• 3 minutes Could Venezuela become a net oil importer?
  • 7 minutes Reuters: OPEC Ministers Agree In Principle On 1 Million Barrels Per Day Nominal Output Increase
  • 12 minutes Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 2 hours Oil prices going Up? NO!
  • 1 day Could Venezuela become a net oil importer?
  • 4 hours Renewables to generate 50% of worldwide electricity by 2050 (BNEF report)
  • 3 hours Reuters: OPEC Ministers Agree In Principle On 1 Million Barrels Per Day Nominal Output Increase
  • 1 day Gazprom Exports to EU Hit Record
  • 8 hours Oil prices going down
  • 11 hours Could oil demand collapse rapidly? Yup, sure could.
  • 1 day Oil Buyers Club
  • 2 days Why is permian oil "locked in" when refineries abound?
  • 10 hours Tesla Closing a Dozen Solar Facilities in Nine States
  • 2 hours China’s Plastic Waste Ban Will Leave 111 Million Tons of Trash With Nowhere To Go
  • 8 hours Saudi Arabia turns to solar
  • 1 day Russia's Energy Minister says Oil Prices Balanced at $75, so Wants to Increase OPEC + Russia Oil by 1.5 mbpd
  • 10 hours Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 2 days EVs Could Help Coal Demand
  • 3 hours Are Electric Vehicles Really Better For The Environment?
Oil Markets Will Only Get Tighter

Oil Markets Will Only Get Tighter

OPEC has agreed to increase…

Russia Pushes Ahead With Controversial Nord Stream 2

Russia Pushes Ahead With Controversial Nord Stream 2

Russia’s controversial Nord Stream 2…

Can OPEC Maintain High Oil Prices into the Future?

OPEC is probably the single most powerful organisation in the oil industry, able to influence the price of oil to help its member states; however a review by Bassam Fattouh and Lavan Mahadeva of the Oxford Institute for Energy Studies suggests that whilst OPEC is able to influence prices in the short term, it has less success over the long term.

That leaves the question as to whether OPEC will be able to maintain oil prices of around $110 a barrel for the coming decade or so? The answer … unlikely.

Fattouh and Mahadeva suggest that OPEC only works effectively to “avoid oil prices falling below some level deemed acceptable by its members, rather than to prevent oil prices from rising above certain levels or to set a price ceiling.” In other words it has less power to maintain high oil prices, as it does to prevent low oil prices.

Related Article: Ten Reasons Why High Oil Prices are a Problem

In the 1970’s to 1980’s OPEC managed to greatly increase the price of oil by limiting production and closing down any excess capacity. However this only created a massive financial incentive for alternative producers of oil in Mexico, Alaska, the North Sea, and the US, to hugely increase their own production volumes, as well as work on energy efficiency to reduce their consumption.

OPEC found themselves in trouble as their share of world production fell from 51% in 1973 to 28% in 1985.

It is possible that history could be about to repeat itself, as in response to the high oil prices that OPEC has nurtured since 2002 output is quickly increasing around the world, and new policies in the US and EU are aiming to force deep cuts in the consumption of petrol and diesel.

If OPEC really wants to defend the current price level it will likely have to accept a large reduction in its market share.

By. Joao Peixe of Oilprice.com



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News