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The Organization of the Petroleum Exporting Countries will find out Friday what happens if it holds a meeting and hardly anyone cares.
OPEC’s gatherings once commanded the world’s attention, because the cartel could roil oil prices, or even force gas rationing as it did in the 70s. But analysts and traders aren’t too excited about the Vienna gathering. They don’t think OPEC will cut production or, even it if did, that it would matter the way it used to.
It’s a sign of just how much power OPEC has lost as oil production booms in other countries, particularly the United States. And OPEC mostly has itself to blame.
“They’ve basically already shot themselves in the foot,” says Amy Myers Jaffe, a University of California, Davis professor and energy policy expert.
By keeping the price of its oil high over the years, she explains, OPEC spurred America to find its own oil. Shale oil production is exploding, even as critics worry about its environmental impact. Canada’s doing it too. Though long known for providing America with maple syrup and Saturday Night Live cast members, Canada also sells us loads of shale oil.
“U.S. and Canadian production can combine with weak demand in the rest of the world and cause some big problems for OPEC countries,” says Michael Levi, a Council on Foreign Relations senior fellow and author of “The Power Surge: Energy, Opportunity, and the Battle for America’s Future.”
OPEC still pumps 40 percent of the world’s crude. But all the extra North American oil sloshing around means the cartel can’t move prices like it once did by cutting production.
“It has made OPEC more of a marginal player in the global oil market,” says Raymond James energy analyst Pavel Molchanov.
OPEC has another problem: OPEC. In the popular imagination, an OPEC meeting is a gathering of sheiks in robes. The oil-drenched Gulf states do dominate, but the cartel’s 12 members also include Nigeria, Venezuela and other countries. These poorer countries rely on oil money to shore up their finances, so they think very differently than rich Arab states that may want to limit production.
Nigeria, in particular, worries about North American shale oil, since it produces a similar product.
“Nigeria never holds back,” explains Molchanov. “They will always pump as much as they physically can because they absolutely need the revenue.”
A changing global energy market, combined with divisions in its own membership, makes for problems inside and outside OPEC. That’s why oil industry watchers believe the old days of supreme OPEC power are dead.
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