Trend of the economy; Saudi Arabia, with OPEC in tow, maintains influence over oil price, production; motorists may pay more
The OPEC oil cartel, famous or infamous depending on the point of view, appears to have won it's battle to stay alive as a pricing and production unit.
Hopes that hard-pinched oil importing nations could force prices to tumble below $30 a barrel by buying less OPEC oil now are doomed, most analysts say.
Members of the 13-nation Organization of Petroleum Exporting Countries met the challenge by whittling their output to about 16.5 million barrels a day (MBD), compared to more than 30 million MBD in 1979.
As a result, OPEC prices have stablized close to the cartel's official price of $34 a barrel for Saudia Arabian light crude oil.
The Western world's giant oil firms, facing the need to build up stocks against next winter's heating requirements, may have to boost their purchases of OPEC oil as the year wears on, especially if the US economy revives.
OPEC's victory is due mainly to Saudi Arabia, by far the cartel's largest producer, which adopted two tactics to keep prices stable.
First, the Saudis cut their output sharply, well below their current official ceiling of 7 MBD. Second, Saudi officials applied pressure on international oil firms to continue buying expensive Nigerian oil. Nigeria's high quality crude sells at $35.50 a barrel, compared to prices $4 to $5 a barrel cheaper for Norweigan and British North Sea oil of similar quality.
Nigeria, with a huge population and hard pressed for cash, might have bolted OPEC and dropped it's price to compete with North Sea oil, had not the Saudis put a hammerlock on the oil firms.
The Seven Sisters, as the major international oil firms are called, do not lightly disregard a warning from Saudi Arabia, the world's largest exporter of oil.
American motorists may regret that the retail price of gasoline, which has plunged as much as 20 cents a gallon in recent months, is not likely to fall further, and may even climb a bit. But to preserve the extraordinary oil savings that the US has chalked up in the past three years, it may be a good thing if prices stabilize.
In April, reports the American Petroleum Institute (API), total deliveries of petroleum poducts were 1.3 percent higher than in April of 1981 -- ''the first such year to year increase in any month since early 1979.''
Gasoline demand in April, says the API, ''though only about 1 percent above last April, was substantially above the trend of the 1979-80 period.'' Using later figures, the US Department of Energy reports that gasoline use was running even higher during the early part of May.
Experts caution that some of the increase may be due to a buildup of stocks and does not necessarily mean that Americans are growing profligate in their use of oil.
Nonetheless, had prices continued to drop, the incentive to burn less oil might well have been lost.
The pressure has not been lifted totally from OPEC, experts say. For one thing, oil discoveries are occurring mainly outside the cartel area, notably in Mexcio and the North Sea.
If Britain and Norway continue to sell their North Sea oil more cheaply than Nigeria, Algeria, and Libya, these three OPEC members may be tempted to cut prices to gain a larger slice of the market.
Iran and Iraq -- two major OPEC partners - currently export relatively little oil, because their Persian Gulf war bottles up export channels. Once that war is over, these cartel members may try to shoulder back into the world market at the expense of their partners.
Finally, the governments of perhaps nine of OPEC's 13 members operate in the red, because their oil income has dropped. Some cartel member are forced to cut back on development plans; others borrow in world capital markets.
For all of OPEC's members to operate in the black, says Marshall Thomas of Petroleum Intelligence Weekly, the cartel would have to raise production to more than 22 MBD, far above the current 16.5 million barrel level.