Business: Bali High for Oil Prices

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The cartel squabbles and then hikes the cost of crude

The oil ministers of the 13-nation Organization of Petroleum Exporting Countries gathered under unusual circumstances last week amid lush tropical greenery on the resort island of Bahi, Indonesia. For the first time in the group's history, two of its members were at war, and the battlefield confrontation threatened to spread into the conference room, thus weakening the cartel's fearsome control over oil prices. But after a two-day meeting, the OPEC nations agreed unanimously not to let the war between Iran and Iraq get in the way of boosting the price of oil by $2 to $4 per bbl. The price of Saudi Arabian light crude was hiked $2 and set at $32 per bbl., while the official ceiling price for oil sold by any OPEC member was increased by $4, to $41 per bbl. The price increases will jack up the world's oil bill by an estimated $26 billion in 1981. The message from Bali was clear: oil and profit are still powerful enough forces to keep even warring nations working together.

The energy producers have been squabbling among themselves all year. Saudi Arabia and Libya broke off diplomatic relations last October when Libyan President Muammar Gaddafi urged Muslims not to make their annual pilgrimage to Mecca because he claimed that the shrine had been desecrated by U.S. radar surveillance planes flying overhead. And after the outbreak of the war between Iran and Iraq, the cartel had to cancel a gala meeting in Baghdad in November that was to have celebrated the group's 20th anniversary.

The Iranians arrived in Bali insisting on their right to denounce Iraq's invasion of their country three months ago and its continued detention of Iranian Oil Minister Mohammad Javad Tondguyan as a prisoner of war. When the conference opened, they disrupted the proceedings by propping a 2-ft. by 3-ft. photo of Tondguyan in the chair reserved for Iran's chief delegate. To protect its Oil Minister, the Iraqi delegation packed 17 guns at the conference. Some Iraqi aides wore guns even inside the meeting room in defiance of the security regulations of their Indonesian hosts.

The two factions were kept apart by the Indonesians, who sat between them at all the meetings. Professor Subroto, the Indonesian Energy Minister, headed off a vote on including Iran's denunciation of Iraq in the official record by telling the legend of the man who must decide whether to eat a fruit, in which case his father will die, or not to eat it, in which case his mother will die. Said Subroto at the end of the meeting: "OPEC demonstrated that even with a war between two of its members, it can continue to function."

Some energy experts, nonetheless, maintain that the Bali agreement showed again the difficulty that the cartel is having agreeing on prices. Said one European Community official: "You can hardly call a meeting at which over half the tune was spent arguing about a war between the two most powerful military members a resounding show of unity." For more than two years, Saudi Oil Minister Ahmed Zaki Yamani has been trying to restore a unified price for OPEC crude. But the spread between the Saudi bench-mark or "marker" price and the cartel's ceiling price after the Bali meeting has grown to $9, thus allowing individual members considerable room to set their own oil prices free of the cartel.