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OPEC announced it would maintain oil production at 30M bbl/day, but do its quotas even matter...

OPEC 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.
Comments (7)
  • Glenn Doty
    , contributor
    Comments (1116) | Send Message
     
    Clearly Julian Jessop needs to take a few courses in game theory.
    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.
    12 Dec 2012, 02:43 PM Reply Like
  • User 353732
    , contributor
    Comments (4787) | Send Message
     
    Cartels almost always fail because they cannot prevent either internal cheating or in time new external entry.

     

    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.
    13 Dec 2012, 05:42 AM Reply Like
  • PalmDesertRat
    , contributor
    Comments (2587) | Send Message
     
    Now that the US is slated to become the largest oil producer in the world, will the US join OPEC?
    13 Dec 2012, 08:41 AM Reply Like
  • Hyrcania
    , contributor
    Comments (48) | Send Message
     
    Don't count on it (either one.)
    13 Dec 2012, 01:47 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (2587) | Send Message
     
    My post was meant to be tongue in cheek.
    13 Dec 2012, 07:20 PM Reply Like
  • Hyrcania
    , contributor
    Comments (48) | Send Message
     
    hah - sorry you never know around here :)
    18 Dec 2012, 12:15 PM Reply Like
  • Freddy Hutter, TrendLines R...
    , contributor
    Comments (3738) | Send Message
     
    It is counter-intuitive, but the Barrel Meter model has found within several weeks of any OPEC quota cuts crude price actually falls. This is due to the confirmation of greater surplus capacity.

     

    http://bit.ly/ThUrZU
    14 Dec 2012, 02:53 PM Reply Like
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