Posted on 12/04/2014 10:01:36 AM PST by thackney
The Organization of the Petroleum Exporting Countries (OPEC) last week made no change to its production target despite a 40 percent slide in oil prices over just five months, causing some commentators to pronounce the cartel irrelevant.
If OPEC cannot act to defend the prices and revenues of its member countries, does the organisation still serve any purpose?
There is an assumption among some commentators that OPEC is only relevant and working if ministers can reach a production agreement in response to shifts in prices, and that strong disagreement is a sign of dysfunction.
But the record suggests that ambitious production-cutting agreements are rare, rather than the norm, and that a robust exchange of views is typical.
There is nothing new about predicting the end of OPEC. Following one particularly acrimonious meeting in 1981, the Kuwaiti oil minister told waiting journalists: "News of OPEC's death has been much exaggerated". A third of a century later, the organisation is still going.
OPEC has always had fierce foes eager to forecast its demise, especially in the United States, where there are still memories about the Arab oil embargo, gasoline lines and soaring fuel prices in the 1970s.
Bitter recollections of the oil crisis merge with Watergate, defeat in Vietnam, the Soviet invasion of Afghanistan and the Iranian hostage crisis to make the 1970s the most humiliating decade in U.S. history.
Little wonder, then, that some hawkish U.S. commentators, eager to ensure it never happens again, have developed a narrative in which home grown shale has finally ended the embarrassing dependence on foreign oil and ended OPEC's dominance of the market.
But is it true? Has OPEC finally become irrelevant almost exactly four decades after it burst into the popular imagination during the first oil shock in 1973?
A Strange Sort Of Cartel...
(Excerpt) Read more at rigzone.com ...
The article provides a history of OPEC but does not really address how the last several years of developments in US oil & gas production (and natural gas demand) affects OPEC’s market power.
2Q 2014, OPEC produced 39% of the World’s Oil.
2Q 2009, OPEC produced 40% of the World’s Oil.
Their marketshare really hasn’t changed much. Our increases have been offset more by other losses and increases in total global demand.
Are supply drops outside of NA the result of big oil companies balking at the terms set by various countries that want to take all the profit but foot none of the risk (i.e. capital expense).
I don’t think there has been significant changes that way over the last 5~10 years. But there has been more incentive to invest capital in US shale than other competing locations.
But we have seen several Middle East and West Africa area where civil unrest has be a strong incentive to invest elsewhere.
Little wonder, then, that some hawkish U.S. commentators, eager to ensure it never happens again, have developed a narrative in which home grown shale has finally ended the embarrassing dependence on foreign oil and ended OPEC's dominance of the market.I don't think that's surprising; I also don't think it's surprising that some people insist that fracking is just a short-lived effort to delay the inevitable day when the oil runs out and they themselves are living in mansions with armed guards to protect their gold bullion. Y2K ping.
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