It's easy to see how the various princes, sheiks and emirs might have felt a bit out of place at last week's 40th-anniversary summit of the Organization of Petroleum Exporting Countries. For one thing, members of the famously fractious group (given up for dead only a couple of years ago amid plummeting oil prices) hadn't been able to see their way through the wars, political infighting and price gouging to convene such a gathering for a quarter-century.
The other jaw dropper was that instead of making a quick jaunt to a neighboring desert kingdom, the heads of state and their massive entourages (Saudi Arabia brought 340 people) jetted all the way to Venezuela--the only Latin American member of this exclusive club, and long a member in poor standing for consistently flouting production quotas.
Why bother? Because their host had incited in OPEC's leaders a belief that their moment had arrived and that they'd better seize it. Hugo Chavez Frias, 46, the fiery nationalist President of Venezuela, saw an opportunity in the booming economies of the developed world to turn a moribund cartel back into a global economic powerhouse. Against the backdrop of soaring energy prices, which have tripled during the past two years to a high two weeks ago of $36 per bbl., Chavez took center stage in Caracas last week to proclaim OPEC's "resurrection."
The U.S. is girding for a potential shortage of heating oil this winter, and European governments are trying to contain protests over the price of petrol. But Chavez boisterously reminded everyone that the supplier of 42% of the world's most precious commodity has the kind of leverage a superpower might yearn for. And by the way, the ex-paratrooper argued, rather than blame OPEC for threatening the global economic boom, the West should look closer to home--at high fuel taxes, market speculators, lagging refining capacity and a Christmas list of other ills.
By the time the historic meeting adjourned, OPEC's leaders had established for themselves not just a new mandate but also a new identity. Gone are the dictatorial Saudi Arabian edicts of Sheik Ahmed Zaki Yamani, who once practically ruled the cartel, if only by virtue of Riyadh's overwhelmingly dominant role as a producer. The new OPEC is, in the words of an Arab diplomat at Caracas, a "management group." Its new strategists are cosmopolitan technocrats, in some cases U.S.-educated. They speak the language of market economics and are unlikely to rock the global boat with sudden embargoes or regional disputes. The President of Iran, Mohammed Khatami, last week acknowledged a tacit partnership with old foe Saudi Arabia, pledging cooperation in raising production "in order to maintain oil prices at a level acceptable to both producers and consumers."
In other words, the new OPEC doesn't want to gouge its customers; it wants global economic stability. That's why at week's end the cartel suggested that its goal was to lift production enough to bring prices down to between $22 and $28 per bbl.--a level that should ease the sense of crisis felt from Washington to Tokyo. Last week the price of crude oil closed at $30.86.