Think oil prices are too high? Think the Organization of Petroleum Exporting Counties is both all-powerful and greedy and George W. Bush should keep his campaign promise to “get tough with OPEC”?

If so, you’re wrong, says Sheikh Hisham Nazer, former Saudi Arabian Minister of Petroleum and Economic Planning. Nazer offered his audience a Middle Eastern perspective on energy pricing during a presentation at Wharton on Jan. 25.

According to Nazer, the modern history of Saudi Arabia, including his own role in it, has been a constant struggle with western companies to obtain a fair share of the income made from oil. He first recognized this, he said, when he returned to Saudi Arabia in the mid-1950s after getting a degree from UCLA and was offered a job in the petroleum ministry. He made a point then of reading up on the history of the industry, an exercise that he described as “the best thing to happen to me.”

Saudi Arabia, a country three times the size of Texas, has the largest oil fields in the world, capable of producing 162 billion barrels of oil, Nazer said. “And if technology improves, we will be able to get to 600 billion more barrels we know about now.”

But before oil was discovered in the 1930s, he added, “Saudi Arabia was an isolated country and had nothing.” When American philanthropist/plumbing magnate Charles Crane “came there and asked the King what he needed, the King replied, ‘help in finding water.’ So Crane sent a geologist to the kingdom to find water and he discovered oil.

“Nobody knew then how much oil there was. An official of Iraq Petroleum was so sure there was none he offered to drink every drop that was found. When Standard Oil of California (now Chevron) offered to pay 21 cents a barrel for a concession giving it the rights to any oil it found, Saudi Arabia had to accept,” he said.

After the first gusher was discovered, Nazer continued, Standard Oil of California brought in Standard Oil of New Jersey, Mobil and Texaco to form the Arab American Oil Co. (Aramco), the largest oil company in the world.

In time, Saudi Arabia wanted to negotiate a fairer agreement. “By the 1950s, when I first joined the Ministry of Petroleum, there was a 50-50 agreement in place, but that was only on the profits from production of crude, not from transporting, refining, distributing or marketing the oil,” Nazer said. “And the profits from crude kept sinking. They went as low as $1.60 a barrel, making crude oil cheaper than Pepsi Cola.”

Decades later, some oil-producing countries resolved their continuous disputes with western oil companies by nationalizing their oil fields. Saudi Arabia pushed instead for greater participation in the oil industry in an “integrated way” – that is, getting involved in all phases of the oil business. While he was Minister of Petroleum from 1986 to 1995, Nazer noted, Saudi Arabia bought refineries, established its own fleet of tankers and developed marketing agreements to serve end customers in the U.S., Greece, the Philippines and Korea.

In those years, Nazer also served as Minister of Planning, a post he was first appointed to in 1970. In that role, his task was to oversee the use of oil revenues to develop the Saudi Arabian economy. It was not difficult to see the kingdom’s infrastructure needs: “We had hardly any schools. There were only 400,000 students in all levels of education in the whole country. No health facilities. No telephones. No power except in a few of the major cities. We built two schools every three days. We built two universities. We provided free homes and free health care. We improved the ports. We built two cities entirely from scratch connected to gas and oil pipelines. Now, 30 years later, 70% of the world’s primary production of chemicals occurs in those cities.”

That could not have been done, he implied, if Saudi Arabia had not fought for an increased share of oil profits. And it was that fight that led to the founding of OPEC in 1960.

OPEC has never been as powerful as its critics claim, Nazer said. He called it an “incoherent organization that gets both credit and blame for things it doesn’t do.” It’s incoherent, he explained, because its member countries have divergent interests that effect decision-making. OPEC includes countries on the right like Iran and countries on the left like Nigeria. It includes countries with different domestic needs and different government organizations. For example, Saudi Arabia with its vast oil reserves has a different outlook from countries with small reserves. “If you have large reserves you want stable prices to elongate consumption and discourage customers from turning to other sources of energy like natural gas or nuclear power. But countries with small reserves want higher prices now because when their reserves are depleted, they’ll have nothing.”

OPEC is typically described as “the oil cartel,” he noted, although “OPEC member countries produce less than 30 million of the 74 million barrels of oil consumed worldwide each day. Producers outside OPEC provide the majority.” The North Sea, for example, produces five million barrels a day, the Soviet Union, six million, the African countries together, 8 million. That’s in addition to the oil from the U.S. and Latin America.

“When OPEC countries vote to moderate production to raise prices [as they just did again in Vienna Jan. 17] we run the risk that other countries will take our market share, so the decision on every action taken by OPEC is a compromise.”

Nazer said he personally doesn’t think $30 a barrel for crude is unreasonable, given comparable costs of other forms of energy. But, he added, “when prices hit $30 people in the U.S. got angry.” He predicts a price from $25 to $28 will prevail.

Asked if OPEC will feel threatened if the U.S. opens the Arctic National Wildlife Refuge to oil exploration to reduce reliance on foreign oil, he replied: “No, because I don’t think they will find much oil there.”

Nazer left government service in 1995 when the king appointed a new minister of petroleum. He formed his own company, the Nazer Group, a holding company with a variety of interests ranging from information technology and health care to property development and the operation of upscale toy stores in Jeddah. He has also served as an advisor at the Center for Strategic and International Studies in Washington, D.C. and been a member of the Board of International Advisors of Columbia College and a trustee of Pitzer College. He speaks frequently on energy issues to oil companies, governments and educational institutions.

Nazer’s first book, Power of a Third Kind, was published in 1999. It describes “how the West has used its control over communication technologies to superimpose its values and political institutions on the rest of the world,” according to a book description.

What Nazer would like to see is an association beyond OPEC that would include all oil producing countries. Such an organization could discuss “environmental concerns and taxes; Italy, for example, gets $80 billion in taxes for the same amount of oil for which the United Arab Emirates earns $9 million. It could act to bring efficiency to an industry that is inefficient now; a refinery may need various blends of oil to make a product but the needed shipment goes somewhere else.”

And, Nazer added, an organization like the one he envisions might also arrive at that “magic level of prices” that all sides would consider reasonable.