BUSINESS/ECONOMY

OPEC’s shaky accord

ROBERT MILLER December 19 1983
BUSINESS/ECONOMY

OPEC’s shaky accord

ROBERT MILLER December 19 1983

OPEC’s shaky accord

The 13 members of the Organization of Petroleum Exporting Countries (OPEC) managed to keep their increasingly shaky cartel from coming apart last week in Geneva. After two difficult days of private debate, delegates decided not to revise their nine-month-old agreement on price and production levels. That deci sion, to continue pumping oil collec tively at a daily rate of 17.5 million

barrels and charging $29 (U.S.) a barrel, means that consumers will not face substantial price increases at least until the next OPEC meeting in July.

But given OPEC’s wide range of problems—diminished demand, increased non-OPEC production, bickering, cheating and even a war among its members—there were widespread doubts that discipline would reign. Said Paul Mlotok, senior international oil analyst with the Wail Street firm of Salomon Brothers Inc.: “A lot can happen between now and July. The marketplace is likely to force OPEC to

hold an interim meeting.”

For more than two years, as the global recession continued and oil consumption slumped, worried frowns have been as commonplace as custom-built jets and bulletproof limousines whenever OPEC’s oil ministers have gathered. Last week’s sessions in Geneva’s plush Intercontinental Hotel were no exception. Before the talks even began, OPEC’s private problems were public knowl-

edge. Among them: demands by Iran, Iraq and Nigeria for larger quotas within OPEC’s overall production ceiling; a call by Iran for a rollback of OPEC’s $5-a-barrel price cut offered its customers last March; and widely published allegations of quota-cheating against such members as Iran, Indonesia and Nigeria. As well, OPEC has had to cope with determined price competition by nonmember nations, including the Soviet Union and Britain. Perhaps understandably, Sheik Maneh Said alOteiba of the United Arab Emirates emerged from one session and declared: “Things aren’t going very well.”

In the end the 13 agreed to follow a recommendation put forward by Indonesia, among others, that they continue to respect existing price and production agreements. For Canadian consumers, who burn roughly 225,000 barreis of imported crude every day, most of it from Venezuela and Mexico, the OPEC decision means that there will probably be no significant change in gasoline and heating-oil

prices this winter—unless, of course, the Iran-Iraq war worsens and Iran fulfils its threat to close the Strait of Hormuz, through which more than 20 per cent of Arabian oil flows.

As the OPEC ministers flew home from Geneva, they could take some comfort from their facade of unity. But whether it was enough to paper over the larger cracks in OPEC for another six months was uncertain. Said Mlotok: “There was clearly no consensus to solve the larger differences, although OPEC is smart enough not to bring that up.” -ROBERT MILLER in Toronto.