrels a day. "It would mark a very dangerous trend in the history of the oil industry," he replied. "If this happens, we will see a deterioration in the price of oil."
But if the current price of $34 a barrel of crude oil is maintained, he said, it would be "proof that OPEC is in the driver's seat."
He painted a grim scenario resulting from lower prices: oil company bankruptcies, an end to investments in alternative energy sources, followed by another energy crisis in 1985 or 1986.
Yamani blamed the current glut on drastic price increases in 1979, followed by world recession and a "conspiracy" by some consumer nations to draw down their stockpiles at much higher rates than usual.
Petroleum companies claim the inventory depletion rate is 2 million barrels per day; Yamani said the Saudis know for sure it is 4 million, "so someone is lying."
Even with the glut, he concluded, western "consumers know they depend entirely on the oil coming from the Middle East, and especially from the Arab countries." Oil is no less a political weapon today than it was in the past, Yamani said.