Britain today firmly rejected Saudi Arabia's pleas to cooperate with the Organization of Petroleum Exporting Countries to reverse the precipitous decline in world oil prices over the past three months.
The British announcement in London dealt a sharp blow to efforts by the 13-member cartel meeting here to enlist major non-OPEC producers in a scheme to force oil prices back up by coordinating cuts in output.
In a speech before Parliament unveiling the national budget, Chancellor of the Exchequer Nigel Lawson said, "There is no question whatsoever, and there never has been, of the United Kingdom cutting back oil production in an attempt to secure a higher oil price."
Lawson's declaration was perceived by OPEC delegates gathered here for an emergency meeting as a stunning rebuke of Saudi Arabia Oil Minister Sheik Zaki Yamani, who has insisted that any strategy to engineer price rises through reduced output must involve the North Sea oil producers.
After studying the depressed oil market for more than five hours today, the OPEC oil ministers adjourned their session until Wednesday morning, when representatives from five outside countries are expected to join their discussions. Egypt, Malaysia, Mexico, Angola and Oman have agreed to cooperate with OPEC in trying to reach a broad consensus on how to shore up prices by controlling output.
Arturo Hernandez Grisanti, the Venezuelan energy minister who is presiding over the OPEC conference, acknowledged after today's meeting that the group's 13 members still were seriously divided over what kind of strategy they should adopt to cope with their crisis.
"We need more time to find common ground," Hernandez said. "The problems are difficult ones, but gradually we hope we will be able to take decisions that will stabilize the markets and restore the price."
The OPEC ministers have failed in three days of talks to overcome a grave rift between Saudi Arabia and its radical opponents, who advocate drastic production cuts to administer a shock to the world oil market that might cause prices to leap above $20 a barrel.
Saudi Arabia's determination to carry out a price war in an effort to browbeat non-OPEC producers to cooperate in sharing markets has caused oil prices to plummet by half to less than $14 since December.
The less wealthy members of OPEC, led by Iran, Algeria and Libya, now argue that this policy has backfired and that many OPEC states are suffering worse economic damage from the price war than outside rivals such as Britain and Norway. The radical OPEC members contend that immediate cuts in output would quickly dry up the persistent world oil surplus and elevate prices along with their incomes.
Yamani contends these production cutbacks would prove self-defeating because major outside producers like Britain, Norway and the Soviet Union -- who have refused to go along with OPEC's policies -- would continue pumping at maximum capacity and steal more customers.
The North Sea crude sold by Britain and Norway, which together produce about 3.5 million barrels a day, competes directly for markets against Nigeria's light blend of oil. As a result, Nigeria has been forced repeatedly to break ranks with OPEC policies in order to keep pace with its competitors.
Nigeria's maverick actions have encouraged other OPEC members to engage in cheating tactics through hidden price discounts or the surpassing of production quotas. This lack of discipline also contributed to Saudi Arabia's decision to launch its price war last December.
The sudden plunge in revenue since that time has induced many OPEC members at this meeting to call for a return to rigid production quotas under a fixed ceiling of 16 million barrels a day or even less.
While there are signs that Saudi Arabia and its Persian Gulf allies are showing more sensitivity to the desperate plight faced by several OPEC members because of falling oil prices, the wealthy sheikdoms are still withholding endorsements of a new quota system until they are reassured that cheating will not resume.
Yamani also appears convinced, according to Saudi delegates, that by carrying the price war into the summer if necessary, he ultimately can persuade Britain and Norway to recognize that they are sacrificing too much valuable oil income through their devotion to free market principles.