If there ever was any doubt about the impact of the oil glut on the economies of the OPEC countries, it has been dissipated by the annual report of the International Monetary Fund: in the two-year period, 1980-82, which marks the second oil-price "shock," OPEC's financial surplus plunged from $116 billion to $25 billion or less this year.
The underlying lesson is that the Western industrialized nations' dependence on Middle East oil has fallen dramatically. For example, in the first quarter of this year, U.S. oil imports from the Middle East were only 1.1 million barrels a day, or 6.9 percent of U.S. oil consumption, compared to the 1977 peak of 3.7 million barrels a day, or 20.2 percent of consumption.
The perception of this fact tends to lag behind reality in some U.S. government offices. At the CIA, they still believe the script as written two years ago -- that American dependence on Middle East oil will rise until the end of this century.
But no one could have failed to notice that during the crisis in Lebanon, not only did Arab nations not rush to the aid of the Palestinians, but no oil-exporting nation threatened an embargo to counter the Israeli effort to wipe out the PLO.
"The Saudis have shot their bolt," said Prof. Eliyahu Kanovsky in an interview here. Kanovsky, an Israeli academic currently serving as a visiting professor at Queens College, New York, is one of a small band of oil analysts who two years ago saw the oil glut on the horizon.
Along with S. Fred Singer of the University of Virgina's Energy Policies Studies Center, Kanovsky foresaw that a revolution in both supply and demand for oil was taking place that would create a huge surplus, dramatically reduce the world price and shake the economic foundations of OPEC.
If supposedly smart bankers had taken these warnings seriously, they might not have poured money down the drain in tar sands projects in Canada, or in Penn Square National Bank energy "participations" in the U.S. Southwest. But they counted on the price of oil going straight up, with OPEC in the driver's seat.
Even now, some thoughtful analysts raise doubts about the permanence of the glut. Americans for Energy Independence, for example, this week warned against complacency: economic recovery, this group said, could boost demand for oil and re-create a dependence on OPEC.
But Kanovsky, in a soon-to-be-published paper, argues convincingly that the glut is here to stay regardless of economic recovery because "large-scale investments in energy efficiency as well as in energy-switching have a long-term impact."
Thus, even with a return to a 3 to 4 percent global annual economic growth rate for the remainder of this decade (which no authoritative source expects), Kanovsky says that "oil consumption is not likely to rise" at all. The historically optimistic Exxon Corp. has now lowered its forecast for growth in consumption to less than 1 percent annually until the end of the century.
Increases in non-OPEC oil production in the free world could easily take care of such a consumption boost. Kanovsky points out that the rise in non-OPEC output from 5 million barrels per day in 1976 to 21 million barrels a day in 1981 was the response, mostly, to the first oil shock of 1973. Massive drilling and exploration activities since the 1979 oil shock have yet to pay full dividends.
Now come back to the depressing economic statistics for OPEC cited by the IMF: most of the cartel countries, including Saudi Arabia and Kuwait, had planned huge domestic budget increases on the assumption of an ever-increasing stream of oil money. It is hard, now, to adjust to more austere times.
"The conspicuous consumption of the thousands of Saudi princes, and of others who have amassed fortunes, has raised expectations amongst the millions of others," says Kanovsky. "The Saudis are on a collision course between rising expenditures and falling revenues, and their ability to control these trends is very limited."
How about the Iran-Iraq war? Once it is over, Kanovsky argues, Iran, Iraq and fellow OPEC members will have to boost their oil output to help pay for the war and to rebuild the Iranian and Iraqi economies. And Mexico, because of its inancial crisis, will be forced to boost production to help pay off its debts.
To sum up, Kanovsky sees OPEC fighting for a share of the market. It will be dependent on the consuming nations, rather than the other way around. That means downward pressure on oil prices, with no ability to cut production to sustain prices. Such a "gradual dethroning" of Middle East oil will require further and perhaps painful domestic adjustments inside OPEC. It also will force the Western consuming powers to reevaluate the political and strategic importance of the Persian Gulf producers.