A Kinder, Gentler OPEC.(Organization of Petroleum Epxporting Countries)(Brief Article)(Interview)

The Organization of Petroleum Epxporting Countries will cut oil production this week by 1 million barrels a day, or 4 percent, despite President George W. Bush's pleas to "open the spigot." The news raised immediate fears of an economic "double whammy," deepening what the White House describes as a full-fledged "energy crisis" and thrusting the "sputtering" global economy closer to recession. It was also another sign that OPEC, so enfeebled in recent years that many pronounced it dead, is again alive and kicking. But what sort of OPEC? The cooperative partner that boosted production last fall to ease Europe's gasoline crunch, or the "evil cartel" of yore that has since cut production twice? Daniel Yergin, chairman of Cambridge Energy Research Associates and author of "The Prize," a Pulitzer-winning history of oil, suggests that OPEC is charting a new role today, trying to look ahead rather than play catch-up. Last week he spoke with NEWSWEEK's Michael Meyer:

MEYER: So, is big, bad OPEC back?

YERGIN: No, this is not the '70s. This is a new OPEC, trying to chart a middle ground. OPEC has its heart and mind set on keeping oil prices between $22 and $28 for what's called the OPEC barrel. That's $3 or $4 lower than the benchmark West Texas Intermediate, currently selling at around $27. They're worried that it will fall through the bottom of that band. They're seeking to preserve their revenues, on which their national budgets depend.

What's scared them?

The threat of recession in the United States, which could cast a pall over the rest of the world, including Asia. That's the big cloud hanging over the international oil market. OPEC is still very traumatized by the collapse of oil prices after the Asian economic crisis of 1997-98. They're haunted by the memory of $10-a-barrel oil. That's why we've seen the recent discipline and cooperation among OPEC and non-OPEC oil producers. They recognize that they have to act together if they are to maintain national revenues.

Isn't this something of a double whammy, saddling the world with $30 oil just when the economy is slumping?

Prices over $30 would hurt the economy at a difficult time. While some members disagree, I think key countries in OPEC are shooting for the middle of their price range. It's a balancing act. OPEC is trying to anticipate what's ahead, managing supply and demand by looking two or three months down the road. If there is no global downturn, the oil exporters will need to start ...