By setting production quotas for its members, Opec tries to manipulate the price of oil, but has found itself increasingly impotent in the oil market of late.
It is far from being the all-powerful cartel it was in the 1970s. A huge increase in production, the Asian economic collapse and the organisation's own inability to hang together has meant that member states are at each others' throats. If they cannot agree to cut production, a further slump in the price seems inevitable.
For Britain, which exports oil but is also an industrial nation, an oil price decline is not a concern. For Asia and the US, it will keep inflation low and boost industry. But it could produce social and political chaos around the world, especially in Latin America and the Middle East.
Russia's income from oil has declined by a third. Even mighty Saudi Arabia is facing severe budgetary pressures, and has borrowed $2bn from banks. In the good years, surging oil revenues were used to build up welfare states that are now hard to finance.
Opec made a critical error of tactics last November. To take account of existing overproduction by its members, it decided to increase quotas. The market took that as a signal and prices slid.
A warm winter, the onset of the Asian crisis and fears that Iraq would re-enter the market made things worse. Since then, prices have slid from around $19 a barrel for benchmark Brent crude to around $14 a barrel. Taking account of inflation and the changing value of the dollar, oil is cheaper than it was in 1973 when Opec made its first effective thrust for market dominance.
The potential saviour was found in the genteel red-brick northern suburbs of Oxford, far from the heat and dust of the Gulf fields. Robert Mabro, head of the Oxford Institute of Energy Studies, was brought in to try to broker a truce between the main players as they began to realise the depth of the crisis.
Mexico, one of the key non-Opec producers, called him in to chair three- way negotiations with Venezuela, the leading renegade within the organisation, and Saudi Arabia, which dominates world oil production. The result was the first round of concerted oil production cuts in more than 10 years, known as the Riyadh pact.
The pact promised cuts in output of 1.2m barrels a day (mbd), but what materialised was only about 1mbd. When Opec meets again today, it will be looking for further cuts. There are 800,000bd on the table, but oil analysts believe that more will be necessary to convince the market.
The presence of non-Opec states at the meeting - Russia, Oman, Norway and Mexico - along with the Riyadh Pact may be a signal that a new cartel is assembling. But Norway is set on maintaining its current levels of production. And the credibility of Opec, once an irresistible force, is at an all-time low. It will take an act of rare unity to convince world markets that Opec's once-fabled strength has returned.Reuse content