IT'S NO TRICK to look like a fiercely aggressive cartel so long as you're selling on a tight market. OPEC has always been most impressive when world oil supplies were short and the price was rising. But to behave like a real cartel in a falling market is a great deal harder.
The central question for OPEC has always been whether it is capable of enforcing cuts in production, in times of declining sales, to enforce its high prices. On the present showing, you'd have to guess that OPEC isn't going to be able to achieve this most difficult, and most important, of a true cartel's operations. OPEC's oil ministers, or at least most of them, are to meet today in Vienna to see what can be done. But the Saudis apparently do not plan to attend, on grounds that they are tired of being screamed at by the Iranians.
Last fall the Saudis, after many months of deliberate overproduction, forced the rest of OPEC to accept their price schedule. While that required the Africans to reduce their extremely high prices to the Saudi level, the Saudis offered assurances that there would be no further erosion. But over the winter, with the large drops in consumption in the industrial countries, prices continued to sink. In March, OPEC tried for the first time actually to impose production ceilings on its members. But over the spring there has been increasing evidence that several of these governments are violating the ceilings --some because they need the money, some because they resent the Saudis' restraint.
Does it follow that the price of oil is now going to drop? Not necessarily. There are several huge imponderables. No one knows what the buyers and consumers of oil are going to do over the summer. This is the time of year when the companies normally begin buying more rapidly to build reserves for the winter, but, amidst this recession, there's no consensus about the size of this buildup. Next, no one knows whether the quiescent war between Iran and Iraq will actually end, or what effect that might have on those two countries' exports. Finally, no one knows how the Saudis will respond to all these developments--and the Saudis alone can tighten or loosen oil markets worldwide at their discretion.
OPEC's troubles won't draw much sympathy from the industrial countries that run on oil. But internal strains in OPEC, and even its collapse, would not be likely to have large consequences for consumers. Over the past decade it has essentially been supply and demand, not the pricing policy of the cartel, that has set oil prices. That will continue to be true regardless of OPEC, and for the decades ahead the trend in oil prices is still far more likely to be up than down.