Oil's New Boss

It's easy to see how the various princes, sheiks and emirs might have felt a bit out of place at last week's 40th-anniversary summit of the Organization of Petroleum Exporting Countries. For one thing, members of the famously fractious group (given up for dead only a couple of years ago amid plummeting oil prices) hadn't been able to see their way through the wars, political infighting and price gouging to convene such a gathering for a quarter-century.

The other jaw dropper was that instead of making a quick jaunt to a neighboring desert kingdom, the heads of state and their massive entourages (Saudi Arabia brought 340 people) jetted all the way to Venezuela--the only Latin American member of this exclusive club, and long a member in poor standing for consistently flouting production quotas.

Why bother? Because their host had incited in OPEC's leaders a belief that their moment had arrived and that they'd better seize it. Hugo Chavez Frias, 46, the fiery nationalist President of Venezuela, saw an opportunity in the booming economies of the developed world to turn a moribund cartel back into a global economic powerhouse. Against the backdrop of soaring energy prices, which have tripled during the past two years to a high two weeks ago of $36 per bbl., Chavez took center stage in Caracas last week to proclaim OPEC's "resurrection."

The U.S. is girding for a potential shortage of heating oil this winter, and European governments are trying to contain protests over the price of petrol. But Chavez boisterously reminded everyone that the supplier of 42% of the world's most precious commodity has the kind of leverage a superpower might yearn for. And by the way, the ex-paratrooper argued, rather than blame OPEC for threatening the global economic boom, the West should look closer to home--at high fuel taxes, market speculators, lagging refining capacity and a Christmas list of other ills.

By the time the historic meeting adjourned, OPEC's leaders had established for themselves not just a new mandate but also a new identity. Gone are the dictatorial Saudi Arabian edicts of Sheik Ahmed Zaki Yamani, who once practically ruled the cartel, if only by virtue of Riyadh's overwhelmingly dominant role as a producer. The new OPEC is, in the words of an Arab diplomat at Caracas, a "management group." Its new strategists are cosmopolitan technocrats, in some cases U.S.-educated. They speak the language of market economics and are unlikely to rock the global boat with sudden embargoes or regional disputes. The President of Iran, Mohammed Khatami, last week acknowledged a tacit partnership with old foe Saudi Arabia, pledging cooperation in raising production "in order to maintain oil prices at a level acceptable to both producers and consumers."

In other words, the new OPEC doesn't want to gouge its customers; it wants global economic stability. That's why at week's end the cartel suggested that its goal was to lift production enough to bring prices down to between $22 and $28 per bbl.--a level that should ease the sense of crisis felt from Washington to Tokyo. Last week the price of crude oil closed at $30.86.

The irony, of course, is that the man who made the Caracas summit possible could also cause OPEC's new unity to blow like black gold out of Spindletop. Before the meeting even began, Chavez showed how immoderate he can be. A former army colonel who spent two years in prison for his role in a failed 1992 coup, the outspoken Venezuelan last month used a weekly radio address to rail against the injustice of the West and hold forth his vision of OPEC as a champion of the developing world, highlighting such issues as debt relief, poverty, trade and the environment. "For a century, they took millions of barrels of oil at giveaway prices," he said. "How nice it would be if they also lowered the prices of things they sell to us, lowered the prices of computers, medicine and cars, and the interest rates on foreign debt."

That kind of rhetoric instills dread in Western capitals--and it's just the sort of tool Chavez loves to wield. The son of schoolteachers, he was raised in a dusty, southwestern Venezuelan cattle town, and joined the army to further his dreams of becoming a professional baseball pitcher. Instead, partly because of a troublesome arm, he rose through the ranks to lieutenant colonel. His rural roots and socialist ideals drew him into the bloody, aborted 1992 coup attempt. During his prison term, he became a voracious reader of everyone from Jean-Jacques Rousseau and Walt Whitman to Che Guevara and his personal hero, Latin American colonial liberator Simon Bolivar.

Pardoned after two years, Chavez sought and won a reputation as a folk hero to the poor and dispossessed, who make up 80% of Venezuela's 25 million people. Donning his trademark bright-red commando's beret, he traversed the country, decrying the rampant corruption of the country's broken two-party system and promising a "social revolution" to lift Venezuela out of a terrible recession brought on by--what else?--a nosedive in oil prices.