Word: cartelizing
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That simple pronouncement could hardly have been loaded with more significance. The mighty organization that once seemed able to bend the world to its will was sinking deeper into its worst crisis. OPEC was badly split, if not permanently shattered. Concluded Harvard Economics Professor Otto Eckstein: "The cartel is on the verge of falling apart. If Saudi Arabia cannot impose some production and price discipline on the other members, then OPEC is finished...
...roughhewn and tieless, was Seyyed Mohammad Gharazi of Iran. The issue before them was the control of OPEC itself. The result: a draw that deepened the most severe crisis in OPEC'S 22-year history and raised doubts about whether the organization can ever function as an effective cartel...
...actual agreement was what was left out. The conference did nothing to resolve the crucial question of how much oil each member should produce. That leaves OPEC without a formal method for limiting its output to maintain its price. Such a method is the heart of a true cartel. Notes John Lichtblau, president of the Petroleum Industry Research Foundation: "To agree on an overall production level does not mean that much when you cannot decide how to set this level. The question of who will produce what is really the most important thing...
Also in 1982 the OPEC countries appear to have recorded a deficit in their international current-account balance for the first time since they emerged as a major price-setting force. Consequently, the poorer OPEC nations are under pressure to produce more oil to keep revenues flowing. The cartel first tried to restore order last March by assigning production quotas. That effort was an instant failure: some members overshot their ceilings by 100% or more...
...long-term outlook for OPEC and oil prices is squarely tied to the health of the world economy, which shows few signs of rebounding any time soon. A vigorous recovery, however, could rejuvenate the cartel by driving up demand. Says James McKie, a University of Texas energy expert and member of the TIME Board of Economists: "If world recovery does proceed and the growth of demand resumes, I would expect OPEC to regain at least the amount of clout that it had before the Iranian crisis." OPEC may be gravely wounded, in other words, but rumors of its imminent demise...