Is OPEC Headed for Collapse?
In the comments section of one of my previous articles, a reader asked me whether the collapse of the Organization of Petroleum Exporting Countries (OPEC — responsible for 40% of the world’s petroleum output) is likely in the near future. Fair question, especially in light of the currently dysfunctional state of the Arab League. Are we really about to witness the end of a monopoly on global oil prices?
In short, it is too difficult to predict either way. I discussed earlier how the Gulf Cooperation Council (GCC ) is starting to replace the Arab League as an inter-Arab political body and Sunni axis against Iran, shifting the onus of decision-making to the Gulf region. However, some of OPEC’s most prominent members — Saudi Arabia, the United Arab Emirates (UAE), Qatar, and Kuwait — are also part of the GCC, and it is notable that neither Syria nor Egypt, both of whose states of political turmoil have been responsible for the Arab League’s decline, is a major exporter of petroleum or member of OPEC. Thus, the growing importance of the GCC as opposed to the diminishing relevance of the Arab League is unlikely to have a major impact on OPEC’s future.
What is more interesting, however, is the conflict within OPEC between a bloc of states led by Saudi Arabia and other OPEC members, led chiefly by Iran and Venezuela, on the International Energy Agency’s (IEA) decision to tap into “strategic” (or “excess”) stockpiles of petroleum in an attempt to boost output, provide relief for high oil prices, and to stabilize the global economy. The IEA hopes to increase production by around 2 million barrels per day. Following a meeting that resulted in a deadlock at OPEC’s headquarters in Vienna on June 8, Saudi Arabia, the UAE, and Kuwait parted ways with other OPEC members and promised to raise production levels by 1.5 million barrels per day. Indeed, over the past month the Saudis have already increased output by approximately 500,000 barrels per day.
Now, ostensibly, Saudi Arabia is complying with the IEA’s initiative, but John Shimkus plausibly argues for another motive behind the Saudis’ behavior: namely, fear of Iran’s nuclear program, which is probably striving to develop nuclear weapons. As pointed out before, Iran has been at the head of an effort to block release of excess oil reserves. Hence, we should not be surprised if Saudi Arabia and its allies in OPEC might wish to flood the market with their own petroleum in the hope of bringing Iran’s government to the point of bankruptcy and thereby halting the Islamic Republic’s goals for its nuclear program.
We can be energy independent when ever we feel like it.
1. Cracking shale deposits for Natural gas.
2. Diesel can be made from Coal.
That said, buying oil of world markets has advantages. Especially when they are flooding the market.
True enough. America’s status as an oil importer is at least as much the result of political decisions as resource reality.
Turn that NG in methanol and burn it in FFV (flex-fueled vehicle). I’ve lived in countries with a lot of NG cars. They work but have a severely reduced ranged because of storage issues and the extra weight of the tank. With an FFV, you don’t have to worry about finding a NG source or driving out of your way to get to one. If you need to, you can burn gasoline.
Methanol is already cheaper than gasoline per BTU and that is without a subsidy.
We should however tie the cost of wheat and other foodstuffs to the price of oil. If OPEC wants to be greedy and pump up the price of oil, the price of food will rise correspondingly. The reasoning is that western style farming is energy intensive.
The Saudi’s will be getting tired of edible oil products in a hurry.
Forget about worrying about the end of OPEC. That’s small potatoes if Iran and Saudia Arabia decide to go to war, igniting that huge Sunni-Shia conflict that has been feared for years now. And if Iran gets a nuclear weapon, what do you think the Saudis are going to do, ask the United States for help? Fat chance. They saw how Obama threw Mubarak under the bus and know that Obama probably wouldn’t support the Saudi monarchy. Nope, Saudi Arabia would probably BUY some nuclear or chemical weapons, either from Russia, North Korea, or maybe even France (since they are weapons whores who would probably sell anything to anybody for the right price). The end of OPEC would only be a prelude to a major regional war which could endanger oil supplies for everybody.
But will Obama support the Suadi monarchy, or will he throw them under the bus too as part of this “arab spring?” If what he did to Mubarak is any indication of what’s to come, we have a disaster in the making here.
The conflict within OPEC [is] between a bloc of states led by Saudi Arabia and other OPEC members, led chiefly by Iran and Venezuela . . . . Considering Venezuela’s at least temporarily debilitated state, her influence within OPEC seems likely to diminish with Chavez’ health and influence.
Divide and conquer.
Can’t happen soon enough. Sure prices will be volatile, but we will start drilling in our won country if it happens.
Not if Hambone has anything to say about it. He would relish the opportunity to have the flow of oil severely curtailed, if for no other reason than to have the price of oil “skyrocket” and force people to succumb to his omniscience in hawking electric cars. One might even think his efforts at ticking off the mid-east sand people was an effort to that effect. Instability, uprisings and war can only ultimately cause uncertainty in the oil market and that fits with his desires to punish America.
It depends on your definition of the terms, “fungible” and “imports”. Democrats, greenies and lefties are all okay about the U.S. importing oil from our enemies, but are absolutely opposed to importing it from Canada, let alone producing it in the U.S.
It also sounds like your definition of “fungible” is “something I prefer not to mention because it shows how silly my premises are”.
It’s a “who gets the money” thing. Moslem rulers are paying off colleges, who teach the students to support things that benifit Moslem rulers.
In reality, OPEC has never been able to restrain production. It creates the mirage of a cartel, when what governs oil prices is worldwide supply and demand. When supplies are tight, it appears like they’re doing it, and when they aren’t, they aren’t.
It is good that someone has pointed out what most commodities market traders have known for a long time: OPEC is a toothless organization. All of these countries seek whatever they can earn from their resources, but few of them are actually willing to limit production, especially not while working with their enemies.
I do not think their governments are worth supporting with our money. I believe we can do better with alternative energy sources. Ultimately self sufficiency for energy should be our goal. However, such self-sufficiency can not be attained without a realistic understanding by environmentaloids of all flavors that fossil fuels will remain a part of our portfolio for a long time to come.
>>> Are we really about to witness the end of a monopoly on global oil prices?
Since when is 40% a monopoly?
Hyperbole just destroys credibility. That’s something I expect of the MSM, not PajamasMedia.
Pull 40% of the world’s current oil supply off the market and you’ll quickly find out why they have the artificial pull that they do. It would have a crippling effect on the world economy.
And pull all the income out of their economies, and see who folds first. The dirty little secret is that they need our cash as much as, if not more than we need their oil. And that’s why they all cheat.
Here is an engine under development at an American University that could cut oil use by at least 50% once it is fully deployed.:
Wave Engine
Faster Please.
eyeroll….
There are many engine designs that look really good on paper until you attempt building a practical model. Theoretically, a Stirling engine ought to give us near 100% efficiency. But to date, no-one has built one with anything close to that level of efficiency.
I wish this professor the best of luck building his wave engine, but to my untrained eyes, it looks like it works on the Brayton cycle. Efficiency will be about as good as anything with a turbine. In other words, it’s not all that good.
There is a link between Obama’s green subsidies and mandates and the near doubling of food costs in the 3rd world.
The uproar in Egypt began with food riots and still could turn very bad as the Muslim Brotherhood attains more power.
Obama said he would raise the price of energy and he did.
Obama simply chose to cripple our energy economy and the results are high gas prices here and riots over there.
Short term we are stuck.
But when Obama is gone, energy costs will stop their rise and the economy will start to heal.
The shale gas cavalry is on it’s way.
Abundance and diversity are both available to us. The energy equivalent of the Women’s Christian Temperance Union is standing in front of the gas pump beating their tambourines, telling us we need gas prohibition. We know what happened last time we listened. Let’s just plow the car right through them and fill ‘er up.
The best way to avoid problems in the Middle East is not to deal with them. With the combined energy resources that we have here and in Canada, there is absolutely no reason why we should be worried about importing oil from the M.E. ! I am all for new forms of energy, but until we have a concrete improvement, it is logical and financially feasible to use that which we have at our disposal.
It should also be very clear that the socialist agenda is to keep our country economically dependent on foreign oil to further their agenda. This administration has been deliberately stalling on an agreement with Canada to complete pipelines into our country to provide our energy needs. In the process China is willing to fund a pipeline across Canada to import Canadian energy to Asia. The Canadians are tired of waiting for the Obama administration to make up it’s mind and are earnestly considering China’s offer. No U.S. president with the interest of this country at heart, would allow such an opportunity to pass and would immediately act to secure energy from Canada.
With the combination of oil and ng on the North American continent, there is absolutely no acceptable explanation as to why we are paying extremely high prices for energy overseas. Not only are our funds supporting extremist in the M.E., but the instability in the M.E. is only drawing our nation into more conflicts as well. By eliminating foreign trade on energy, we eliminate a lot of financial stress as well as the social disorder that is taking place because of the M.E. crises.
Less we not forget the PEAK Oil is on the decline – you don’t hear much about it. Has anyone watched the documentary “Collapse” on this by Michael Ruppert?
It is available to Netflix subscribers streaming and dvd. I highly recommend it. Also the End of America is another really eye opening documentary.
Dirty Secret IS -
Apart from Petroleum the majority Muslim nations of OPEC are Economic Basket Cases unable to grow enough food to feed themselves or provide water and sanitation. While complete Energy Independence is probably impossible, it is possible over a period of about 5-10 years to encourage Domestic (read “North American”) production and bankrupt the bastards. No Oil Sales there means No Economy, No Food, No Water, No Nothing!
Dr. Shalit