DOES OPEC matter? Those who dismiss the significance of the Organisation of Petroleum Exporting Countries, a producers’ cartel, cite at least three reasons to think not. Its 14 members cannot agree among themselves, not least because they include bitter regional rivals like Iran and Saudi Arabia. Even if the cartel could agree, its pacts would not work, because so much crude oil is now produced outside the club, in the hinterlands of Siberia or the fracking fields of America. And if OPEC’s agreements will not work, its members will have no reason to stick to them.
Those who think OPEC still matters can now make one powerful counterargument: Algiers 2016. On September 28th OPEC members gathered there for an informal meeting and agreed to cut output for the first time since 2008. The agreed cut was modest, limiting production to 32.5m-33m barrels per day, which is between 0.7% and 2.2% below current output. Saudi Arabia’s production was likely to fall anyway as the winter approaches. The agreement was also vague. Members will wait until their formal meeting in November to settle how the overall cut will be distributed among them....Continue reading
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