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Analysis: OPEC tries to play it safe

By MARTIN SIEFF, UPI Senior News Analyst

KUWAIT CITY, Dec. 10 (UPI) -- Thirty years ago, the world trembled every time the Organization of Petroleum Exporting Countries held a summit. But when OPEC leaders gather in Kuwait City Monday, while global business chiefs will watch closely, they will not be trembling.

OPEC leaders have already made very clear that Monday's meeting is intended to stabilize the world's economy, not undermine it. Kuwait's own oil minister, Sheikh Ahmad Fahd al-Sabah, who is the current president of OPEC, said Saturday that global oil prices, currently just over $60 a barrel, were at an "acceptable" level.

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OPEC's production is maxed out at the moment, but Sheikh Ahmad and other OPEC leaders have made clear that the cartel is prepared to maintain its current enormous levels of production to prevent oil prices going through the roof because of heating demands in the northern hemisphere over the winter.

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"We will continue with our production levels," Sheikh Ahmad said.

Those levels are already about as high as they can be: OPEC's member nations -- Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela -- are pumping at nearly full capacity for a combined total output of around 30 million barrels per day, over-shooting their 28 million barrels per day official output ceiling.

Sheikh Ahmad was expressing the overwhelming consensus in the 11-nation cartel: Saudi Arabia, Nigeria, Algeria, Indonesia, the United Arab Emirates and even Iran have all publicly committed themselves to maintaining their current high production levels.

The OPEC members also look set to renew their current agreement that Saudi Arabia, the world's key "swing" oil producer over the past four decades, should continue its current commitment to be ready to pump an extra 2 million barrels per day into the global marketplace if demand requires it.

Indeed, the cartel, far from wanting to keep global oil prices at their current almost record levels, is quietly planning to try and bring them down by possibly $5 to $10 a barrel next spring and summer after winter passes. The OPEC members have no plans to deliberately try and raise or maintain existing global market prices for oil unless they fall by at least one third from current levels to below $45 a barrel.

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And they are coordinating the development of additional capacity for the global market so that even continued increased demand from China's dramatically growing industrial economy will not put more long-term structural pressure on global prices.

All this is a far cry indeed from the way OPEC leaders behaved 30 years ago. For the OPEC of today is a very different body, with a very different approach to the world, than the apparently all-powerful cartel that tripled real global prices after the 1973 Arab-Israeli War and dramatically shifted the global balance of economic power.

Then, OPEC was a young, revolutionary organization. It had only been founded a decade and a half before in 1960 and had just discovered its intoxicating new strength. It was determined to change the world and bring unprecedented wealth and power to the governments that controlled oil -- the world's most important energy resource. And it succeeded.

OPEC was also secure and confident. From conservative Saudi Arabia and Iran to revolutionary Algeria and Libya, its members in the 1970s were convinced they were on the cutting edge of history, and that they could raise the price of global oil to their hearts' content and suffer no backlash from it.

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But the national governments whose representatives are meeting in Kuwait City Monday understand the power of backlash -- political, financial and even military -- all too well. They know that the United States wiped out the fourth or fifth largest and most powerful land army in the world -- Saddam Hussein's in Iraq -- in a matter of days in the first Gulf War in 1991 as a direct response to Iraq seizing its tiny neighbor Kuwait, the host of this 138th OPEC summit.

And they also know that from the bleak 1980s and the even grimmer 1990s, that if they over-price their resource, precious as it is, they cannot get away with it forever, or even for long. Alternative energy resources and other oil reserves it was previously too uneconomic to develop will rapidly emerge as significant forces on the global scene and the value of their own holdings may be devalued for a generation as a result.

Also, while OPEC is once again the commanding coordinated force in the global oil market, it is far from the dominant player in it that it was in the 1970s. The 11 OPEC nations combined accounted for only 36.1 percent of global oil output in November. While other nations, especially Russia, now the world's number two oil exporter, usually work smoothly with OPEC in oil price negotiations, they have the potential to go their own ways and cut their own deals if OPEC overplays its hand. The same goes for the rising Central Asian oil pricing nations led by Kazakhstan.

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The OPEC of the 21st century, therefore, has become a reassuring force for global stability that is a far cry from the frightening and revolutionary swagger it cut on the world stage a generation ago. It is the reassurance, not the revolution that is playing before its global audience on Monday

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