Inside the Big Oil Game

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producing states have discovered that the secret to the Oil Game is collusion, not competition. So far, the cartel's principal difficulty has been getting all members to agree to price-propping production quotas. But Libya has been cutting back on its normal deliveries by 17% since April 1, while Iran, whose production is now at 4 million bbl. a day, is actually pumping only two-thirds of its prerevolutionary volume. Others may soon follow with cutbacks of their own."

Some cartel members, of course, really do need the money. States like Venezuela and Indonesia have launched crash development programs to provide for their large, poverty-blighted populations. From an initial surplus of $60 billion in 1974, which the cartel simply could not spend fast enough, OPEC'S ledgers have returned to close to balance for nearly all members. But there are major exceptions. Saudi Arabia, Kuwait and the smaller Persian Gulf sheikdoms still have large surpluses.

Much of the cartel's wealth has been squandered on well-intentioned but poorly planned and executed development schemes: atomic power plants for Iran, whose bountiful natural resources can meet that nation's energy needs for a century or more; steel mills and petrochemical plants at remote desert sites throughout the Gulf, where transportation costs alone render the products uncompetitive.

Yet even so, OPEC officials insist that there is nothing wanton or immoral about their policies. Cartel members point out that in Western Europe most governments still collect more in taxes on petroleum imports than OPEC does when it exports the crude. Eventually, everyone stands to lose. The world's poorest countries have borrowed so much to pay for oil that their accumulated indebtedness has risen to more than $210 billion. Such major U.S. lenders as Citicorp and Chase Manhattan have huge loans out to India, Pakistan, Turkey and many other countries. Fears are rising that sooner or later some borrowers will not be able to afford even their interest payments. The threat is not simply of defaults leading to instability, but of worsening hunger and unrest among the world's more than 1 billion subsistence-level people.

These harsh realities are every bit as troubling to oilmen as to anybody else. They chafe at charges that they belong to some sort of seamless monolith, and they are bewildered by the public's suspicions. The dismay is understandable. Hardly the conspiratorial business that it is widely thought to be, the 1.8 million-employee industry operates in an intensely competitive arena.

Some 50% of all domestic production, which now stands at 8.7 million bbl. per day, comes from wells dug by the industry's 10,000 independent wildcatters. The breed's home base is the boom city of Houston, and the risks and rewards of the profession are reflected in a remark by one of its members, Chester Benge: "The oil business is one of the few businesses in the world where you can go to bed poor and wake up rich."

Though the Seven Sisters dominate the industry, their influence and power are actually being cut down by the energy upheavals of the 1970s. This winter the worldwide shortage of crude has encouraged one nation after another, and numerous independent oil firms, to deal directly with OPEC, in effect short-circuiting the big multinationals. Says Thornton Bradshaw,