Saudi Arabia issued a blunt warning to Britain and other non-OPEC oil producers today, saying that unless they cooperated with the 13 members of the organization, the price of oil could drop as low as $8 a barrel.
The appeal came as the Organization of Petroleum Exporting Countries opened an emergency meeting here today to explore ways to salvage the collapsing oil market. Prices have plummeted by more than half from the $26 per barrel price that many OPEC members were paid for their oil as recently as December.
OPEC's acting chairman, Arturo Hernandez Grisanti of Venezuela, said after the initial day's session that the ministers "were very worried by the sharp fall in prices in recent weeks." He said OPEC hoped to devise a strategy to prop up the market before embarking on consultations Wednesday with non-OPEC producers.
The plunge in income has further embittered the tense relations between the rich Persian Gulf sheikdoms, led by Saudi Arabia, and the poorer, more populous states that face serious economic and political difficulties because of the depressed oil revenues.
Algeria, Iran and Libya have accused the Saudis of instigating the price war by doubling output in the past year to more than 4 million barrels a day. The three countries have complained that the production policies of the gulf states are selfish and are imposing intolerable hardships on other OPEC members.
Saudi Arabia defended its actions by insisting that Britain, Norway, the Soviet Union and other key oil producers outside OPEC will cooperate only when they realize that their determination to go their own way will exacerbate the oil surplus and that prices will fall to levels ruinous to producers.
Saudi delegates said their country was now determined to avoid being undercut by Britain and other rivals outside OPEC. They indicated that the price war may continue through the summer to force non-OPEC producers to recognize that their own economic interests dictate a need to cooperate on curbing output so that prices can rise once again.
But delegates from rival states inside OPEC expressed suspicion as well as skepticism toward the Saudi strategy. They said that the gulf's sheikdoms, with their enormous crude oil reserves, are vitally interested in keeping oil prices low in order to ensure future demand for their product.
They contended that such long-term considerations, rather than the short-term goal of compelling Britain to curb its production, lie behind the decision taken by gulf Arab states to raise oil output in a depressed market.
In carrying out this policy, the delegates added with some bitterness, the Saudis seemed prepared to sacrifice even the most basic economic needs of the poorer OPEC members.
Only Egypt, Mexico, Oman, Malaysia and Brunei have shown any interest in discussing marketing arrangements this week with the OPEC members. But oil traders observing the meeting said such consultations seemed pointless unless the major North Sea producers also join in a cooperative plan.
In an interview published in Britain's Sunday Telegraph newspaper today, Saudi Arabian Oil Minister Ahmed Zaki Yamani warned that "disaster lies ahead for which Britain would bear the lion's share of the blame" because of its adamant refusal to consider production limits to help control the oil market.
Yamani's call was echoed in an extraordinary declaration earlier in the week from the court of King Fahd, who said Saudi Arabia wanted oil prices to rise but stressed that "this can only be done with the cooperation of all producers inside and outside OPEC."
The economic crunch, while much worse in such debt-strapped nations as Nigeria, also has taken a toll in Saudi Arabia. Fahd last week announced a five-month delay in the Saudi national budget because of uncertainties about revenues derived from the chaotic oil market.
Britain and Norway, who together are pumping more than 3 million barrels a day out of the North Sea, have resisted OPEC's pleas to cooperate because their governments favor free market principles and their economies are reaping the same benefits from lower oil prices as are other western industrial nations.
The failure to persuade the North Sea producers to restrain output, or get them to consent to market quotas, prompted OPEC members to declare their intentions last December to defend their existing share of the market of 17 million barrels a day at whatever the cost.
The policy switch ignited the latest price war, which many OPEC members now want to see halted because of their worsening economic plight. Industry analysts say that if current trends continue, the 13 OPEC producers will lose more than $50 billion in earnings -- equal to one-third of their entire income for 1985.
Those prospects have evoked renewed calls from OPEC's more desperate members for drastic production cuts to generate a shock that would elevate oil prices above $20 a barrel.
Iran has even called for a total embargo on all OPEC oil exports for one month, to be followed by a substantially reduced OPEC output of as low as 10 million barrels a day.
Saudi Arabia, backed by the other gulf sheikdoms, already has rejected this idea because it claims countries outside OPEC simply would resume stealing its customers.