The Organization of Petroleum Exporting Countries (OPEC) had its glory days in the 1970s when its Arab members imposed an oil embargo on select nations - including the US - which had chosen to help Israel during its 1973 Yom Kippur war with Egypt and Syria. By the time the embargo ended, the price of oil had quadrupled. For decades thereafter, OPEC, which at the time provided 50 per cent of the world's oil, has been the key player in determining oil pricing.
The scenario is so different now - with the price of oil having fallen 60 per cent in the past two years - that OPEC is fighting hard to retain its relevance. Its share of the oil trade by volume has fallen to 30 per cent, even though it is producing a record 33.47 million barrels a day. The US no longer depends on it as much as it did before. Apart from increasingly using domestic shale gas, it has increased its own oil production from around 5 million barrels a day in 2010 to 9.5 million, and is also importing much more oil than before from South American - rather than Arab - countries.
OPEC could have held the oil price line by limiting production, but this was stoutly resisted by Saudi Arabia, which feared loss of market share. The fear was not misplaced, considering Iran is back in the international oil market following its historic rapprochement with the US in January this year. Nigeria and Libya, too, have maintained that even if they did not increase production, they would not lower it.
The oil price crash has had major consequences. While on the one hand, it has helped large oil importers like India, on the other it is playing havoc with the economies of countries heavily dependent on oil export - Saudi Arabia, Nigeria, Libya, Kuwait, Qatar, Iran, Iraq, the United Arab Emirates and even non-OPEC Russia.
At its last meeting in Algiers on September 27, OPEC members finally agreed on a production cut of a sizeable 700,000 barrels. Despite this, the price of oil has not noticeably firmed up. Brent crude, which cost $44.61 a barrel then, now costs just $5.22 more.
OPEC's September production report forecasts an increase in production in 2017. Non-OPEC oil production is also likely to rise indicating that low oil prices will continue. Both OPEC and non-OPEC oil producers are meeting soon in Istanbul to thrash out more details ahead of the next official OPEC meet at its Vienna headquarters on November 30.
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