Financial News

Is OPEC Still Relevant To The World Economy?

OPEC is meeting behind closed doors as some of the world’s leading oil producing nations lock horns in a play for power.

Saudi Arabia has traditionally dominated OPEC and only gained from war in Iraq and sanctions against Iran, the kingdom’s two biggest rivals in the region.

With a resurgent Iraq and Iran both pumping oil at near full capacity despite the worldwide drop in prices, Saudi Arabia is plotting to cement a place at the top of the OPEC pile.

Ministers at the OPEC meeting in Vienna have hear Saudi Arabia’s delegates threaten to walk out if they do not get their own way.

So far, Iran and Iraq are standing firm and calling their bluff.

Throttling shale oil industry

But was does all this posturing mean for consumers in Europe and America?

Both are among Saudi Arabia’s biggest customers, but this could soon change.

The US is less reliant on Saudi crude due to huge shale oil discoveries in Canada and oil fields in Dakota, California and Texas.

Governments in Europe are keen on green energy solutions and are moving away from hydrocarbons to cleaner fuels, such as nuclear energy and wind farms.

To counter, OPEC has tried to throttle the shale oil industry by pumping oil at a faster rate than the market wants to buy, resulting in an oversupply.

At the same time, Iran and Iraq have come back on line and boosted the glut.

Oil glut worsens

OPEC must stop pumping oil or prices will drop even more, causing producers economic problems as they create huge budget deficits.

With developments away from OPEC reducing reliance on the crude produced by the members, not only are nations fighting for OPEC dominance but also for their relevance to the world economy.

The issue dates to conflicts in the Middle East decades ago that saw OPEC hold the West prisoner to oil producers who turned off the taps. The West vowed never to be totally reliant on OPEC oil and the ambition has come to pass.

Delegates from Iran and Iraq are optimistic about the talks.

“There will be an agreement,” an Iraqi delegate said while Iranian Oil Minister Bijan Zanganeh confirmed he was ‘optimistic’.

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