OPEC is over a barrel.
Proposals to boost energy taxes in Europe and the United States threaten future profits for the once-powerful Organization of Petroleum Exporting Countries. The OPEC cartel, which includes Saudi Arabia, Iran, Kuwait, and nine other major producers, pumps nearly 40 percent of the world's oil.
Higher taxes could upset OPEC's long-range production plans, lower crude-oil prices, and drain billions of dollars of income from the petroleum giants.
Consumer nations, including the US, see oil as a potential gusher of tax revenues. They predict higher taxes will also reduce consumption, protect the environment, and cut dependence on imports. In April, the US imported more than half its daily oil supplies, mostly from OPEC nations.
President Clinton has proposed billions in new taxes that would hit petroleum harder than coal, natural gas, and other forms of energy. The taxes, which still must get through a skeptical Congress, would boost prices by $3.50 per barrel of oil, or about 9 cents on a gallon of gasoline.
Last month, 11 of the 12 members of the European Community (EC) called for a new carbon tax, which would amount to $3 on a barrel of oil and rise to $10 by 2000. Only Britain, itself a major oil producer, was opposed.
All this leaves OPEC with little room for maneuver - and a growing threat to its own revenues.
Although OPEC was blamed by many Americans in the 1970s and '80s for gasoline shortages and sky-high prices, the cartel has followed a policy of restraint in recent years.
With the oil-rich Saudis taking the lead, OPEC has attempted to keep petroleum supplies reliable, and stabilize prices within a "moderate" range of $18 to $22 a barrel. This week, West Texas crude, a benchmark oil, was selling for $19.50.
If the US and Europe add $3 to $10 a barrel in new taxes to OPEC prices, however, demand could drop, prices could weaken, and OPEC profits could decline.
Joseph Stanislaw, managing director of Cambridge Energy Research Associates, says that unlike a few years ago, OPEC now finds itself with few attractive options.
Competition among the world's oil producers has become fierce. The Saudis, Kuwait, and Iran are all jockeying for larger shares of OPEC's daily output of more than 26 million barrels of petroleum. If taxes rise, OPEC might be able to stabilize its prices, and protect profits, by cutting production. But which OPEC country would volunteer to sell less oil?
Meanwhile, there is the problem of Iraq. Although currently boycotted by most of the world's nations, Iraq stands ready to pour another 3 million barrels a day into world markets. If the boycott ends, it could threaten worldwide oil-price stability.
Some OPEC nations complain that their most important commodity is being singled out unfairly for special punishment, and exploitation, by the world's industrialized nations. They also protest that oil's detrimental effects on the environment are being exaggerated, especially when compared to coal, which often wins favorable treatment in Europe and the US.
In a report on OPEC's problems, Dr. Stanislaw quotes Hisham Nazer, Saudi minister of petroleum and mineral resources, who says: "Oil has been made the culprit. Oil has been taxed far in excess of any contributon it may have in environmental degradation." Consumer countries suffer from "petrophobia," he says.
Even before Washington and the EC act, smaller units of government are boosting oil taxes.
Since mid-1991, Germany has boosted gasoline taxes by 70 cents a gallon, and the government there wants another 30-cent rise in 1994. Other gas-tax increases since mid-1991 include Austria (49 cents a gallon), Belgium (53 cents), Denmark (26 cents), Finland (40 cents), France (23 cents), Greece ($1.02), Ireland (23 cents), the Netherlands (76 cents), Portugal (38 cents), and Switzerland (55 cents).
In the US, individual states have also hiked taxes, though by an average of only 1 cent. The highest increase came in New York, up 7 cents.