IT'S NOT SURPRISING that OPEC's meeting in Vienna has broken up in another angry quarrel. The purpose of the meeting was to try to impose limits on the member countries' production, in an attempt to keep prices from falling further. But OPEC has never succeeded in maintaining production agreements. Making OPEC work like a real cartel would be difficult under the best of conditions, and, with the long war between Iraq and Iran, present conditions within OPEC are far from ideal.
The really interesting question is the Saudi response, over the months ahead, to this collapse. The Saudis' enormous reserves give them the power, within very wide limits, to set the world price of oil wherever they choose. When the Libyans were leading the drive to push prices far higher than the Saudis thought sustainable, the Saudis deliberately created a glut of supply that last year forced them down to the compromise level the Saudis wanted. But even that compromise level turns out to be too high to hold firm at OPEC's current production rates. If the other OPEC governments aren't going to help, the Saudis are left with an unpleasantly simple choice. Either they must cut back their own production--now half their capacity but twice any other OPEC country's output--or they must be prepared to see the price drop further.
The Saudi price, at $34 a barrel for the past 15 months, has more than a purely economic significance. The rapid rise in oil prices over the past decade has seemed to much of the Third World, including people in countries that have suffered grievously from it, to be a great historic righting of old wrongs and wounds inflicted by the rich industrial powers. It was, in truth, redistribution of the world's income on an unprecedented scale, and widely celebrated in the poor countries as a long stride in the direction of social justice.
The Saudi monarchy is now talking about stern measures to eliminate corruption and to broaden political participation. Those are not necessarily signs of any great self-confidence within Saudi Arabia. Cutting prices to keep sales up would invite trouble from everybody in the world to whom that $34 price has become an important political symbol, and the Saudis are unlikely to do that. But to go in the other direction, cutting sales to keep the price up, is not necessarily safer, since it means reducing the incomes of many Saudis who like their present style of life. It would be a great mistake to expect oil prices to be any more stable than the political structure of the Persian Gulf region.