Word: opec
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...immediate impact. In spot markets, where shipments of oil that are not part of long-term contracts are traded, the cost of crude dropped to about $30. Some experts believe that the price will eventually drop below this level, but even if $30 became the new OPEC price, it would represent a 12% decline. Any reduction, in fact, would be like a huge tax cut for the world economy, which could help end its worst downturn since the 1930s...
Before long, the Saudis made a last-ditch effort to seal the cracks in OPEC'S unity. At a meeting in Bahrain of seven of the organization's members, Yamani offered to lower the Saudis' production quota if the others would accept new ceilings and stick to them. The ministers reached a tentative agreement and decided to convene a full OPEC meeting in Geneva...
...accept a slight cut instead. On Sunday night Venezuela's Calderón Berti suddenly emerged and disclosed that the participants had hammered out new quotas designed to hold the oil price at $34. Iran's Mohammed Gharazi was jubilant. "This is the greatest victory for OPEC," he proclaimed...
...reflected its higher-than-average quality. Nigeria, Algeria and Libya produce so-called sweet crude, which yields a particularly desirable mix of products after refining. Moreover, because these countries are relatively close geographically to their European customers, the cost of transporting the crude is lower. For these reasons, the OPEC members have tacitly agreed in the past that African oil should sell for a few dollars more per barrel than the $34 price for Saudi light crude. But what the exact differential should be has been a matter of dispute...
Despite all the potential pitfalls of a sharp oil-price decline, many energy ex perts feel certain that the benefits would far outweigh the risks. Says John Sawhill, Deputy Secretary of Energy under President Carter: "The soaring OPEC prices were in effect an excise tax on the world economy. A drop would be precisely the reverse - an enormous shot in the arm." Agrees Walter Heller, chief economic ad viser to President Kennedy: "The eco nomic tonic would be worldwide. If best comes to best, and we see $20 to $25 oil again, we could use part of the economic bonanza...