| Summary: | In 1981, the price of oil was $34 in current dollars ($50 at 1992 price levels). The consensus was that it would keep rising toward the cost of synthetic crude oil or some such long-run ceiling. In fact, the cartel had fixed the price far above the point of maximum profit. OPEC members did not lose their power, they regained their wits, and saw their limits. The drop in consumption in belated response to the two price explosions was borne entirely by OPEC as price guardian. Non-OPEC production rose. OPEC market share fell to less than 30 percent. OPEC members kept a remarkable cohesion. During 1982-1985 Saudi Arabia absorbed most of the loss, and prices declined moderately. But when Saudi exports went to near-zero, they ceased to be the restrictor of last resort. The price fell below $10, until OPEC could patch up a market sharing deal and bring it back to the neighborhood of $18, where it has remained.
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