Ministers Far From Reaching Accord on OPEC Pricing Policy

The oil ministers of the Organization of Petroleum Exporting Countries, threatened by desperate divisions, opened a vital conference Friday but failed to come anywhere close to a common policy on salvaging the price of oil.

The 13 OPEC ministers could not even agree on an agenda. As a result, they said, they are “consulting,” not conferring, and they insisted that their real conference had not officially begun.

This attitude provoked rumors that the ministers might go home without convening an official conference, thus postponing any decision on what to do about the price of oil. But Dr. Subroto, the Indonesian minister of energy and the president of the conference, denied that this was so.

Consultative Sessions

After two so-called consultative sessions, Subroto, replying to a question about a possible breakup of the meeting, said: “We will not leave things just like that. We will take some decision.”

Surrounded by journalists and cameramen as he made his way down a staircase at the Intercontinental Hotel, the site of the meeting, Subroto said the OPEC ministers were considering two very different approaches.

The first, he said, using medical terminology, is “to continue what we are doing but with increased doses.” By this, he implied that OPEC might consider strong measures against those members, perhaps most of the member countries, who are producing more oil than authorized or selling at lower prices than those set by the organization.

On the other hand, Subroto said, OPEC might try a new approach, “a new treatment altogether.” But he was vague about this and refused to discuss any details. “We are considering many things,” he said, “but we have not pinpointed anything.” Asked if this included a cut in the price of oil, he repeated the phrase “many things.”

Difficult Position

The difficulty of OPEC’s position was emphasized on the eve of the conference when the International Energy Agency in Paris reported that all of the OPEC nations had produced an average of only 14.5 million barrels a day in June, their lowest level in 20 years.

Despite this, the price of oil on the world market has fallen significantly below the OPEC price. This could be seen by the market prices for Arab heavy oil and Arab light oil, the two standards quoted most often by OPEC and by others in the oil business. On Wednesday, Arab light oil was selling for $26.70 a barrel, $1.30 below the official OPEC price. Arab heavy oil was selling for $25 a barrel, $1.50 below the official OPEC price.

The combination of lower production and lower prices has upset Saudi Arabia, which has the largest national oil reserves in the world. To make the OPEC system work, Saudi Arabia has agreed to cut its production when consumer demand is even less than OPEC’s self-imposed production limit of 16 million barrels of day. But the Saudi Arabians have had to cut their production even more than they should under the system, for the majority of its fellow OPEC members are selling more than they should under OPEC quotas.

To make matters worse, many OPEC members are selling oil at lower than official OPEC prices. In short, there has been a breakdown of the OPEC production and pricing system, and the Saudi Arabian government has warned that it will pump more oil and drive the price down even further unless the others stick to the agreement.

According to many reports, most OPEC ministers have come to the meeting determined to keep the OPEC price at its present level of $28 a barrel for Arab light. But some analysts insist that it no longer matters what OPEC does, for it now supplies barely a third of the non-Communist world’s demand for oil.

According to this view, prices will keep going down whatever OPEC tries to do. Mexico, for example, which is not a member of OPEC, reportedly intends to cut its price next week even if OPEC refuses to do so.

The confusion about the exact nature of the OPEC meeting seemed to reflect even greater confusion among OPEC members about what to do about prices and production.

OPEC was supposed to hold its regular conference in Geneva at the end of July, but, worried about their failure to hold the level of prices, the ministers announced that they would meet instead at the end of June in Geneva. Then, OPEC said it was forced by logistics to change the meeting to early July in Vienna.

Now, OPEC staff members told journalists, the oil ministers might decide to consider their time in Vienna as “consultations” and confer officially as originally scheduled, in Geneva at the end of the month. All of this concern over dates apparently stems from worry about convening an official conference that might be doomed to failure.

The ministers were obviously far from any kind of common approach. As Arturo Hernandez Grisanti, the Venezuelan minister of energy, told journalists: “There is not a special point of view yet. We are talking about everything.”

Subroto echoed this, saying, “We have not arrived at a precise consensus yet.”