OPEC raises oil output prices to stay moderate

GENEVA — GENEVA -- The Organization of Petroleum Exporting Countries agreed yesterday to a Saudi proposal to increase the group's total production ceiling by more than a million barrels a day, which would keep oil prices at their present moderate range, averaging about $19 a barrel worldwide.

The accord, which calls for output of 23.6 million barrels a day, was opposed by several OPEC countries. The stated Saudi aim is to permit the halting recovery of the world economy to continue without any shocks from higher energy prices.


But the tenacious view of the Saudis was also heavily influenced by Riyadh's decision to retain the commanding share of OPEC production that Saudi Arabia has held since the Persian Gulf crisis, when it raised its output to 8.5 million barrels a day from 5.5 million barrels.

"The Saudis got what they wanted, and the others walked away empty handed," said Bahman Karbassioun, an Iranian oil economist and former OPEC official.


The OPEC action came as oil consumers moved to discourage fuel use. The European Community proposed to its 12 member nations a clean-energy tax of $10 a barrel on oil by the end of the century to curb worldwide emissions of carbon dioxide.

Saudi officials have repeatedly said that they will not abandon their share of world oil markets.

Against the objections of several OPEC members, Saudi Arabia argued that producers should continueto pump all the oil they could to protect world markets against shortages in view of the tumbling production of the Soviet Union. A senior Arab OPEC delegate said, "I think they have made a lot of people unhappy, but they have the ability to produce more oil than any of us, and if you can produce, you can dictate the terms."

The Saudis have emerged from the Persian Gulf crisis as the undisputed masters of OPEC, particularly since a United Nations economic embargo eliminated Iraq as an effective member of the organization.

OPEC's last agreement, reached in June, had set the ceiling for its members at 22.3 million barrels a day. However, the group was in effect producing about 23 million barrels a day, with Saudi Arabia accounting alone for more than a third of that quantity.

In addition to the Saudis' professed concern for the health of the world economy, OPEC experts said that their principal goals are to regain dominance of the organization and to wipe out the consequences of the pre-gulf crisis policies of OPEC.

Before the crisis, some members aimed constantly at pushing oil prices up by restraining output, particularly Saudi output.

Saudi Arabia had said that it would not return to the old and now largely extinct OPEC production quota system adopted in July 1990.


The Saudi goal, several OPEC officials said, is to end the 2-decade-old policy of attempting to set the price of oil by regulating its output. Instead, the Saudis want to focus the organization's attention on forging long-term agreements of cooperation with the industrial world.

The Saudi strategy has not been opposed strongly here by the country's main rival in OPEC, Iran. Iran is attempting to normalize its ties with Saudi Arabia.