Word: opec
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Such dangers seemed remote when the OPEC representatives gathered on July 27 at the 18-story glass-and-concrete Geneva Intercontinental Hotel. Most of the ministers were convinced that the meeting would prove as futile as their three earlier sessions had this year. Sighed Indonesian Oil Minister Subroto, as the session began: "This will be a short meeting. The political will is lacking." The members had not been able to agree on specific production quotas for each country...
...spark for a settlement came, surprisingly, from Iran. On the morning of Aug. 2, Iranian Oil Minister Gholamreza Aqazadeh approached Sheik Ahmed Zaki Yamani, his Saudi Arabian counterpart. The two men talked for about 90 minutes in Yamani's suite, which had a sweeping view of Lake Geneva. Since OPEC members were unwilling to make long-term promises to limit their oil production, Aqazadeh reasoned, Why not try an interim measure? He suggested a temporary return to the group's 1984 quota of some 16 million...
This is far from the first time that OPEC has tried to cope with oil prices, which have been falling since 1981 because of sluggish world demand. The group has periodically imposed quotas, but they never stuck. For most of this decade, Saudi Arabia, OPEC's largest producer, kept its production far below capacity. Last year, though, it began a new strategy of boosting output and flooding the market. A price war ensued, as Yamani knew it would...
...goal of the Saudis' tactic was to drive high-cost non-OPEC oil producers out of business and thus limit energy exploration. To some extent, the swamp 'em and stomp 'em strategy has worked. In the U.S., for example, the number of active drilling rigs has fallen from 1,911 a year ago to fewer than 800 today...
Equally important, the Saudi strategy forced the other OPEC members to think seriously about quotas or face the prospect of almost bottomless oil prices. Before last week's agreement, some experts were predicting a price of $6 per bbl. by the end of the year. Says Sanford Margoshes, who follows the industry for Shearson Lehman Brothers: "Producers have suffered exquisite pain, and pain makes one wise." Arnold Safer, an energy consultant based in Bethesda, Md., believes "it was a do-or-die situation in Geneva...