Oil production has been dominated by the nations of OPEC for 30 years but as production in the US and Russia pick up OPEC may be losing its grip on the market. The Organization of Petroleum Exporting Countries, which is mostly composed of Middle Eastern nations, uses its control of the majority of oil produced globally to dictate the price of oil. The current glut of oil production in the US and Russia is weaning the OPEC nations from their normal price monitoring practices.
Russia has faced pressure to increase oil and gas production as the nation depends primarily on these resources for the stability of its economy. Russia also benefits from political influence thanks to its position as a major oil supplier to parts of Europe. The US, on the other hand, is experiencing large oil production due to new innovations which allow for more oil to be extracted from old wells and unconventional rock types. Neither nation is benefited by the price manipulation of OPEC, as both countries are large consumers of oil. This means that OPEC has no real leverage to regain its dominant market control of oil exportation.
Today’s oil crisis is one…which might be signaling that OPEC has finally reached its use-by date.”
The current dip in gas prices may cause instability in numerous OPEC nations. Iran has called for OPEC to take control of the lowering prices but any action by the organization could endanger some of the member nations. The demise of OPEC could make the US the world leader in oil production, as the nation is likely to edge out Saudi Arabia as the number oil and gas producing nation in the next few weeks.
Read More – News of OPEC’s Death May Not Be An Exaggeration (Forbes, Tim Treadgold)