Market Currents
OPEC announced it would maintain oil production at 30M bbl/day, but do its quotas even matter...
-
Wednesday, December 12, 2012, 12:45 PM ETOPEC announced it would maintain oil production at 30M bbl/day, but do its quotas even matter any more? Capital Economics' Julian Jessop thinks not: "While it may be in the interests of the group as a whole to cap output and support prices, each individual member has an obvious incentive to sell as much oil as possible." Plus, as non-OPEC supply increases, compliance is likely to weaken further.
Other date
Latest Energy & Materials Articles
This news story has 7 comments:
Yes everyone cheats and over-produces, but in the end the treaties hold surprisingly well, and without the cartel all of the member nations would be producing far more oil. The only time that was not the case was during the run-up from 2002-2008, when world demand simply out-paced global production capacity.
Today that is not the case, and OPEC matters again. By mid-2014? Probably not... but for now, they matter.
As North America becomes increasingly important in global oil and liquids markets and Iraq/Kurdistan seeks to greatly increase production at the expense of other OPEC members, so OPEC must become relatively less powerful.
It is no longer OPEC that drives prices but geo strategic instability; rising demand for transportation in Asia and technological innovation plus entrepreneurial vision that are turning vast deepwater and onshore shale resources outside OPEC into reserves and with a lag into production capacity.
http://bit.ly/ThUrZU