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OPEC Is Not What It Was But Can Still Be An Influence

OPEC

Conventional wisdom among those that follow energy markets and oil in particular is that OPEC is not what it once was. For a few decades the cartel of oil producing nations was both feared and revered around the world. They had the power to effectively set the price of oil in the global market and, in using that power, could alter the economic conditions in all of the world’s major powers. Why that is no longer the case is a complicated question, but one which bears examining, especially now that crude has collapsed out of its range even as an OPEC meeting approaches.

There are several theories as to why OPEC’s power has been so severely reduced and as is often the case the reason is probably a combination of all of them. First, and most obviously, the U.S. and other nations have been able to increase production due to new technologies and techniques, in particular horizontal fracking. What is interesting though is why, given the opportunity to increase production, the U.S.A. and many other countries have elected to do so. That may seem like a strange question to ask, but in the past an understanding that oil was a finite resource and that it had to be used sparingly. That has, however, changed.

The irony here is that the reason for the change is the rise of alternative energy. As technology and political will advance solar, wind and other renewable energy sources to the point where they become commercially viable the pressure to preserve precious stocks…

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