Less than three years ago, the word ``OPEC'' was dreaded throughout the oil-importing world. OPEC stood for: Digging ever deeper into the wallet at the gas station, higher and higher inflation, and the apparent loss of Western economic and political power to a bunch of oil grandees.
But now OPEC seems almost pass'e. The ``cartel'' is no longer monolithic, no longer presiding over inexorable price hikes, nor supreme in the energy world.
A meeting of the Organization of Petroleum Exporting Countries in Vienna saw OPEC again struggling to maintain the official $28 per barrel price even while it loses its market to cheaper non-OPEC oil.
The meeting ended yesterday, but no specific actions to end the slide in the price of oil were adopted. However, there was a tentative agreement to tailor production to meet changing seasonal Western demand.
``The OPEC meeting is but one scene in a drama that will go on for several years,'' says Daniel Yergin, president of Cambridge Energy Research Associates. ``It will be a holding action until the next meeting.''
Whatever the outcome of OPEC's summit, it is virtually certain that oil prices will continue to fall this year unless drastic measures are taken. OPEC can cut prices or cut production. Either would be painful for the organization.
Falling prices hurt OPEC, other oil-producing nations like Mexico, Britain, and Norway, and many energy-producing regions in the US. But they are good news for most consumers and businesses:
Each $1 off a barrel of oil takes 21/2 cents out of the cost of a gallon of gas. Yergin estimates 1985 gas prices are 10 cents a gallon less than 1975 prices in inflation-adjusted terms.
Each $5 per barrel cut in the price of oil knocks 1 percent out of the inflation rate and stimulates US gross national product by 0.5 percent, Charles Schotta, deputy assistant Treasury secretary, recently noted.
Prior to the Vienna meeting, Saudi Arabia threatened to flood oil markets. While more analysts viewed this as a Saudi bargaining position, it shows Saudi ire with fellow members cheating on agreed-upon production quotas and leaving the Saudis to compensate.
Though consumers may wish for a price war, most economists agree that an orderly decrease in the price of oil -- rather than a free fall -- prevents problems for the West's financial system. If prices were to plummet, many oil wells would have to shut down and nations like Saudi Arabia would have to withdraw deposits in Western banks to cope with lower revenues. Conservation, oil exploration, and alternate energy research would go by the board.
Sliding OPEC prices were brought about in part by the recession in industrial countries in the early 1980s. In part, too, they were engineered by the Saudis.
But Saudi policy has not had its intended effect: to stimulate industrial economies into consuming greater quantities of oil. Prices have fallen. So has OPEC's market share. And both look like they will fall more since industrial economies are sluggish.
Saudi Arabia and other nations must sell their crude and refined oil to earn much-needed revenue. But OPEC today controls less than one-third of the oil market. And deep divisions within OPEC mirror Saudi vs. Iranian divisions in the Middle East.
Iran, supported primarily by Libya and Algeria, is often characterized as a ``price hawk'' in the oil world.
Iran advocates a sharp cut in OPEC's current production ceiling of 16 million barrels a day. This could have the effect of an oil embargo, the Iranians argue, drying up the oil surplus and prompting a rise in prices.
It is a policy that is slowly gaining support in OPEC, says G. Henry M. Schuler, head of the energy security program for the Georgetown Center for Strategic and International Studies in Washington.
``The Iranians have offered very sound economic analysis in support of their position,'' Schuler says. ``The Saudis are getting constant pressure on this. Can the Saudis continue to ignore the short term in the face of very real, immediate regional political problems?''
A key question: Just how much of a surplus of oil is there in the world today? Schuler figures it at 2 million barrels a day and thinks it is possible OPEC could switch market ``psychology'' in its favor by holding back that much.
Energy consultant Yergin, however, puts the surplus at 10 million barrels a day and says simply, ``The Iranian scheme would not work.''
``OPEC is living in a world of stagnant demand and growing production by non-OPEC countries,'' says Yergin, who this month will publish a report entitled ``Just another commodity: the reshaping of the oil industry.''
By 1990, however, two things could happen. Some oil experts see OPEC rising in power again. North Sea, Soviet, and Alaskan fields will be playing out. Saudi Oil Minister Ahmad Zaki Yamani recently told the Arab newspaper Al-Sharq al-Awsat he expects the 1990s to be ``a golden age for Arab oil.''
Others argue that energy conservation now is part of the industrial world's culture and new oil fields and alternative energy will keep OPEC in the background.