The Organization of Petroleum Exporting Countries, or OPEC, has been trying various methods for raising the price of crude oil, most of them revolving around cutbacks in supply (by withholding up to 2% of the world's supply daily). Nothing's worked, so far, and the price of crude has actually fallen, not risen. Mostly, this is because many of OPEC's member-states don't appear to be making all that much effort to cut back their own production, even though all have promised to do so:
"Eight months after the Organization of the Petroleum Exporting Countries announced a plan for its 14 members and 10 allied countries to withhold almost 2% of the world’s oil every day to boost prices, seven of the 11 OPEC members that pledged to cut appear to be producing more oil than promised.
Crude prices have actually fallen, by 7.6% to $52.52 a barrel, since the beginning of the year—half what the cartel called a fair price just three years ago and a level that some say is here for the long term.
Previously, low production costs meant OPEC members profited even when oil prices fell. These days, members have ramped up government spending to keep populations happy and cover military expenses, and don’t have a cushion to let oil revenues slip. Their strained budgets can be covered only through increasingly high prices per barrel, and if prices are low they need to produce more.
The inability to control output poses a potentially existential threat to OPEC’s influence."
New oil exploration and extraction technologies -- and the efficiencies of scale attaching to them -- seem to be one of the major roadblocks to OPEC controlling the oil markets as they once did. This is especially so when it comes fracking, which has seen the cost of producing a barrel of end-product oil drop dramatically over the last several years.
OPEC Has a Crippling Problem: Its Members Can’t Stop Pumping - WSJ (full article's behind WSJ's paywall)
At any rate, cue the sad trombone when it comes to OPEC's troubles: ;-)
"Politics is just show business for ugly people."
"Eight months after the Organization of the Petroleum Exporting Countries announced a plan for its 14 members and 10 allied countries to withhold almost 2% of the world’s oil every day to boost prices, seven of the 11 OPEC members that pledged to cut appear to be producing more oil than promised.
Crude prices have actually fallen, by 7.6% to $52.52 a barrel, since the beginning of the year—half what the cartel called a fair price just three years ago and a level that some say is here for the long term.
Previously, low production costs meant OPEC members profited even when oil prices fell. These days, members have ramped up government spending to keep populations happy and cover military expenses, and don’t have a cushion to let oil revenues slip. Their strained budgets can be covered only through increasingly high prices per barrel, and if prices are low they need to produce more.
The inability to control output poses a potentially existential threat to OPEC’s influence."
New oil exploration and extraction technologies -- and the efficiencies of scale attaching to them -- seem to be one of the major roadblocks to OPEC controlling the oil markets as they once did. This is especially so when it comes fracking, which has seen the cost of producing a barrel of end-product oil drop dramatically over the last several years.
OPEC Has a Crippling Problem: Its Members Can’t Stop Pumping - WSJ (full article's behind WSJ's paywall)
At any rate, cue the sad trombone when it comes to OPEC's troubles: ;-)
"Politics is just show business for ugly people."
