HOW THE WORLD will find out whether OPEC is really a cartel. It's no trick to raise prices in the midst of shortages, as OPEC did in the 1970s. To maintain those prices in the shrinking market of the 1980s is going to be much harder. It means agreeing on production cuts, and it means enforcing those agreements. Over the past weekend, OPEC, meeting in Vienna, appears to have worked out quotas--in principle. The next question is whether the 13 very diverse countries comprising OPEC can actually make them stick.
The OPEC agreement will have little immediate impact on the prices of gasoline and fuel oil. But it probably means that the long downward trend in world oil prices has been broken, at least for the present. That trend began more than a year ago. Evidently fearing that ultra-high prices would wreck the world oil market, the Saudis used their enormous reserves to create a small glut and eventually forced the radicals, led by Libya and Algeria, to come down to a compromise price schedule. In return it promised to prevent further price reductions by controlling its own output.
But the world was cutting down its use of oil much faster than the experts had expected. The glut persisted, and by mid-winter, speculators were beginning to wonder whether the Saudis were going to force prices even lower. With the agreement last weekend, that question has been answered. They are not. At least temporarily, crude oil prices seem likely to stay where they are.
But that isn't necessarily the end of the story. You don't have to have been in Vienna to sense the bitter row within OPEC. While the Saudi production will be about one-fourth below the level of 1979, the last boom year, production for the rest of OPEC will average hardly more than half the 1979 level. Or, to put it the other way around, the Saudis apparently intend to preempt a larger share of OPEC's market as the price for preventing further price drops.
Of all OPEC's internal divisions, the deepest is the one that separates the governments of the rich, thinly populated desert countries from those with large, poor populations that urgently need the oil revenues for economic development. In contrast to Saudi Arabia and its population of some 8 million, there is Nigeria with 90 million people and an income per capita of perhaps $700 a year. Nigeria's oil production, because of its right to re pricing errors, is now about half the 1979 volume. While OPEC may have agreed on a market strategy for the short term, you are entitled to a degree of skepticism regarding its ability to deal with the issues of economic equity that lie beyond.