Conservation -- cold splash in the face of oil prices

American energy conservation is finally beginning to put pressure on OPEC to moderate the upward spiral of oil prices. More oil is pouring out the wells of the 13-nation cartel than the world needs, with the result that some customers resist paying the top dollar demanded by the highest-priced OPEC members.

"The glut [of oil]," says Saudi Arabian Petroleum Minister Ahmad Zaki Yamani, "was almost [manufactured] by Saudi Arabia. We engineered by glut to stabilize prices."

Only if the Organization of Petroleum Exporting Countries (OPEC) cuts production sharply from today's 26 million to 27 million barrel-a-day level will demand again exceed supply, at least in the short term.

Cartel production will not decline, if Saudi Arabia has its way, said Sheikh Yamani April 19 on "Meet the Press" (NBC-TV). "There will be no decline in [ Saudi] production, until [OPEC unifies] prices."

This indicates to experts that oil prices this year may not rise -- or possibly could decline a bit -- since the Saudis, with their huge output of 10.3 million barrels a day, hold the key to overall OPEC production.

For two reasons the noncommunist world, including the United States, is buying less oil than had been expected:

1. A number of European nations either are in recession or in the economic doldrums, reducing industrial demand for oil.

2. High retail prices for gasoline, heating oil, and other petroleum products are forcing individuals and firms to cut back on the amount of oil they burn.

Americans play a major role in all this, because they burn roughly one-third of all oil consumed by the free world. When Americans conserve, the impact is worldwide.

In March, according to the American Petroleum Institute (API), the US chalked up some major conservation victories:

* Gasoline consumption, at 6,039,000 barrels per day, was 5.8 percent below the average of a year ago and a whopping 16.5 percent below the average of March 1979.

* Overall use of petroleum in March was 5.2 percent less than the March consumption figure of 1980.

* This had a marked effect on oil imports, which dropped 18.1 percent below the corresponding period of 1980.

* This had a marked effect on oil imports, which dropped 18.1 percent below the corresponding period of 1980.

Americans, experts agree, are continuing a conservation trend which began to accelerate in 1979 when OPEC prices more than doubled.

Just as the US holds the key to world oil consumption, Saudi Arabia dominates the production policy of OPEC. AT 10.3 million barrels a day, Saudi output amounts to well over one-third of all oil pumped by the 13 cartel members.

Those OPEC nations which charge the highest price for their crude -- Nigeria, Algeria, and Libya are in the $40-a-barrel range -- insist that the Saudis trim their output, to drain away the world's current oil surplus.

Ideally, Saudi officials would like to do just that. Their official production ceiling is 8.5 million barrels daily. But the internal OPEC situation is not ideal from the Saudi point of view, which charges only $32 for its oil -- lowest in the cartel.

The Saudis want a unified pricing policy, somewhere above current Saudi prices but below the $40 mark, linked to a long-range OPEC price and production program.

This program, as the Saudis see it, would allow oil prices to rise in a systematic and coordinated manner, pegged to world inflation and to the periodically measured value of a group of currencies of OPEC's major customers.

At the cartel's next general meeting on May 25, Saudi Arabia is expected to press for such a formula, holding out the carrot of lower Saudi output if its partners go along with the plan.

Saudi leaders, most analysts agree, are motivated by various factors -- including a realistic assessment of their kingdom's needs, a desire not to plunge the industrial world into depression, and ultimate dependence on the US for military protection.

American officials, from the Ford administration onward, have quietly applauded Saudi policy for exerting a moderating influence on OPEC prices.

Now, however, a snarl over the Reagan administration's plans to sell the Saudis a variety of advanced weaponry is raising tension between Washington and Riyadh.

Israel and its supporters in the US bitterly oppose White House plans to sell the Saudis five AWACS electronic surveillance aircraft, capable of detecting air activity far beyond Saudi frontiers.

Because of doubts that the Saudi military package would be approved by Congress, Reagan administration officials are sounding out Saudi leaders about postponing the AWACS sale, while going ahead with other parts of the defense package.

Reportedly, Saudi officials want the whole loaf, describing the AWACS deal as an integral part of an agreement already worked out.

"We look at [the AWACS issue] in the context of US-Saudi relations," said Sheikh Yamani on "Meet the Press." He implied a possible linkage between the AWACS sale and Saudi oil policy.