World oil prices have been slipping again as OPEC's marathon session in Geneva dragged into its 10th day Wednesday. But the stakes for oil producers this time are much larger than before. At issue is the direction of oil prices over the balance of the decade.
The squabble over a formula for oil production quotas disguises radically different perspectives on oil prices, which have split the Organization of Petroleum Exporting Countries into two camps.
Two key producers, Saudi Arabia and Kuwait, believe that oil prices -- now at around $14 a barrel -- are, in fact, still too high.
These two nations control the largest known oil reserves in the world, and both publicly and privately argue that lower prices are needed to consolidate OPEC's longer-run competitive position.
Oil prices now hinge critically upon some form of agreement, because the present ad hoc production accord, cobbled together in August, automatically self-destructs Nov. 1.
Producers fear that failure to agree will trigger a new price war like that of last summer, when oil prices collapsed below $8 a barrel.
Early this week, with the OPEC conference apparently heading for a simple renewal of production curbs, the Saudi Cabinet insisted on a redistribution of quota allocations. King Fahd's demand was that the kingdom get an even higher share, because of the ``sacrifices'' he said it had made to help the organization in the past.
Except for Kuwait and Saudi Arabia, all OPEC members have been willing to renew the present agreement. None is happy with its quota, but each appears to recognize that dissatisfaction is preferable to the financial disaster that would ensue if the current talks fell and prices tumbled.
The dispute over quotas has become a proxy war between the two camps. Ostensibly, OPEC has debated the design of a mathematical formula to apportion production.
The formula is to involve predetermined, unambiguous criteria -- such as population, proven oil reserves, or historical production capacity -- so that each member's allowed output can be calculated rigorously and without further debate.
Focus on a formula has all but guaranteed failure, however, since a workable formula entails, essentially, squaring the circle.
Nigeria and Indonesia, for instance, emphasize population as the basis for assignment of quotas, while others stress reserves or capacity.
Abu Dhabi has further cluttered the discussion by proposing ``technical complexity'' and ``cost'' as factors to be considered -- reflecting the economic inefficiency of its own reservoirs.
Thus, an agreement on any combination of criteria and weights which does not simply ratify reality is remote.
Neither Saudi Arabia nor Kuwait would grieve if the quest for a formula should fail. Both are poised to increase production and see prices fall again, if only until the next OPEC meeting in December.
For both nations, the tactic is painless, because higher output offsets lower prices, just as before.
Two more months of plummeting prices in oil markets is actually viewed as salutary by the Saudis and Kuwaitis. First, overproducers such as Abu Dhabi or Nigeria could be traumatized into tractability, and Norway, Britain, and the Canadian province of Alberta would be reminded of their vulnerability if they, too, did not elect to cooperate.
Second, Saudi Arabia and Kuwait are now convinced that lower prices over the next year to 18 months, coupled with the fear of still further drops, will dry up com peting oil in the United States and the North Sea -- a perspective that has been confirmed by studies recently carried out for the two countries.
Moreover, both claim that OPEC suffered more from lost markets after 1979 than it gained from the few years of oil that sold for more than $30 a barrel.
Ironically, the debate within OPEC has changed radically since the latter part of 1985, and the cartel's ostensible weakness today masks a longer-term strength: OPEC is technically able to raise prices again, but the key players now resist, believing any rise to be premature.
OPEC's struggle in Geneva has thus been between proponents of immediate price increases versus those who want low prices to help the organization regain market share.
This time, unlike the crisis years of 1979-80, Saudi Arabia and Kuwait weigh heavily in the organization, given their surplus production capacity and extensive financial reserves.
The dispute over the mathematics of quotas is therefore a much more important debate over the timing of future price increases. Thus it is of critical importance to consumers and energy producers.
For now consumers enjoy low oil prices (relative to what they were a year ago).
They may see even lower prices if OPEC fails to reach a new or extended production agreement. But eventually prices will rise -- sooner if one faction within OPEC prevails; later if the Saudis and Kuwaitis do so.