Skip to: Content
Skip to: Site Navigation
Skip to: Search


OPEC about to meet again and the forecast is for calm

By David R. FrancisBusiness editor of The Christian Science Monitor / July 15, 1983



Boston

When the OPEC oil ministers get together in Helsinki Monday and Tuesday, the news will be bland: no oil price increase, no oil price decrease, no major squabbles.

Skip to next paragraph

And that, according to Dr. Rajai M. Abu-Khadra, the top economic adviser to the Kuwaiti Oil Ministry, is dandy.

''I don't think there will be anything spectacular,'' he said in an interview here.

That's a major difference from the last go-around of the Organization of Petroleum Exporting Countries oil ministers, in London in March, when there was a crisis atmosphere. Oil prices were declining. The ministers were fighting over quotas for exports of their ''black gold,'' and they had to settle on price ''differentials'' - the differences between varying crudes from various nations intended to make competition equal among the OPEC suppliers - as well as a new base price.

But after much hassle, those issues were all settled, with the ''marker'' price set at $29 a barrel.

Since then price pressures have eased for OPEC producers. Britain has squared the price of its North Sea oil with the OPEC pricing structure, helping Nigeria especially. ''Cheating'' by OPEC members on their quotas or prices has been reduced.

Most important, Dr. Abu-Khadra notes, the demand for OPEC oil has stepped up and shows promise of increasing further over the next year or so. At the moment, he says, the OPEC members are producing some 16 to 17 million barrels a day. But the oil companies, instead of trimming inventories of crude, are starting to build up stocks again. This could raise demand some 2 million barrels a day.

Further, the economic recovery has definitely started in the United States and to some lesser degree elsewhere in the world. This could build up over the next year or so to another 2 to 3 million barrels in daily demand for crude, Dr. Abu-Khadra reckons.

The Kuwaiti economic adviser, a Palestinian, is not firm about these numbers. He does not claim to have a precise idea as to how much additional fuel conservation will take place within the industrial or developing nations. Nor does he know whether Americans will switch back to their old habit of driving larger cars that consume more gasoline.

Nonetheless, it will make the OPEC nations ''more comfortable,'' Dr. Abu-Khadra says. ''It would minimize the forces of dissension in OPEC, and the squabbling.'' He regards 23 million barrels of exports per day for OPEC as ''the point of comfort.''

As the demand increases, the OPEC nations will have to decide which members will ''get the benefits.'' The distribution of price-maintaining quotas has always been a problem for cartels, and OPEC became a genuine cartel only relatively recently, when it started to control member production and not just set prices.

The London quota agreement, Dr. Abu-Khadra argues, proves once again that OPEC will not disintegrate over such disputes as production allocations. Since the price of oil is so vital to the OPEC nations, it ''concentrates the minds'' of the ministers, he says. ''This has been proved time and time again, that they will stick together . . . despite all the big political problems.'' That includes the war between Iran and Iraq, two OPEC members.