OPEC Is in its Death Throes
The latest bluster by Saudi Arabia won't scare America’s oil producers – or solve its own existential crisis.
Like the boy who cried wolf, 2016 might become the year of the oil producers’ cartel that cried “output cut.” If that’s right, and the U.S. shale industry becomes the oil market’s marginal producer, Middle Eastern petro-states and, above all, Saudi Arabia are in for lean and hard years ahead.
In February, OPEC called for an oil production “freeze” to raise crude prices in conjunction with Russia. But this effort collapsed at a meeting in Doha, Qatar, in April when Iran refused to join any freeze in order to regain the pre-2012 production levels of close to 4 mbpd it enjoyed before U.S. and European Union nuclear sanctions were imposed, following the removal of certain sanctions after the 2015 nuclear deal. A similar proposal failed at the OPEC meeting in June, again following Iran’s refusal, despite outreach by the Qataris.
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WNU Editor: If mankind has learned one thing in the past century .... it is that developments in technology can be truly revolutionary for change .... and how the old status quo can be easily swept aside. For the oil industry .... better methods of fracking has truly revolutionised oil and natural gas extraction, and the result of it has been a world glut in these energy sources. For OPEC .... that derives its power from limiting energy resources to obtain a price for their resource .... this has been a disaster. My prediction .... fracking is not going away .... and I expect this situation to remain for a very long time.