The Organization of Petroleum Exporting Countries (OPEC) is a cartel of 14 major oil-exporting countries. There are 12 oil barons who are said to control the world’s energy supply, with Ali bin Ibrahim- al-Naimi from Saudi Arabia said to have the most powerful voice. By regulating the supply of oil, OPEC attempts to manipulate the price of oil on the world market.
The way the oil world used to work
Researchers have identified the period between 1973 and 1997 as being the age of OPEC. There was dominance over oil production that meant OPEC held significant, direct influence over global oil prices. The growth and dominance of OPEC oil production also encouraged a significant decrease in the production of non-OPEC oil.
From 1997, there were a number of global and structural changes that impacted on the strength of OPEC as an organisation. From war, to political instability, to a changing world order, where energy independence is seen as a geopolitical necessity, the balance of power changed.
The new reality
In 2019, during the CERAWeek, a group of experts presented findings that demonstrated a significant shift in power. They noted that the United States will now be the driving force behind global oil supply growth in the coming years. The level of production from the highly successful shale sector has transformed oil markets and will continue to dominate. Forecasts suggest that oil exports from the US will exceed Russia and be close to the level of Saudi Arabia within the next five years. The ability of the shale industry to respond quickly to price signals has led to an unprecedented shift in influence.
The increase in US influence over oil supply and, therefore, the oil price is matched by the easing of demand for oil. With the slow down of the Chinese economy and other influences, such as the rise of the electric car and the need to make jet fuel carbon-neutral, global markets will be less influenced by supply anyway.
As well as the US, Brazil, Norway and Guyana are also seeing significant growth in production. Yet, the influence of these other nations is nothing in comparison to the influence of the second wave of US shale, which will mean they will be responsible for 70% of the rise in global oil production.
However, the recent price war between Saudi Arabia and Russia, two OPEC+ members, shows that member nations still have some sway over world oil prices. It might have felt irresponsible in the time of COVID-19, but it proved that the US still needed cooperation between nations across the world to maintain stability. It fell to Mexico, of all countries, to help bring the crisis to a resolution.
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