Word: opec
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...epic oil plunge of the 1980s started out slowly and a bit remotely. To most people, it was just a downward-sloping diagram on the financial page, an abstract reminder of the mysterious world of desert oil wells, filthy-rich Arabs and the irritating antics of OPEC. But suddenly oil's new situation is hitting home with the wallop of a 42-gal. oil barrel dropped on the front porch. Last week consumers, businessmen and traders around the world watched in awe as the price of crude dipped below $10 per bbl. for the first time in almost a decade...
While that statement heartened U.S. oil drillers, along came a more dire forecast by Mani Said al-Oteiba, the Oil Minister of the United Arab Emirates. He declared OPEC--the Organization of Petroleum Exporting Countries--to be in disarray and predicted that prices could fall as low as $5 per bbl. His remarks helped send the price of West Texas Intermediate, a benchmark crude, tumbling to $9.75 per bbl. Tuesday on the New York Mercantile Exchange...
Even the passing idea that the Administration might want to ask OPEC to withhold oil from the market struck many experts as a colossal irony. Said Robert Hormats, an investment banker with New York City's Goldman Sachs and a former Assistant Secretary of State: "Talk about a world being upside down. Only a few years ago, we were asking them to raise production as much as possible...
...when the Arabs embargoed oil in retaliation for U.S. support of Israel; the second in 1979, after the overthrow of the Shah of Iran cut off that country's supply. The shortages, even though they were never greater than 10%, enabled the oil producers to crank prices ever higher. OPEC became a nasty acronym in the West, the favorite villain of cartoonists and columnists...
Though oil prices have been drifting downward since 1981, the current price war began when Saudi Arabia got fed up with its OPEC partners. For years the kingdom, which holds about one-fourth of the world's oil reserves, tried almost single-handed to prop up prices by curbing its production. The country wound up slashing its output from a peak of 10.3 million bbl. a day in 1981 to ! a low of 2 million bbl. a day last June. During that time its annual oil revenue fell from $113 billion to $28 billion. Many of the other twelve countries...