It's been a long time since the world trembled whenever the Saudi oil minister or some of his more volatile OPEC counterparts mused about prices or production. And now, as the dozen members of the 54-year-old Organization of Petroleum Exporting Countries once again weigh the merits of enforced cutbacks in the midst of a global oil glut, the question is whether anyone will care at all.
In the wake of the 1973 oil embargo organized by OPEC's Arab members that drove prices up fourfold and sent the U.S. spinning into a recession, erudite Saudi oil boss Sheikh Ahmed Zaki Yamani made headlines every time he said something about the market over the next dozen years. He routinely ranked among the world's most powerful people.
Today, 79-year-old Saudi oil minister Ali al-Naimi remains the most influential oilman on the planet thanks to his other government job as chairman of Saudi Aramco, the world's biggest producer and exporter. But OPEC itself has been a toothless tabby for years, weakened by internal squabbles and an inability to enforce quotas on recalcitrant members. The cartel also must face the fact that it no longer calls the shots when it comes to pricing or even supply.
Mr. al-Naimi has had little to say publicly about the slide that has knocked about 30 per cent off the price of oil on the global market since June, sending it to a four-year low. And when he did comment at a Mexican conference recently, it was to reiterate that Saudi Arabia plans no changes in its oil policy and that the market is setting the prices.
The message to OPEC hardliners like Venezuela and Iran, which have been pushing hard for deep production cuts at Thursday's critical meeting in Vienna (aided and abetted by Russia, a non-OPEC country), was clear: Don't expect Riyadh to agree to any drastic action at a time when it is desperate to shore up its dwindling market share.
Analysts expect a modest cutback at best that could easily be replaced by non-OPEC producers and would have no effect on prices in any case. The strongest advocates of production curbs fear a further price drop that their fragile public finances are in no condition to handle. This view is supported by some oil watchers who predict crude could slip to $60 (U.S.) a barrel if OPEC sits on its hands.
But the Saudis seem perfectly content to do nothing, because their longer-term concern is protecting themselves from the onslaught of U.S. shale oil. They are also worried about falling demand in China and India, where they have been losing market share as well.
The Saudis were caught flatfooted by the technological advances that made shale production economical and slashed U.S. imports to 30 per cent of consumption from 60 per cent just a decade ago. Even worse, U.S. producers may soon get the green light to export crude abroad.
But what better way to hurt the high-cost competition than for the world's cheapest producer to drive prices even lower for a time.
Saudi Arabia "does not want to give up market share to other producers," says energy policy expert Daniel Yergin, author of The Quest: Energy, Security, and the Remaking of the Modern World. "And it does not want to find itself left holding the bag, cutting back when other exporters say they will but don't cut back."
Leaks from pre-meeting conversations Mr. al-Naimi has held with his counterparts from Venezuela, Russia and Mexico, another non-OPEC producer, indicate there may be no support for production cuts.
Sheikh Yamani, who was booted out of his ministerial post during a sharp decline in prices in 1986, predicted in 2000 that a rash of new discoveries, major investments in exploration and production and key technological advances would sink oil prices in five years. And there was nothing OPEC could do about it. He was wrong, but only about the timing.