The group of oil producers known as OPEC+ has become an irrelevance.
Amid the the most unstable oil-supply situation in more than 30 years,
it went missing in action.
The 23 countries, which together
account for nearly 45% of the world’s oil production, met on Wednesday
with crude prices surging to their highest levels since 2014. Their
virtual gathering lasted just 13 minutes. From the subsequent crowing
about the new record set for the brevity of the meeting, you’d be
forgiven for thinking that the mission was to get together for as short a
time as possible, rather than to balance the oil market.
Russia’s invasion of Ukraine and the potential
impact on oil markets wasn’t even deemed worthy of discussion. That is a
shocking dereliction of duty for a group that considers itself the
central bank of oil.
Sure, it would have been uncomfortable. The
invasion was launched by one of the group’s co-chairs and keeping Russia
in OPEC+ is important for the other members — the last time it pulled
out, it triggered a production free-for-all that sent prices plummeting.
So there’s an understandable reluctance to raise the topic.
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that hasn’t stopped them before. Iraq, a founding OPEC member, twice
invaded neighbors — Iran in 1980 and Kuwait a decade later. Both its
victims were fellow founding members of the group. When Iraq
attacked Kuwait in 1990, the world lost about4 million
barrels a day of supply overnight as a result of United
Nations sanctions on the exports of both countries. That represented
about 7% of global production at the time.
The rest of OPEC stepped in, using
spare capacity to boost supply. Within a month, the group’s
total output was almost back where it had been before the sanctions.
That didn’t stop oil prices from continuing to rise, though. Much of the
market’s nervousness was driven by fears that Saddam Hussein’s troops
would push further south all the way toSaudi Arabia’s oil fields.
Thirty years on, the situation is very different. Far from acting as a stabilizing force, the bigger OPEC+ producer group hasabstained.
they fear some form of retribution from Russia if they say, or do,
anything it doesn't like. Or perhaps they have no problem with President
Vladimir Putin invading a sovereign neighbor. Maybe the truth is that
there's actually not much they can do.
don't have anything like the spare capacity they held in 1990. Back
then, Saudi Arabia alone was able to boost output by about 3 million
barrels a day over five months and still have more in reserve. It might
struggle to do half that now.
Aside from the United Arab Emirates, the rest of
the OPEC+ group would be hard pressed to add much at all. They are
already struggling — and failing — to keep pace with their rising output
targets. Production in January was almost 1 million barrels a day below
the group’s goal, according to its own figures.
inability, or unwillingness, to act might buy oil producers a
short-lived burst of sky-high prices, but it will speed the death knell
for oil. Consuming nations will surely redouble efforts to decarbonize
their economies and boost energy security by reducing dependence on
foreign fuels - fossil, or otherwise.
Saudi Arabian oil minister Prince Abdulaziz bin
Salman has repeatedly taunted the International Energy Agency’s
blueprint for decarbonization as a La-La Land fantasy. It’s starting to
look like the oil producers are living in a fantasy land of their own.