Why won’t OPEC cut production ?

Scott Tong Dec 22, 2014
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Why won’t OPEC cut production ?

Scott Tong Dec 22, 2014
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Despite falling crude oil prices, key members of OPEC reiterated over the weekend that they intend to keep drilling and pumping.

Yesterday, the oil minister for Saudi Arabia, OPEC’s biggest and most influential member, indicated the cartel would never cut production. Analyst Bhushan Bahree at IHS Energy points out that the cartel’s last supply cut in 2008 backfired when competitors ate into its market. OPEC does not want a rerun.

Persistent low prices could benefit the cartel long term: They could cultivate a new generation of car drivers who drive more and alleviate concerns in the oil patch that global demand for oil may soon peak. Political concerns are also in play: OPEC’s supply-king, Saudi Arabia, could see low prices bankrupting its key nemesis, Iran. If Tehran runs out of money to support Syria’s regime, as well as its own nuclear ambitions, Valerie Marcel of the Chatham House think tank says that would go down as a victory in Saudi Arabia.

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