Word: benchmarks
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Dates: during 1980-1989
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...major stumbling block to an agreement is the belligerent attitude of Iran, which sent no delegate to last week's sessions. Publicly, the Iranians have demanded that the OPEC benchmark stay at $34. Privately, they are selling all the oil they can at cut rates to raise cash for their war with another OPEC member, Iraq. Oil industry sources in Western Europe say that Iran has been selling oil for as little as $20 per bbl. The Iranians apparently hope that the official price will stay at $34 so they can keep undercutting...
...first gambit came from an unexpected source: the Soviet Union. In a new deal with the Italian government, the Soviets reduced the price of their crude by $2.15 per bbl., to $29.35, which was considerably lower than the OPEC benchmark price of $34. The Soviet Union produces more oil than any other country (12 million bbl. per day), and exports of crude account for 80% of its foreign currency earnings. Apparently, Moscow wants to protect its share of the oil market, or even increase sales, through price cutting. But almost no one followed the Soviet lead. Only Egypt, which exports...
TIME's board warned, however, that a recovery is not assured. Reason: interest rates may still be too high to support an upturn. Since July, the benchmark prime rate on bank loans has dipped from 16% to 11.5%, but that level is 6.5 points higher than the 5% inflation rate. Historically, the cost of borrowing money has usually been only 2 to 3 points above the rate of price rises. Consumer credit remains discouragingly expensive. Bank of America, for example, charges 22% on personal loans...
Interest Rates. The benchmark prime rate charged by banks stood at 20% in January 1981 and averaged 18.87% for the entire year. The prime began dropping rapidly in July, and now stands at 13.5%, its lowest level since September 1980. Other borrowing costs are also receding. The interest on Government-insured home mortgages slid to 14% last week, from a high of 18% in September 1981. Falling rates should spur consumer purchases of big-ticket items and boost business investments. But many economists caution, that interest levels are unlikely to fall much further. The cost of borrowing might even increase...
...OPEC's price-propping ploy succeeds will depend on the willingness of members to abide by the agreement. In the past two years, weakening worldwide demand for oil has driven down the spot-market prices for crude until they were about $6 per bbl. below the official OPEC benchmark price of $34 per bbl. If prices continue to slide, cash-hungry producers such as Algeria, Venezuela and Nigeria will be tempted to offer under-the-table deals to potential customers in order to take sales away from other cartel producers. To monitor compliance, OPEC decided...