GASOLINE prices were too good to be true and have gone up. Expect another 8 to 15 cent-a-gallon increase at the pump before summer vacation but not the higher prices of two years ago.
Oil prices sank because the Asian recession reduced demand, and producer countries that regulate supply were cheating to boost national revenues to meet government deficits. Regimes at war or subverting each other could not cooperate. Two attempts by the Organization of Petroleum Exporting Countries (OPEC) to limit production failed last year.
The oil quotas agreed to at the OPEC meeting in Vienna yesterday, however, will probably stick for a while. Whether they will survive a year is problematic.
The goal is to manipulate the price. West Texas Intermediate crude, which dipped to $11.37 a barrel in February and was back up to $15.50 at the start of this week, is slated for $18 but no higher than $20.
The low price of oil helped stimulate consumer confidence here and prolong U.S. prosperity. It was the equivalent of a tax cut. With most of the rest of the world in slower growth or recession, oil producers have no interest in slowing the U.S. economy, which would capsize the oil prices they are trying to raise. Their goal is to stimulate their own economies without torpedoing ours.
If OPEC nations can keep their agreement, they would cut their production to 23 million barrels per day from 24.7 million last July and 27.3 million a year ago. They will probably stick to their agreement -- at least temporarily. Such fine-tuning through cumbersome diplomacy and distrustful cooperation is never wholly successful, though.
What makes last week's agreement different is that such non-OPEC nations as Mexico, Norway, Oman and Russia went along. It was preceded by a thaw between Saudi Arabia's Crown Prince Abdullah and Iran's President Mohammad Khatami. Venezuela's leftist President Hugo Chavez, elected last December, restored Venezuelan enthusiasm for OPEC.
Washington was not officially consulted and hardly talks to three OPEC members (Iran, Iraq and Libya). But if the new OPEC discipline actually succeeds in restoring producer economies without harming importer economies, that would help the U.S. national interest in a stable and prosperous world.