It was an image that the press photographers covering last week’s Geneva meeting of the Organization of Petroleum Exporting Countries (OPEC) could not resist. They fell over one another for pictures of the current OPEC president, Indonesian Oil Minister Subroto, hobbling into the plush Intercontinental Hotel on crutches. The vision of the 25-year-old cartel on its last legs was only slightly overworked. When the meeting closed four days later, the only agreement was on a cut in the price of lower-quality crude oil, amounting to an overall reduction of less than one per cent in OPEC’s average price. And even that meagre cut was too much for three key members: Algeria, Libya and Iran refused to go along. Declared Constantine Fliakos, an oil analyst with Merrill Lynch Pierce Fenner & Smith Inc. of New York: “The meeting was a joke. It did more damage to OPEC than good.” The inability to agree on significant price cuts was not the only failure of the session. The 13 oil ministers also sidestepped the crucial issue of OPEC production quotas designed to support high prices by limiting supplies of oil. But many OPEC countries—particularly the poorer ones, such as Nigeria and Iran —openly disregard them. That has aggravated a glut of oil on world markets, created in part by non-OPEC oil producers such as Canada, Great Britain and Mexico. In fact, a Venezuelan delegate told Maclean’s that Canada’s role as a “destabilizing influence” on prices was discussed last week in a special session. Battles over price cuts also under-
scored resentment by the poorer OPEC members toward the wealthy Persian Gulf producers. At one extreme, in the United Arab Emirates, the average annual income per person is $22,870 (U.S.); in Indonesia the figure is $560. Tensions surfaced after Saudi Arabian Oil Minister Sheik Ahmed Zaki Yamani expressed surprise at Algeria’s “intransigence” over price cuts. The Algerian representative, Belkacem Nabi, retorted angrily that Saudi Arabia was “lifting the wallets” of the poorer members.
The polarization led many analysts to doubt that OPEC will be any more successful in enforcing production quotas when it meets again in October. Their greatest fear is that Saudi Arabia, which has cut its own production to offset overproduction by other OPEC members, will lose patience and drive prices down further by flooding the market. Earlier last month Sheik Yamani warned that such a move could lop up to $10 (U.S.) from the current price of $28 per barrel. OPEC’s official price peaked at $34 per barrel in 1983.
For non-OPEC oil producers, the prospect of further price reductions is a continuing source of anxiety. Said one British official: “The oil companies themselves become panicky if prices fluctuate wildly. But if they see a steady trend—even if it is a downward one —they can plan around it.” After last week’s debacle, the steadiness of OPEC itself is in doubt.
-MARC CLARK, with JAMES CRAWFORD in Geneva and IAN MATHER in London.
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