What power does OPEC now have to influence prices?

Is OPEC dead? And will shale oil long survive it?
by Lee Lane


With the price of crude oil dropping precipitously over the last two years — falling by over 65 percent between June 2014 and December 2015 — oil producers around the globe have looked to Saudi Arabia and the Organization of Petroleum Exporting Countries (OPEC) to boost prices by cutting output. And so, earlier this month, representatives of Russia, Mexico, and all the OPEC countries except Iran met in Doha, the capital of Qatar, to discuss doing just that.

They failed to reach an accord.

Absent action by the OPEC cartel, many experts foresee an extended period of low oil prices. For example, the U.S. Energy Information Administration projects that in 2016 the price of imported crude oil (in constant dollars) will be only 35 percent of that paid in 1980; 33 percent of the 2008 average price; and only 31 percent of the price in 2011, the year in which the annual average oil price peaked.

U.S. independent oilman Robert Mosbacher, Jr. attributes the fall in oil prices to what he calls Saudi Arabia’s “current strategy of flooding the market.” Much media coverage echoes his claim. But while Saudi production did increase by 1.7 million barrels per day (MBD) between 2010 and 2015, Iraq’s production rose faster. And an even more important factor is American oil production: during that same period, U.S. output increased by 3.8 MBD — an amount that exceeded the growth of the Saudis and the Iraqis combined. (See Figure 1.)



..................

Read morre: www.thenewatlantis.com