OPEC search for price unity could stabilize oil market
Gasoline and heating oil prices in the United States soon may jump by 2 or 3 cents a gallon, but the longer-range outlook for oil price stability remains good.
This is the assessment of experts on the eve of a special meeting Oct. 29 in Geneva of the 13-nation Organization of Petroleum Exporting Countries (OPEC).
The aim of the meeting is to restore pricing unity to OPEC, whose members unilaterally are discounting prices in a kind of cutthroat effort to sell more crude in a depressed world market.
Nigeria is a case in point. Twice Nigeria has lowered the price of its high-quality oil - from $40 to $36 a barrel, then to $34.50. As a result, Nigerian production has jumped to more than a million barrels a day, compared with 600,000 last year.
Libya's case is the opposite. Clinging hard to its high price, Libya has seen customers turn away. Today Libyan output is 600,000 barrels a day or less - one-third the total of last year.
Current official prices range from Saudi Arabia's $32 a barrel to a high of $ 40 posted by North African producers - notably Libya and Algeria.
Now a compromise, reportedly worked out behind the scenes, appears to be in sight, narrowing the cartel's price range from $34 to $37 a barrel.
The Saudis, under the compromise, would move their base price up by $2 to $34 , OPEC's other 12 members would lower their base quote from $36 to $34, and some producers would be allowed to tack on premiums of up to $3 a barrel, depending on the quality of their oil.
Another part of the compromise, of major significance to oil-importing countries, calls for an OPEC price freeze through the end of 1982, as demanded by the Saudis.
Some specialists doubt that Saudi oil policy will be affected, at least in the short term, by the outcome of the AWACS vote in Washington, one day before the oil cartel convenes.
Japan and Western Europe, noted a leading expert, are more dependent than the United States on Saudi oil. Although the Saudis supply about 17.5 percent of US imported oil, this amounts to less than 7 percent of total American consumption.
Any use of the ''oil weapon'' - i.e., lower production to force up prices - would hurt other nations more than it would the US.
Some experts contended that, given a positive vote on AWACS, the Saudis might have been reluctant to raise the price of their oil by even $2 a barrel one day later.
Such an ''affront'' to Americans, however, would be mitigated by a Saudi announcement that, at the same time, OPEC had agreed to a price freeze through 1982.
If all works out as planned in Geneva, the outcome will contain bad news for consumers in the form of early price hikes for gasoline and heating oil, but good news over the longer run.
Between now and the end of 1982, prices for goods in general are likely to rise by at least 10 percent, perhaps more, given the outlook for inflation.
Oil prices, if frozen by OPEC, would decline over the period in relation to other goods, which would be rising in price.
Even if a formal price freeze does not come about, world conditions are likely to force pricing restraint on OPEC producers, according to energy experts.
Because of conservation by major industrial powers, including the United States, and because the world economy is slack, the demand for oil is so low that OPEC has been forced to reduce its output from a peak of 31 million barrels a day (m.b.d.) to about 20 m.b.d.
Even so, says John Lichtblau, executive director of the Petroleum Industry Research Foundation Inc., the ''current oversupply of oil is 2 m.b.d. or more, partly because of buyer resistance to high prices.'' Some oil companies, he said , are dipping into inventories, rather than paying high prices for fresh supplies.
Observers assume that Saudi oil production - now in the 9 to 9.5 m.b.d. range - may decline as part of the expected OPEC compromise at Geneva.
''For the time being,'' says Mr. Lichtblau, ''there would still be more oil available than is required, even if the Saudis dropped back to 8.5 m.b.d.''
He foresees possible tightness in the market in the latter part of 1982, if the industrial powers snap out of recession and if Iraqi and Iranian output continues to be low.
Those two warring powers at present export a combined total of about 2 m.b.d. , compared with 7 m.b.d. before the Iranian revolution that overthrew the Shah.