OPEC over a Barrel

After years of climbing up and up, petroleum prices have begun to show the first signs of slipping and sliding. Moreover, the 13-nation Organization of Petroleum Exporting Countries, which meets in Geneva this week for its semiannual price-setting conference, does not now appear able to do much about it.

That was the encouraging message offered by TIME'S Board of Economists. Members were confident that, barring some new reduction in supply, such as first occurred in the wake of the Iranian revolution and later during the Iran-Iraq war, prices will remain stable for perhaps the next 18 months or so. Said Energy Economist James McKie of the University of Texas, who joined the TIME board last week: "I think the cartel will maintain a real price in 1980 dollars of around $35 per bbl. I don't anticipate that there will be any major decline below that level. But in the absence of some new supply disruption, I do not think that there is going to be much increase above it either."

The slowdown or halt in price increases has been caused by a minisurplus of petroleum, which has created a strong downward pressure on prices. One oil company after another is shaving the prices it will pay for crude. Exxon and Mobil, the two largest American producers, have instituted automatic cutbacks of about $2 per bbl. in the prices that they will pay to independent domestic suppliers.

Last week the OPEC oil ministers were trying to reach a consensus prior to the Geneva meeting. One proposal: Saudi Arabia, the free world's largest oil producer, would increase its prices slightly if countries like Libya and Nigeria, which have been charging almost $10 per bbl. more for oil than the Saudis, would agree to lower their prices. In addition, Saudi Oil Minister Sheik Ahmed Zaki Yamani suggested that the cost of crude be frozen until the end of 1982.

OPEC's sales are slumping in part because the sky-high cost of crude has made consumers far more conscious about conservation than almost anyone had thought possible. In the U.S., consumption has dropped by 6.2% from year-earlier levels, and imports have slumped by more than one-fifth, to about 5.4 million bbl. daily.

In McKie's view, much more conservation is still possible. Said he: "We have shown an extraordinary ability to conserve oil and other forms of energy. Given enough time to install the technology, and to revise old habits, we can expect the gains brought on by conservation to continue and to be a strong additional element, helping to maintain stable real prices for oil."

The prospects for oil price restraint were further brightened during the week by the release of an unexpectedly optimistic Central Intelligence Agency assessment of Soviet oil production potential through the 1980s. Four years ago, the agency had predicted that growing Soviet need for oil would force that country to import as much as 3.5 million bbl. daily from non-Communist suppliers by the mid-1980s, thus placing grave new strains on the world petroleum market. But last week the agency contradicted its original assessment of Soviet production capacity and revised the estimates upward, suggesting that the Soviet Union will remain self-sufficient in oil until at least 1990. By that time, perhaps, OPEC will be looked upon not as an economic menace to the world but as merely a tolerable annoyance.

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