WITH THE COLLAPSE of OPEC's attempt to enforce production ceilings, the worldwide price of oil now depends essentially on Saudi Arabia. If the Saudis continue to produce at current levels, prices may fall--at least for a little while. If the Saudis cut production again, prices will probably hold firm, and, as winter approaches, even rise. But it would be a great error to think that the test of wills and purposes now proceeding within OPEC is only about oil prices. Increasingly, it is about relations with the West, and about governments' survival.
The Saudis, with their enormous reserves and their small population, have been able in recent years to play the balance wheel in the world oil market. When the Iranian revolution suddenly decreased oil exports from the Persian Gulf in 1978-79, and the Iran-Iraq war decreased them further in 1980, the Saudis raised their production to cover some of that shortfall. They kept production high through last summer, stabilizing prices and forcing some of them down a little. Their purpose was to demonstrate to the West, and particularly to the United States, the importance of having friends in Riyadh. Saudi Arabia has little in the way of military power. Its national security depends on the assumption that the governments of the West consider it crucial to have the present Saudi regime in power, willing to help maintain the accustomed flow of oil--and the economic stability that, in the industrial democracies, depends on it.
With the decline in world oil consumption, the Saudis have now reduced their exports. Since last summer, they have cut their production by a third --a gigantic decline. But they have not cut fast enough to accommodate Iran. The quarrel within OPEC is, above all, between revolutionary Iran, which needs the money for its war, and Saudi Arabia, which is the arbiter.
The Saudis now find themselves between two wars. Iran, having thrown the Iraqis off its territory, is apparently preparing a counter-invasion of Iraq. In Lebanon, the battle lurches from one broken cease- fire to the next. In either case, the fighting is not far from Saudi borders. The disputes within OPEC exacerbate the tensions between the rich, thinly populated and deeply conservative Arab states of the Gulf and the Mediterranean Arabs, who are mostly poor, mostly urban, and frequently radical. Meanwhile the pressures from Iran rise. The Gulf Arabs were severely shaken by the attempted coup, supported by Iran, in Bahrein last winter.
Rather than wondering whether the price of gasoline is coming down this summer, Americans would do better to consider whether the political structure of the Persian Gulf region is going to hold up. If it begins to slide, you can expect the price of gasoline to move very rapidly indeed.