The politics within OPEC are coming under closer scrutiny as it becomes clearer that a major production cut is the only thing standing in the way of still lower oil prices. This in turn would dampen oil exploration and production projects still further. The key question at the minute is whether OPEC can cut production enough to drive prices back up. While most analysts are talking of another 1 to 2 million b/d production cut, at least one observer says it will take a 6 or 7 million b/d cut to force prices back up by $30 or $40 a barrel.

Theories and intrigue abound. While the Saudis and the smaller Gulf producers have the financial reserves to see their way through some bad years, other OPEC members do not. The continuation of very low prices or substantial production cuts would force major changes in domestic and foreign policy, and perhaps even foster political instability in Iran, Venezuela, Ecuador, Nigeria, and Russia.

Some believe the pro-Western Saudis and their Gulf brethren understand that increasing oil prices in the midst of global recession can only deepen the troubles and delay the recovery. The  Saudis have every reason to want the confrontational stances and policies that have developed in several newly rich oil exporters, particularly those of the Iranians, moderated.