A rare meeting of the heads of state of the Organization of Petroleum Exporting Countries (OPEC) in Saudi Arabia this weekend was predictably focused on prices. But the price most often discussed wasn't the cost of oil, but rather the plummeting US dollar.
As oil hovers near $100 a barrel, it's causing global jitters. Some economists worry that price, which depending on whose math you use is either near or above an inflation-adjusted record, could push many world economies into recession.
But the organization that was created in 1960 to stabilize prices, today wields less clout than it once did over the cost of crude. The 13-nation cartel once controlled prices often by just talking about pumping more or less oil. But now its leaders say booming world demand – largely from India and China – and concern over a possible US attack on Iran are driving prices.
"OPEC is still a major force, but it's certainly far less influential that it was in the 70s or 80s," says Mustafa Alani, at the Gulf Research Center in Dubai, United Arab Emirates. "What we saw at this conference is that the leaders of OPEC were giving assurances that they'll do all they can to maintain the stability of the oil supply. But can they do it? We don't know."
OPEC's biggest producers – Saudi Arabia and its Gulf neighbors – say they'd like prices to be a little lower but are pumping near capacity now. After all, their currencies are pegged to the dollar, so a weak US economy hurts them, too. Analysts say that while Saudi Arabia and others might be able to squeeze out an extra 1 million barrels a day, that's only 3 percent more than estimated current OPEC production of 31 million barrels a day.
The new reality facing OPEC left the ministers over the weekend discussing once peripheral issues: pricing oil in US dollars, climate change, and developing nations. Political opponents of the US – Iran and Venezuela – have been pushing for the market to be moved from the US dollar into stronger Euros. While analysts say that is unlikely to happen anytime soon, the fact that such issues – not oil prices – got so much attention reflects changing times.
US Energy Secretary Samuel Bodman said earlier this week that he did ask OPEC members to increase supply, though he said that the request seemed to have fallen on deaf ears.
Anyone hoping that the OPEC Summit – the first meeting of the leaders of its member states since 2000 – would bring relief from gas prices that have jumped 25 percent this year to above $3 a gallon in the US, is going to be disappointed.
On Friday, crude oil traded in the US rose $1 to over $95 a barrel after Venezuela's Oil Minister Rafael Ramírez said, "OPEC can't do anything about the price ... there is enough oil in the market."
Venezuela – whose leftist President Hugo Chávez appears to revel in tweaking the nose of the US, which he alleges backed a failed coup against him five years ago – has been pushing for higher oil prices in tandem with Iran, as well as a move away from the US dollar.
In this, both countries failed. Saudi Arabia – which accounts for about 30 percent of OPEC production – clearly signaling its opposition to what it views as the politicization of the commodity.
After Mr. Chávez urged OPEC's leaders to use their oil wealth to become an "active political agent" and warned that oil prices would rise above $200 a barrel if the US takes military action against his ally, Iran, Saudi King Abdullah dismissed his arguments.
"Oil ... should not become a tool for conflict and emotions," he said. "Those who want OPEC to become an organization of monopoly and exploitation ignore the truth."
The joint OPEC statement released at the end of the summit said that the "stability of the oil market is essential," which oil analysts said was a repudiation of Venezuela's and Iran's aims.
Chávez also called on oil producers to sell to poor countries at prices at about one-fifth of the current market price, an idea that gained no traction and appeared designed to bolster his populist credentials. The only support for this idea came from Ecuador's leftist president, Rafael Correa. Even Iranian President Mahmoud Ahmadinejad, who Chávez was scheduled to meet later Sunday in Tehran, failed to back to him on this suggestion.
Mr. Ahmadinejad has portrayed himself as a man of the people and the promise of his 2005 election campaign to spread Iran's oil wealth to every dinner table struck a chord with voters. During a visit to Venezuela last January, Ahmadinejad kept that populist touch, announcing with Chávez the creation of a $2 billion anti-US fund. And on Sunday, after meeting with President Correa, Ahmadinejad promised to use his country's oil wealth to fight "imperialism."
But his promises remain unfulfilled for most Iranians, though Iran has seen its oil revenues surge in the past five years. Despite the cash boom, Iran's economy is struggling under the weight of high unemployment and rising inflation, not to mention US sanctions. He simply isn't in a position to back up his rhetoric, analysts say.
"Iran can't even think about this case [of cut-rate sales to poor countries], because the oil price works in the market economy," says Abbas Maleki, a former deputy foreign minister of Iran, and chair of the International Institute for Caspian Studies.
"The best way for Iran is to establish a fund for development, to support development projects," says Mr. Maleki, who was recently a fellow at Harvard University's Belfer Center for Science and International Affairs. "OPEC already has a development fund for Africa and Third World countries … Iran wants to spend all oil revenues in Iran."
Indeed, though OPEC made it clear it isn't in a position to lower prices, a silver-lining for the US is that Chávez's efforts to build a populist bloc within OPEC fizzled.
"There are basically two camps, Iran and Venezuela and one led by Saudi Arabia," says Mr. Alani, the oil analyst. "What happened at this conference was that the leaders of OPEC – Saudi Arabia and the Gulf states – made it clear they oppose the use of oil as a weapon, so the radicals within OPEC were isolated.
"What's going to happen now is the leaders will do everything they can to maintain supply. But there's very little they can do if there's an attack on Iran or something of that nature. In that case, prices will double, perhaps go to $300 a barrel."
Scott Peterson contributed reporting from Tehran, Iran.