Oil industry sees good year in '83, despite OPEC's pricing turmoil
Perhaps it's whistling in the dark for petroleum industry giants to assume that world oil prices will remain near $30 a barrel. But major oil companies are whistling in unison - and investing heavily in the oil business.
One sign of the upbeat mood: The authoritative Oil & Gas Journal estimates that the US oil industry will pump $68.4 billion into capital and exploration expenditures for 1983. This level would be a 9.5 percent drop from the year before, but it could accomplish as much as 1982's $75.6 billion. The difference is that costs associated with drilling, from the cost of hiring drilling rigs to interest rates, have dropped substantially.
Meanwhile, front-page headlines predicting a collapse of world crude oil prices continue to raise both consumer hopes and producer fears. But one company with a long record of tracking oil industry activity expects little change in prices, and forecasts that 1983 will be another good year for efficient oil producers. After a barrage of reassuring statistics, oilmen came away smiling from the Petroleum Information Corporation's recent Houston briefing on the oil industry's '82 performance and '83 prospects.
According to Petroleum Information executives, the Arab-dominated Organization of Petroleum Exporting Countries remains a powerful and cohesive force. Saudi Arabia, said one executive, can prevent any major drop from OPEC's current $34-a-barrel official price. He explained that the Saudis will be able to hold the price at $28 or above simply by threatening to flood the world market with their surplus oil.
University of California, Berkeley, economist David Teece disagrees. While he does not expect a sudden collapse, he anticipates that ''the prices are going to continue to spiral downward . . . gradually ratcheting down, perhaps going as low as $15.''
Professor Teece says that regardless of OPEC price-fixing efforts, non-OPEC producers in need of oil revenue will drive prices lower. ''Sooner or later Mexico, in particular, is going to drop (its) price and increase output,'' he predicts. He does not expect any US government action to halt the price decline because ''while a few countries will have problems (due to falling oil revenues) , the potential benefits to the United States and other countries are so huge that we can afford to help out other countries as problems arise.'' As a result, he adds, ''the United States should try to propel this downward movement in the world price.''
Edward Morse, international affairs director for Phillips Petroleum Company and former State Department assistant secretary for international energy policy, does not expect any sharp price cut.
He says that the world's oil supply-demand balance has been substantially changed by the emergence of new non-OPEC producers such as Britain and Mexico, energy conservation, and conversion to other types of fuel. In today's more competitive energy environment, he says, ''OPEC no longer has the stranglehold that it had.'' He adds that ''pricing power has switched from the producing to the consuming end of the marketplace.''
James Tanner, editor of Petroleum Information International, agrees that the months ahead will bring stable or rising oil prices and ''probably the second or third best year ever'' for the oil industry.
Mr. Tanner says that downward pressure on prices has come mostly from unusually large world oil inventories, which peaked last year. He expects that worldwide production will climb to prevent a return to the tight supplies and sharp price increases that come ''when you get down to only ten days supply and start straining the system.''