Page 446 - Arabia the Gulf and the West

The ‘Sling’ 443

Abu Dhabi and the UAE, and current president of OPEC, who solemnly
averred on 9 May: ‘Although the market can now justify more or less any size of

increase in crude oil prices owing to the current imbalance between supply and
demand, nevertheless I think we should not go for any further price increases
this year. .. . This is a duty we have to fulfil.’ Eight days later Abu Dhabi raised
the official selling price of her oil by a further 80 cents a barrel.

At its semi-annual conference in Geneva in the last week of June 1979 OPEC
unblushingly ratified the results of the prices’ free-for-all of the preceding
quarter. Saudi Arabia, which had for the most part kept her prices steady since
April, agreed to raise the price of the marker crude, standard Arabian light, to
$18 a barrel. To recover some of the revenue she had lost in the interim, the
increase was made retrospective to 1 June and the period allowed for payment

of purchases of Saudi crude, hitherto sixty days, was reduced to thirty days.
The Persian delegation, perhaps unhinged by revolutionary zeal, promptly
raised the price of Persian light crude, customarily pegged at 11 cents above the
price of Arabian light, to $21 a barrel, thereby creating in effect a second
Gulf marker price. All the delegates were agreed that in the prevailing con­

dition of the market their governments were entitled to impose a surcharge of
$2 a barrel on the Saudi marker price, and to charge whatever they saw fit
for quality and geographic location premiums, up to a ceiling price of $23.50 a
barrel. With the sole exception of Saudi Arabia every member state imposed
the surcharge from 1 July, and, where applicable, the quality and location
premiums. The effect was to bring the average price increase for a barrel of

OPEC oil for the six months since December 1978 to an aggregate of 65 per
cent, with Iraq (71 per cent), Libya (69 per cent) and Algeria (67 per cent)
leading the field, and Saudi Arabia (42 per cent) trailing well behind. Such was
the volume of Saudi Arabian production, however, that the Saudi government
would be the principal financial beneficiary of the price increases. The total

revenues of OPEC, which had been in the vicinity of $140,000 million in 1978,
were expected to exceed $200,000 million in 1979.
Although the combined price increases of the first half of 1979 were by far
the highest that had occurred since the quadrupling of oil prices late in 1973?
they failed to elicit from the Western world any response other than a sustained
bout of indignant bleating. The finance ministers of the OECD, meeting in
Paris in the middle of June 1979, could propose no solution to the severe

economic problems which the price increases would create for the industrial
nations other than to say that their peoples should resign themselves to a lower
standard of living. Just how excessive a price increase is needed to provoke
some real resistance from the Western powers and Japan there is no way of

nowing: their submissiveness seems boundless. However, should the im­
probable occur and they should find the modicum of courage required to resist
some particularly outrageous demand, what measures could the Middle-
astern members of OPEC adopt to force the West to resume its habitual