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| There was a time when OPEC was feared. Nowadays, it's a laughingstock. |
Let's just say there was more third world solidarity forty-some years ago than there is today. United they stood; nowadays, they fall divided as divisions that always existed now tear OPEC apart: Latin America (Venezuela) versus the Middle East (Saudi Arabia); Shia (Iran) versus Sunni (Saudi Arabia, Iraq, etc.) Of course, you also have to account for the increased production of non-OPEC members, but still, OPEC countries cannot get their act together by any means. The party line--or what passes for it nowadays--is that OPEC cutting members' production won't matter when two-thirds of it is in the hands of non-OPEC members pumping out the stuff as furiously as OPEC:
The group considered cutting production but decided that a reduction “even of 5%” wasn’t likely to push prices higher if non-OPEC producers, which make up about two-thirds of global production, join in cutting, said OPEC President Emmanuel Ibe Kachikwu, Nigeria’s petroleum minister. Instead, the group will maintain its current production—about 31.5 million barrels a day—and “closely monitor market developments in the coming months,” according to a statement released at the end of the meeting. “We just felt comfortable to wait and watch,” said Mr. Kachikwu.
The group, which gave up individual production quotas several years ago in favor of an aggregate production ceiling, also appeared to have largely done away with those restraints, as well. The ceiling, which has been set at 30 million barrels a day, has been breached routinely by the group.Allowing Indonesia which has long since become a net oil importer to re-join OPEC was just the comic warm-up. The most recent meeting in Vienna was the pinnacle of inaction, which spurred all sorts of comments from member states that struck me as excuses of the most hilarious variety to pretend all is well when it isn't the case.
Take Nigeria's representative again who says observers shouldn't worry so much about the "semantics" of it all. What's more, it's supposedly doing right by customers by keeping oil prices low:
Emmanuel Ibe Kachikwu, the Nigerian minister, reinforced the message, saying the market shouldn’t worry about the “semantics” of targets or real production. “We aren’t going to go back to a cartel and work against the customers -- that time has passed,” said United Arab Emirates Minister Suhail Al Mazrouei.How touching; OPEC is concerned about the welfare of oil users (probably for the first time ever if true, which I doubt). His Iraqi counterpart ups the hilarity quotient by suggesting that this erstwhile cartel shouldn't establish a production ceiling since other, non-OPEC producers don't have one (which again defeats the purpose of having a cartel):
Most of the market “doesn’t have any ceiling,” Iraqi Oil Minister Adel Abdul Mahdi told reporters. “Americans don’t have any ceiling. Russians don’t have any ceiling. Why should OPEC have a ceiling?”Because it should act as a global swing producer? The final word probably belongs to bigwig Saudi Arabia's oil minister, who explains that OPEC still "matters" somehow despite doing no appreciable actions to act together in their common interest:
OPEC will “continue its pivotal role in production and investment no matter how much prices fall,” Saudi Arabian Oil Minister Ali al-Naimi said in an interview with Al Eqtisadiah newspaper published Saturday.I guess us oil users should just enjoy low oil prices that should hold a little while longer, though I still think they should be lower still since crude oil price falls don't fully reflect at prices at the pump, but that's another story for another day. Meanwhile, it's OPEC comedy hour...
How many OPEC oil ministers does it take to establish an output ceiling? Take my oil cartel, please [BADA-BOOM], etc., etc.
