Oil Man: Saudi King Abdullah dominates OPEC meetings, but less than he would like. (Salah Malkawi/ Getty Images)
It is the most reviled, the most powerful of all cartels: the Organization of Petroleum Exporting Countries. The organization's mission claims "to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets."
Unity and stability are the least of its capabilities these days.
The oil cartel met in Vienna this week. Saudi Arabia wanted oil flows loosened to bring down prices, partly as a favor to the United States (because the Obama Administration is not getting on Saudi Arabia's case for being as politically repressive as Syria, and for militarily aiding Bahrain to crush its democracy supporters), partly as another way of undercutting Iran, which depends on oil revenue to enforce its own police state. Iran wants supplies tightened. So do Libya and Algeria.
When the meeting was over, Saudi oil minister Ali Naimi didn't mince words. He called it "one of the worst meetings we ever had." It's saying a lot. OPEC has had a lot of bad meetings.
Saudi Arabia wanted to increase production a full 1.5 million barrels per day, bringing OPEC's world total to 30.3 million. Libya isn't producing much oil these days. But the world economy, led by China and the United States, is slowing down, not picking up steam. That suggests oil demand will fall, and with it, oil prices. Filling the market with more oil doesn't sound like very good policy, though in fairness to consumers, prices have been too steep, to the overwhelming benefits of tyrannies.
Meanwhile in the United States, Obama is considering tapping into the more than 700 million barrels in the Strategic Petroleum Reserve--which would also be a serious mistake, the president's move being driven more by political than strategic calculations.
But OPEC's breakdown this week was unexpected. Saudi Arabia followed it by deciding unilaterally that it would raise its own production to 10 million barrels per day. Oil fell below $100 a barrel on that news.
Still, the acrimony at OPEC's meeting raised questions. "No matter what anyone has been talking about for the past four or five days, this outcome was not in anyone's conversation," Dominick Chirichella, an analyst at the Energy Management Institute in New York, told the Wall Street Journal. "It makes me start to wonder, why does anyone want to be in OPEC anymore? Why pay the millions in dues and go to these meetings where the decisions don't even matter?"
Good question. You may want to take a crack at an answer: "Is OPEC Still Relevant?"
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Comments
Like it or hate it, OPEC is here to stay. So-called experts predicted its demise in the 1970s and also after 11/9 2001 etc.
The fact is that OPEC is not only serving the interests of its members but also the interest of non-Opec producers.
If Opec produces around 32 million barrels per day, the combined daily total production of the non-Opec producers is in excess of 50 million barrels. I like to ask why don’t the non-OPEC producers work together as a “NO-OPEC” producers and manipulate production to force the prices down. Why don’t they flood the market with the crude stuff?
In fact the non-Opec producers in Russia, Mexico, Norway, the Gulf of Mexico, Texas and even the marginal operators in Tulsa Oklahoma and Louisnana are skimmking huge profits on the back of OPEC. In other words, the are enjoying the free ride aboard the OPEC high price wagon. When it suits them they criticse OPEC publicly on CNN, but they don’t tell you that they secretly support OPEC to the hilt.
I would suggest they form a cartel and call themselves HYPOC (Hypocritical Oil Cartel).