As everyone watches OPEC and Russia ahead of their meeting in Vienna next week, it’s easy to miss the fact that this is not the only meeting that will set the course of the global oil market in the coming months. OPEC officials will also meet with chief executives from the U.S. shale industry in Vienna, with Continental’s Harold Hamm, Hess Corp’s John Hess, and Pioneer’s Scott Sheffield among those to address OPEC, Reuters reports.
Although none of the executives were willing to comment on the meeting ahead of it, the topic of discussion will be cooperation, after the last price crisis revealed that the only way to achieve a balance between crude oil demand and supply is to work together rather than against each other.
The fact that has brought shale producers and OPEC closer together is that production is no longer priority number-one. “We’re getting to a point where a continued rise in the oil price is going to cause major problems for the global economy,” Reuters quoted the Council on Foreign Relations’ energy security and climate change program director Amy Meyers Jaffe as saying. “There are bigger issues at hand besides output that OPEC and shale producers care about.” Related: Saudi Arabia: Deal To Gradually Ease Cuts Is ‘Inevitable’
One of these bigger issues is the increase price elasticity of oil. A couple of decades ago, fossil fuels had no real alternatives. Now there are solar power plants and electric cars. As we saw from the last oil price rally, consumers are no longer willing to pay more to get increasing amounts of oil. They often seek alternatives and can find them relatively easily.
According to analysts, the top priority for shale producers now is not ever-higher oil prices—it’s stable prices. Although they cannot legally coordinate production to achieve these stable prices, the can discuss the situation and the future prospects of the global industry with OPEC. What will come out of these discussions remains to be seen.
By Irina Slav for Oilprice.com
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