The Organization of the Petroleum Exporting Countries or better known as OPEC is a group of countries that has been controlling the oil supply for many decades now, but is their clout coming to an end?
New oil discoveries and new entrants to the market have caused an over supply in the market and as demand has fallen around the world, oil that used to trade at around $120 per barrel is now just above $40. As a result OPEC member countries are hurting as their economies are so dependent on oil revenues.
The 12 member countries is led by Saudi Arabia who alone pumps out about 30 million barrels of oil a day and despite the low oil price, OPEC continues to pump record oil volumes to defend their market share. OPEC’s decision to keep pumping is to bankrupt the other players. Unfortunately for OPEC aka Saudi Arabia, that decision will come back to haunt them in the long-run.
The new market entrants, especially US oil shale and Canada’s oil sands will continue to innovate and squeeze out profits despite the $40 per barrel price. If for some reason they can no longer continue, they will just shut down production until price increase again. Once the genie is out of the bottle there is really nothing that OPEC can do now to control the market.
Besides the new players in oil market, countries like China and Germany are moving away from oil to solar and wind and there is also big advancements in cold fusion, limitless energy is just around the corner.
There is another reason, more of a conspiracy theory than anything else of why OPEC continues to pump out oil despite the glut. They are supposedly doing the bidding of US to keep Russia in check because Russia biggest export is energy and they have been belligerent lately.
Whatever the case it seems that the mighty OPEC isn’t just the same anymore.
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Does OPEC (Organization of the Petroleum Exporting Countries) still have a monopoly on the oil market?