A failing economy hurts 401Ks and more in the U.S. In Saudi Arabia, and many other OPEC-member nations, it threatens the president, or king. Saudi Arabia claims it can’t make oil for under US$80 a barrel any longer, not because of replacement costs, although those are higher than in the past. Instead, the population would revolt against the monarchy, if it had to pay for garbage collection and many other conveniences and luxuries for which the populations of most other countries accept individual responsibility.

What would the world look like if OPEC-member countries’ constituencies overthrew those in power? Particularly, in Saudi Arabia? And if a coup were successful in Iran?

In terms of oil supply to the U.S., this could be disastrous. While OPEC’s power is much unloved by net-oil-consuming countries, OPEC, led by Saudi Arabia, has created stability in oil supply for many years.

It’s the devil that works.

But all good things do eventually come to an end, and the petroleum-fueled century is not destined to be “the petroleum-fueled centuries.” It will eventually go the way of whale oil—a depleting resource that takes too long to replace and is insufficient to power meaningful economic growth.

Neil McMahon, senior energy analyst for Bernstein Research, says OPEC may be breaking up, divided by hawks (particularly, Venezuela, Iran, Nigeria, Libya and Algeria) and doves (i.e., Saudi Arabia).

We believe the extreme differences within OPEC could tear the organization apart in the near term, leading to Saudi Arabia pursuing a more moderate course (on near-term output) with a few others, while the hawks (Venezuela and Iran) focus on self preservation. Maybe the cartel will remain in name, but its influence as a group could soon be called into question. These were the sorts of thoughts running through our heads yesterday when it was clear that OPEC, or some of its members, were currently residing on another planet, unaware of the bigger picture and what was happening in the marketplace,” McMahon wrote on Oct. 10.

OPEC will meet Nov. 18. While enjoying the income of high oil prices, Saudi Arabia will be careful to not kill its customers. The U.S. consumes 25% of global crude oil supply, and the U.S. is in a recession that is bordering on depression (at least through Nov. 4).

Venezuela’s president Hugo Chavez, meanwhile, has been propped up by high oil prices during his reign. McMahon says, “Saudi Arabia might plan a budget for 2009, which will be published in December, on a WTI oil price of $65/barrel, again including some debt reduction. So, this may be the sort of level it might think about defending (on Nov. 18), although it would be closer to $55/barrel if the kingdom did not pay down debt in 2009.”

(Back to the Saudi constituency, a leading indicator of the propped-up kingdom’s spending is that the world’s No. 1 oil producer has debt, while public, major oil companies, such as ExxonMobil, that produce less can’t find enough to do with their cash.)

McMahon continues, “In contrast, Venezuela, is talking about an ‘austerity budget’ for 2009, in which government spending on ‘certain types of vehicles, on mobile phones, and on celebrations would be eliminated,’ according to finance minister Ali Rodriguez (a former OPEC president).”

Saudi Arabia may do its own thing, McMahon suggests.

“We are sure the Saudis have worked this out for themselves, so having a few of the OPEC hawks suffer in the near term with sub-$80/barrel prices might also be something that it has been contemplating, especially if the long-term outlook for supply and demand is still constructive for the price.”

He adds that flooding the market with cheaper oil will help the kingdom in the long run: it will re-assert its recently dubious power in controlling oil prices, make new oil production elsewhere less economic, and help kill a growing competitor—alternative energy.

And its placated constituency will not mind, as long as the king still takes out the garbage.

–Nissa Darbonne, Executive Editor, Oil and Gas Investor, A&D Watch, OilandGasInvestor.com Today, OilandGasInvestor.com, A-Dcenter.com; ndarbonne@hartenergy.com