Laurent Fabius, France's finance minister, declared on Friday that the determining element of the shock that has hit the world is oil. "So far the reaction has been measured," he said, implying that if the oil markets had not panicked, the rest of the world had no reason to.

Yet Opec ministers gathering for a meeting of the cartel on Wednesday know that this "measured" reaction of the oil markets is really the result of two strongly opposing sentiments, more or less cancelling each other out. The tension is between oil supplies as casualty (and sometimes engine) of war and oil demand as barometer of declining economic activity. Opec is comfortable with neither.

In the immediate aftermath of the terrorist attacks, the price of the benchmark Brent crude rose by $4 a barrel to more than $31, on fears that US military retaliation would hit Middle East oil supplies. Last week, however, it slipped to around $26 on the belief that war would be confined to Afghanistan - which has no oil - and therefore oil's problem was one of collapsing demand.

The Gulf war 10 years ago demonstrated that the fear of war can have more impact on the oil price than the reality of war. When Iraq occupied Kuwait in August 1990 and in effect took both countries' oil off the world market, anxiety about oil supply seemed well founded.

"People stockpiled oil, thinking the end of the world was coming," recalls Leo Drollas, of the Centre for Global Energy Studies in London. "But once the air attack on Iraq started and people realised how devastating it was . . . the price collapsed. It dropped $4 the day after the bombing began and never came back."

Mr Drollas believes the oil implications of the present situation are very different, because it looks like being, unusually, "a Middle East crisis without oil". He acknowledges that Osama bin Laden and his Taliban backers can use, and have used, terrorism to equalise the US's advantage over them. But he sees the US even more determined to prevail than it was in the Gulf war.

Yet there is a wider context that is disquieting. Despite all the talk of the need to reduce the output of the greenhouse gases that come from burning fossil fuels, the world economy is still as dependent as ever on oil. It provides 40 per cent of the world's primary energy and will still do so in 2020, according to the International Energy Agency. Oil powers travel and transport, heats houses and goes into plastics, chemicals, fertilisers. And, despite the search for oil elsewhere over the past 30 years, some 53 per cent of the world's oil reserves still lie in the hands of Middle East members of Opec.

This region's political instability has been the cause of the past three oil shocks - the embargo imposed in 1973 by the Arabs on Israel and certain of its western backers; the 1979-80 Iranian revolution, which sent prices up to $40 a barrel; and the Gulf war.

To those who worry about a fourth oil shock - particularly in Asia where, unlike the west, few governments have stockpiles - Ali al-Naimi, the oil minister of Saudi Arabia has reassuring words. Opec is in the business of stabilising the price of oil rather than using it as a political weapon, he stressed last Friday, and would increase oil supplies to cover any shortfall.

"Saudi Arabia has always said, should there be any shortage of supply anywhere, we will work to alleviate it," he said. In its role as swing Opec producer, Saudi Arabia has frequently increased output to compensate for periodic export stoppages by Opec's most errant member, Iraq. It has also kept its anger at Israel's treatment of the Palestinians quite separate from its oil policy.

No Saudi minister can, however, be wholly convincing on the issue of Middle East stability while many of the suspects for the destruction of the World Trade Center are alleged to have come from Saudi Arabia. And although stability may remain Opec's aim, it is against an entirely new backdrop.

Opec's recent strategy has been to keep the average price of its crude oils - which because of transport costs and lower quality trade generally fetch a couple of dollars less than Brent - within a $22-$28 band. The strategy, which has demanded three production cuts this year, has worked so well that Opec has been emboldened into thinking it can micro-manage the market and aim more precisely at $25 a barrel.

But evidence of recession is in Opec's face as well as everyone else's. "Normally economic data signalling a downturn comes out piecemeal - this time it came in a rush," notes Lawrence Eagles, an analyst with GNI, a derivatives broker.

When Mr al-Naimi and Opec ministers meet in Vienna they may have to accept stabilisation of the oil price at a lower level, at least for a while.

"What September 11 has changed is the price floor that Opec can defend - it will be very hard for Opec to keep its basket at $25," says Raad Alkadiri, an analyst at the Petroleum Finance Company in Washington.

Opec faces a new political constraint. When Spencer Abraham, the US energy secretary, visited Opec's Vienna headquarters last weekend, he did not ask for the cartel to increase output, but he did make clear that the US wanted no further Opec oil removed from the market.

Opec members cannot risk offending Washington right now by being seen to "defend high prices", claims Mr Alkadiri. He adds that many Opec governments would find it politically easier to help US President George W. Bush on the oil market than to co-operate openly with him in diplomatic and intelligence action against Muslim or even Arab targets.

Yet Opec members have as much cause as they ever did to seek the price of $25 a barrel. If lower oil prices do not rekindle economic activity and thus oil consumption, many Opec governments will find themselves strapped for cash next year. "Saudi Arabia needs $25 a barrel to balance its budget, repay debts and keep up its capital expenditure programme," says Mr Drollas of CGES.

Inside Opec, Riyadh is believed to have improved relations with Iran and Venezuela by accepting the views of this hawkish pair on price. Acquiescence in lower prices could therefore threaten Opec's cohesion.

Opec's influence on the oil market would be less if oil producers outside the cartel had a greater share of the market. Financially, they have been doing well, making record profits, ironically due to the almost altruistic way that Opec props up the oil price by keeping some of its own production off the market. That has led to an increase in non-Opec production. Led by the former Soviet Union - Russia, Kazakhstan and Azerbaijan - this is rising by, according to a Deutsche Bank study, 730,000 barrels a day this year with a predicted increase of nearly 1m b/d next year.

But this increase has not been as fast as was predicted after nearly three years of high prices. Royal Dutch/Shell rocked many observers, and its share price, by last week scaling back the growth of its medium-term production targets from 5 to 3 per cent a year. Aside from unexpected slowness in gaining access to Opec countries, the Anglo- Dutch group cited delays in deepwater projects off west Africa and faster-than-expected declines in mature oil zones such as the North Sea. There is a suspicion that other producers are experiencing the same problems.

This reinforces what every geologist knows - that the cheapest and most plentiful oil lies under the Middle East sands. It may also advance the return of Opec dominance. Non-Opec oil supplies are expected to plateau by 2010.

Opec's ample reserves will allow its production to overtake the output of non-Opec countries, so that by 2020 the cartel will have a world market share of 55 per cent, according to CGES. This underlines the importance for Mr Bush of treading carefully over Middle East oilfields as he wages war against terrorism.

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