Oil ministers of the Organization of Petroleum Exporting Countries have finished another meeting, agreed that OPEC's 13 member countries would hold down production and left the world, as usual, worrying about the price of oil.
In the 14 years it has been paying attention to OPEC, the world has learned that no one is safe. Most people worry about rising prices for gasoline and heating oil, but the risk of lower prices is equally worrisome, considering the bankruptcies and hardships that last year's price collapse brought to energy-producing areas of this country.
So what's the worry today--higher prices or lower?
Neither is the answer--with the necessary qualification that oil supplies and prices are always disaster-prone, as they are today in the Persian Gulf.
Nonetheless, the outlook is not bad. The price of oil is unlikely to rise, or fall, much at all--not only this year but perhaps as far out as 1992, according to supply-demand analyses by several oil experts. The immediate outlook is for the oil price, which rose above $20 a barrel in the wake of the OPEC meeting, to settle back below $19--meaning that gasoline will stay under a buck a gallon in most places and heating oil, depending on the severity of the winter, will stay reasonable.
No New Hardship
Yet this sunny state for consumers does not mean new hardship for the energy-producing areas of Texas, Oklahoma and Colorado nor that the United States will be at the mercy of OPEC once again.
The truth is, we've come to a relatively fortunate time in oil. But if we want to preserve or extend that good fortune, we need to understand what brought it about.
Conservation--fuel-efficient cars, lowered thermostats--helped, mainly by keeping demand steady instead of rising in recent years. The world outside of China and the Soviet Bloc countries used 46.4 million barrels of oil a day last year, according to American Petroleum Institute statistics, 2% less than it used in 1981.
But the big factor curbing OPEC's power has been that supply has increased, especially non-OPEC oil from Britain, Mexico, South America and elsewhere. In this decade, an increase in non-OPEC production of more than 6 million barrels a day--according to estimates by analyst Barry Good of Morgan Stanley--has forced the cartel to reduce its output in order to support the price. And, as OPEC has learned, keeping production in check isn't easy.
The beauty of oil is that countries that have it want or need to produce it in order to raise tax revenue. Thus, OPEC member Nigeria, with a big population to support, guarantees Chevron a $2-a-barrel profit to keep producing regardless of the world price. And non-OPEC Britain gives tax incentives to Exxon and Mobil to encourage production from its North Sea. Last weekend's OPEC meeting did nothing to affect such consumer-favoring practices.
Plenty to Be Found
Meanwhile, in the United States the outlook for oil drilling activity is improving--at least on a certain scale. True enough, a price of $19 isn't high enough to encourage oil exploration on the scale that last brought us the big strikes in Alaska. In fact, new large deposits would be tough to find at any price. But there is a lot of oil still to be found and produced economically in smaller deposits--about 40 billion barrels, according to professor William L. Fisher, head of the geology department at the University of Texas.
Is anybody going for those smaller deposits? Sure, Charles L. Blackburn is. Blackburn, one of the smartest men in the oil business, is chairman of Maxus Energy, the Dallas-based company that inherited the exploration and production activities of the failed Diamond Shamrock Co. And Blackburn is confident: "These are the best times to drill for oil and gas since the early 1970s," he says.
Denver-based oil analyst Tom Petrie of First Boston Corp. agrees. Drilling costs have declined, Petrie says, and there are good prospects for wells in or near already discovered oil fields, onshore and off. No, it's not as big as Alaska, but it's enough to maintain U.S. production for years to come.
Which means that it buys time for us to find some new sources of fuel and avoid future dependence on OPEC. The fact is, much of the oil production that is keeping OPEC at bay these days was discovered, if not developed, before 1973. And it would be unwise to count on a big surge of new discoveries to replace that production. So while we have a breather, it's time to think again about developing substitutes for petroleum--things like alcohol fuel, gasified coal, oil shale. Maybe if we do, OPEC meetings will never be a cause for worry again.