Opec Takes a Stand, Maybe

For months, the Organization of Petroleum Exporting Countries had seemed ready for the obituary columns. The oil ministers of the 13-nation group, which once cowed energy-importing countries and commanded banner headlines with every pronouncement, had become a group of divided and argumentative men, powerless to halt a long slide in petroleum prices. Last week, though, OPEC suddenly sprang from its deathbed and caught the world's attention once again. After nine days of tense meetings in Geneva, the cartel adopted a plan to slash its daily oil production by some 17% in the hope of driving prices back up. The move, like the appearance of a ghost, both surprised and disconcerted the industrial nations and gave at least a temporary morale boost to the world's petroleum producers.

The oil market reacted immediately and forcefully to the new plan, which calls for OPEC to reduce its production by roughly 3.5 million bbl. a day, down to a daily total of about 16.7 million bbl. The price for next month's delivery of the benchmark West Texas Intermediate crude jumped 30% in two days, to $15.08 per bbl. and closed the week at $14.82. Boasted one OPEC official: "We have weathered the storm. Talk about OPEC on its knees? We are standing tall again, and we are here to stay."

The accord, though, is a fragile one. Many observers are skeptical about the ability of OPEC to hold to its quotas in the face of a worldwide oil glut. Never in its 26-year history has the group sustained production cuts for any length of time. One or more of its members have always managed to cheat on agreements. Moreover, the current plan is only an interim one. It takes effect on Sept. 1 (the delay results mostly from existing contracts that must be honored) and expires on Oct. 31. The cartel has no guarantee that its members will renew the pact.

If OPEC somehow sticks to its agreement and prices keep rising, heavily indebted petroleum-producing nations like Mexico and Venezuela would clearly enjoy a boon. The production cut would also help the oil-patch states in the U.S., which felt the pinch as the price of Texas-grade oil fell from about $27 per bbl. in January to a low of $9.75 in April. Consumers, though, would face more expensive heating oil and gasoline, and if prices continue to climb, the increase could rekindle inflation and eventually weaken the world economy.

Such dangers seemed remote when the OPEC representatives gathered on July 27 at the 18-story glass-and-concrete Geneva Intercontinental Hotel. Most of the ministers were convinced that the meeting would prove as futile as their three earlier sessions had this year. Sighed Indonesian Oil Minister Subroto, as the session began: "This will be a short meeting. The political will is lacking." The members had not been able to agree on specific production quotas for each country.

The spark for a settlement came, surprisingly, from Iran. On the morning of Aug. 2, Iranian Oil Minister Gholamreza Aqazadeh approached Sheik Ahmed Zaki Yamani, his Saudi Arabian counterpart. The two men talked for about 90 minutes in Yamani's suite, which had a sweeping view of Lake Geneva. Since OPEC members were unwilling to make long-term promises to limit their oil production, Aqazadeh reasoned, Why not try an interim measure? He suggested a temporary return to the group's 1984 quota of some 16 million bbl. a day.