Word: opec
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...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...
...from independent producers in the U.S. Gulf also curtailed its purchases of North Sea oil, and was reported to be selling oil on the spot market at significant discounts. The moves were clearly designed to force down the price of crude from overseas suppliers, including the OPEC countries...
News from the Middle East about the intentions of OPEC'S feuding members was confused and contradictory. Early in the week, Kuwait's government news agency reported that Saudi Arabia, Kuwait, Qatar and the United Arab Emirates had agreed to trim $4 off their $34-per-bbl. price unless the other members of OPEC accepted new limits on their production. Two days later, the United Arab Emirates' Oil Minister denied that the four Persian Gulf nations were threatening their OPEC allies with price cuts...
Western oil experts believe that the Saudis are willing to reduce their price but want some other major oil producer to go first. Two weeks ago, Saudi Oil Minister Sheik Ahmed Zaki Yamani suggested that Britain, which is not part of OPEC, might take the lead by lopping $2 or $3 off the $33.50 it charges for a barrel of North Sea oil. But British Prime Minister Margaret Thatcher is hardly eager to initiate a price cut that would slow the flow of oil revenues into Britain's struggling economy. Says a senior British oil executive: "Why should...
Automakers also are being helped by renewed customer interest in larger cars, on which they make more money, spurred partly by the weakening in gasoline prices as the OPEC cartel loses its grip. Rust also is Detroit's friend: more and more cars in the U.S. auto fleet are older ones (average age: seven years) and will need to be replaced sooner or later. This year will not be a great one for Detroit. But at last there seems to be cause for believing that good times, if not around the next bend, could be around the one after...