ABSTRACT
OPEC agreed collectively to reduce official selling prices for the first time in its history in March 1983. The organization also imposed an overall production ceiling on its members and adopted a prorationing agreement, making the Saudis the explicit swing producer and market balancer. Cyclicality in the oil markets - fluctuations in demand or supply with accompanying changes in prices - has always existed. Despite the unknowns, it seems useful to assume that price stability at the new levels will persist, in order to trace the benefits and costs. The general and diffuse positive benefits to most governments and consumers should be set against the more concentrated costs to all oil-exporting countries. Investment patterns in the petroleum industry reflect the interplay of a multiplicity of factors: geology, projected prices and costs, availability of capital, terms and conditions for entry established by ‘host’ governments, and expected stability of economic and political conditions and of governmental policies.
