OPINION/COMMENTARY

The Oil Problem

WHEN THE OPEC CARTEL convenes this week it will have to deal with demands that it rev up its capacity to supply the world with the increasing amounts of oil that America's drivers and shivering homeowners, China's industries, and even Europe's stalled economies need. The International Monetary Fund has leaked the chapter of next month's World Economic Outlook in which it calls for OPEC to provide "much better protection" against price spikes by increasing its spare capacity from about 2 million barrels per day to between 3 million and 5 million barrels. And the Federal Reserve Board's latest survey of the state of the U.S. economy warns that manufacturers are regaining sufficient pricing power to enable them to pass on higher costs to consumers. Worse still, both the experts and the markets agree that high prices are here to stay. Saudi Arabia's oil minister, Ali Naimi, predicts that prices will be in the $40-$50 range for the foreseeable future; the futures market is suggesting that no relief is in sight from the $55 level; the Department of Energy agrees; David O'Reilly, CEO of ChevronTexaco warns, "The time when we could count on cheap oil . . . is clearly ending"; and there is talk on the street of $80 oil....

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