When I heard the news this morning that OPEC will cut its production by 1.5 million barrels per day next month, I thought they made a good decision. Such a cut should slow down the rapid decline in oil prices without making prices shoot back up to record territory. While they made the cut to maximize oligopolist profits, I was interested in the consequences of such an action. I felt that a $65+ oil price per barrel is crucial to keep consumers from flocking back to over-sized, inefficient vehicles and to keep renewable energy competitive with its fossil fuel counterparts. I then realized this logic begs the question: does the production cut make OPEC's action green?

Let's start by looking at the immediate effect of the action itself...

  1. Withholding 1.5 million barrels of oil from the market daily prevents ~150 million tons of carbon dioxide in combustion emissions on an annual basis. In other words, OPEC seems to have in one fell swoop cut global emissions by .6% (equivalent to 3% of US emissions). Any environmental organization would dream of achieving such a significant and quick reduction in a one day meeting like OPEC's Vienna rendezvous today. I think the action in itself gets four green stars.

  2. But of course OPEC is not the only source of oil. So, if the cut keeps oil prices above $60 instead of falling to $50 during the recession then non-OPEC oil that can be profitably produced between $50 and $60 will be shipped to consumers, thus increasing greenhouse gas emissions. But non-OPEC fields are usually more expensive than OPEC ones (such as some Canadian tar sands reservoirs that can require $80+ to be profitable), so the increase in non-OPEC production will probably only offset a fraction of OPEC's production, let's say 1/4. That seems to warrant the reduction of one green star.

  3. And oil is not the only source of greenhouse gas emissions. If oil costs more and is less available then there will be a mix of conservation, efficiency, and substitution to cope with that change. The conservation and efficiency is an unambiguously positive development for the environment. But the substitution can include energy from dirtier coal along with the cleaner burning natural gas and renewables. The oil used for heating can be directly replaced by natural gas and sometimes coal. The small amount of oil that generates electricity can switch to natural gas, coal or renewables. But for renewables like wind and solar to replace the bulk of oil that goes into transportation, the production and infrastructure for plug-in hybrid electric vehicles must ramp up and that will take at least two more years. Since most substitutes are cleaner than oil and efficiency/conservation are definitely climate-friendly, I'm gonna say this aspect of the change earns them one green star.

  4. But OPEC is a major producer of oil, one of the leading causes of environmental destruction our Earth has faced over the last 150 years. Almost as big a global climate culprit as coal and a contributor of horrific local pollution from spills like the Exxon Valdez in Alaska to regular environmental degradation in the Niger Delta, oil has done serious damage to our ecosystems. To me, that means OPEC loses three green stars.

According to my arbitrary review, that makes OPEC's move a tepid green move that earns them a green star. By keeping oil from getting too cheap in global economic downturns, I believe OPEC is helping the environment.

It will take a serious investment of hundreds of billions of petro-dollars into renewables and a shift of focus to those power sources for me to see OPEC earning more than one green star. But with the gigantic solar resources in Middle Eastern and North African deserts, that may just be a good move for key OPEC producers like Saudi Arabia, Iraq, Libya, and Algeria to consider.

Do you think OPEC's production cut raises their green-cred?