• 4 minutes Pompeo: Aramco Attacks Are An "Act Of War" By Iran
  • 7 minutes Who Really Benefits From The "Iran Attacked Saudi Arabia" Narrative?
  • 11 minutes Trump Will Win In 2020
  • 15 minutes Experts review Saudi damage photos. Say Said is need to do a lot of explaining.
  • 17 hours Ethanol is the SAVIOR of the Oil Industry, Convenience Store Industry, Automotive Supply Chain Industry and Much More!
  • 45 mins Ethanol, the Perfect Home Remedy for A Saudi Oil Fever
  • 53 mins Pepe Escobar: “How The Houthis Overturned The Chessboard”
  • 17 hours Instagram Now Banning Photos Of People At Gun Ranges, Claiming They Promote "Violence"
  • 10 hours Let's shut down dissent like The Conversation in Australia
  • 23 hours Famous Manufacturer of Anti-Ethanol Additives Proves Ethanol's Safety and Benefits
  • 1 day Collateral Damage: Saudi Disruption Leaves Canada's Biggest Refinery Vulnerable
  • 2 hours Democrats and Gun Views
  • 8 hours US and China are already in a full economic war and this battle for global hegemony is a little bit frightening
  • 1 day Iran in the world market
  • 1 day Trump Accidentally Discusses Technology Used In The Border Wall
  • 1 day One of the fire satellite pictures showed what look like the fire hit outside the main oil complex. Like it hit storage or pipeline facility. Not big deal.
Alt Text

Trump Clashes With California Over Fuel Regulations

The Trump administration is moving…

Alt Text

The Restoration Scenarios For Saudi Oil Supply

After the largest supply disruption…

Alt Text

Houthis Threaten More Attacks In The Middle East

The Houthi rebels have threatened…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

OPEC Chief: U.S. Shale Helped Avert Total Chaos In Oil Markets

The U.S. shale revolution helped avert a “major, major energy chaos” in the world, OPEC’s Secretary General Mohammed Barkindo said in a somewhat puzzling interview with CNBC this week. Barkindo was also quite delicate in his reference to the role U.S. shale played in the latest price crash, which, together with the praise, suggests the official head of the cartel is trying to make peace with any and all amid discussions in U.S. Congress about anti-OPEC legislation that would make its members liable to prosecution under U.S. antitrust laws.

Barkindo said OPEC had saved the global oil industry in 2016 when it struck the original production cut deal that saw almost 1.8 million bpd removed from global supply, but added that U.S. shale had helped to avoid a crisis, possibly implying a shortage of crude as demand rose.

The comments are somewhat contradictory: “The decisions that OPEC took, together with our non-OPEC partners, literally rescued this industry from total collapse,” he said, recalling how Brent crude fell below US$30 a barrel at one point in 2015. Since virtually all industry analysts and observers agree that it was U.S. shale development that led the surge in global oversupply that was the main reason behind the price drop, it is a bit unclear what energy chaos the shale boom helped avert.

Barkindo further said the OPEC decision to cut production had actually helped U.S. producers to survive the downturn that followed the 2014 price collapse.

"In particular, during this longest cycle where we saw prices crash by over 80 percent at one point, where we saw the supply and demand balance in (a period of) disequilibrium that had never been witnessed, where we saw more than 100 U.S. companies file for bankruptcy with all the negative consequences on the industry, the regions where they operate … no party was insulated," Barkindo said.

Related: Oil Prices Could Soar On Trade War Truce

Yet, it was OPEC initially opening up the pumps to the maximum that added to the flood of new U.S. supply and eventually brought about the price collapse, as those with longer memories will remember. This fact makes the OPEC secretary general’s remark borderline ironic, but it does suggest that Barkindo may be trying to appease the U.S. and reduce the likelihood of NOPEC legislation getting passed. This likelihood is not great to begin with: the bill is not the first one that Congress has discussed over the decades as a means of putting the brakes on OPEC’s cartel practices.

Interestingly enough, Barkindo had something to say about that, too. It was that "without OPEC, the U.S. would probably have created another organization to do exactly the same." Now, this remark does not play into the scenario of the official trying to make better friends with the U.S. as it suggests the United States is no better than OPEC when it comes to market control practices, but it does seem to send the message that OPEC and the U.S. oil industry need each other.

This message was reinforced by Barkindo’s remark that OPEC and non-OPEC producers need to maintain their relationship “in order to sustain the relative, and fragile, market stability that we have been able to achieve."

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com: 

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • Mamdouh Salameh on March 04 2019 said:
    OPEC’s Secretary General Mohammed Barkindo got it horribly wrong by claiming in an interview that US shale revolution helped avert total chaos in the global oil market.

    He should have the courage of his convictions to admit that the oil glut that led to the 2014 oil price crash wasn’t caused by US shale oil production since the impact of US shale oil production on the global oil supplies was, is and will remain minor for the foreseeable future. OPEC members brought the oil price crash on themselves by far exceeding their production quotas.

    Another factor which contributed to the 2014 oil price crash is the United States manipulation of oil prices by hiking the value of the dollar and also through exaggerated claims about rises in US oil production and huge build-up in its oil and refined products inventories in order to depress oil prices and achieve geopolitical and economic aims.

    If OPEC’s Secretary General is trying by his praise of the role of US shale oil in saving the global oil market from chaos to make peace with any and all amid discussions in US Congress about anti-OPEC legislation that would make its members liable to prosecution under U.S. antitrust laws, then he is taking the wrong approach.

    The only approach that the United States understands is for OPEC to meet threat with threat, sanctions with sanctions, retaliation with retaliation and a fight with a fight. He should learn from China’s dealing with the United States over the trade war between them. China stood its ground and never ran away from retaliating blow for blow for whatever tariffs the Trump administration imposed on Chinese exports. That is what brought President Trump to the negotiations table not a softly softly approach.

    OPEC’s Secretary General could learn another lesson from Saudi Arabia’s dealing with President Trump over his threat to punish it over the murder of the Saudi journalist Jamal Khashoggi in Istanbul. When Saudi Arabia threatened to retaliate against any punishment with stronger measures including cutting its oil production to force prices up and cancelling lucrative arms deals, President Trump backed down.

    Therefore, OPEC shouldn’t be unduly worried about the“No Oil Producing and Exporting Cartels Act,” or NOPEC Act. It has enough muscle to retaliate against the US. If NOPEC ever becomes a law and the United States tried to sue any OPEC member under the NOPEC Act, OPEC members collectively could retaliate by withdrawing every single penny they keep in the United States and stop investing in the US altogether. They could also stop all their oil exports to the US and even cut their oil production to force prices further up. This will harm the US economy most being the world’s largest consumer of oil. They could also discard the petrodollar and adopt the petro-yuan instead thus undermining the US financial system.

    In fact, OPEC should pre-empt and sue the United States at the WTO for manipulation of oil prices to achieve unfair benefits for its economy at the expense of the economies of OPEC members.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play