Still Another OPEC Price Hike

Under pressure, the Saudis push up the cost of crude

Even in the normally supercharged atmosphere of petro politics, last week's meeting in Vienna of foreign, finance and oil ministers from the 13-member OPEC cartel was highly unusual. The Austrian capital is OPEC's administrative headquarters, but no meeting of oil ministers had been held there since December 1975, when pro-Palestinian terrorists kidnaped some of the delegates and held them hostage. Saudi Arabia's Oil Minister, Sheik Ahmed Zaki Yamani, the principal target of the 1975 raid, was taking no chances on a repeat performance. First he sent his private plane to Vienna's Schwechat Airport, and then let rumors circulate that he would arrive on Monday. In fact, he showed up in another plane on Sunday night. During the meeting, he was constantly surrounded by his own British-trained security officers as well as by Austrian antiterrorist policemen carrying Israeli-made Uzi submachine guns.

The conference was held in the majestic 705-year-old imperial Hofburg Palace, but the atmosphere was anything but stately. At times the discussions were overshadowed by the bitter border dispute between Iran and Iraq, both OPEC members. And at one point the Iranian Oil Minister, Ali Akbar Moinfar, accused the Saudis of catering to "Western imperialists." Said one Iranian delegate after two days of bickering: "This thing is going to blow sky-high."

In those surroundings of tight security and contention, the oil cartel last week was seeking to reach agreement on a long-range pricing and production strategy. Several key OPEC countries, including Saudi Arabia, want to replace the current erratic increases in the cost of crude oil with a system of regular quarterly price hikes that would be tied to the level of inflation in industrialized nations. The Saudis are also anxious to return to a unified OPEC oil price. Since last July, rates have ranged from $28 to $37 per bbl. Prior to the meeting, the Saudis hinted that they would be willing to cut their production from 9.5 million bbl. per day to 8.5 million, if agreement could be reached on a unified price. This would have eliminated the current world glut of oil that has been pushing down the price of OPEC crude for the past four months.

After three days of charges, threats and bluffs, the oil ministers hammered out a shaky compromise. The Saudis agreed to raise their price from $28 per bbl. to $30, while the other OPEC members said that they would freeze theirs at existing levels, which average about $32. The Saudis, however, also announced that they will continue to produce 9.5 million bbl. per day, thus maintaining the market pressure for lower prices. The proposed quarterly increases of oil prices will be discussed further at a 20th anniversary summit meeting of OPEC countries in Baghdad in November.

Last week's increase in the price of Saudi oil is expected to raise the cost of gasoline and heating oil in the U.S. by less than a penny per gallon. Western observers, who had feared that a drop in Saudi production would lead to a new escalation of oil prices, sighed with some relief after the meeting. But the session again showed how much the oil-importing nations and their economies hang on the decisions of the fractious oil cartel.

This file is automatically generated by a robot program, so viewer discretion is required.