The meeting of ministers from the Organization of Petroleum Exporting Countries could reveal diminished power for the group.
For years, the oil cartel held a firm grip on oil prices. In 1973, OPEC imposed an embargo. The price of oil shot up from $1.70 U.S. a barrel to $12.50 U.S. OPEC controlled much of the world’s oil supply. And it wielded that influence like a truncheon.
But slowly that grip loosened. The cartel has been beset by in-fighting. Members constantly cheated on their own production quotas. High prices encouraged other countries to produce oil of their own. Today, the United States is set to become the world’s largest producer of oil.
Keeping a lid on global prices is a difficult job that requires patience and discipline.
Today in Vienna, the once-mighty OPEC ministers gather under dramatically reduced circumstances.
One expert says the rise in oil production from non-OPEC countries combined with lower growth in China are the main factors driving down oil prices — a basic matter of supply and demand. More oil sloshing around the world today and a weaker global economy mean there’s less demand from people looking to power their factories and ship their goods.
In the midst of plummeting oil prices, OPEC countries are pushing for wildly different solutions. Saudi Arabia wants lower prices to force out the competition, especially in the U.S. and perhaps even Canada. Iran and Venezuela want higher prices to pay the bills.
Some analysts have said that unless OPEC countries agree to cut production, the price of oil could fall as low as $60 U.S. per barrel. Now, that would be welcome news to most of us. Driving your car, heating your home and shipping your goods will all become cheaper. But what does it mean for Canadian oil production?
A recent report from TD Bank says the effect of falling oil prices is often misunderstood. It points to a gap between what it costs to start an oilsands project and what it costs to keep existing ones running.
Whatever they decide, it’s clear the landscape has changed. The days of OPEC ministers dictating prices of oil are over. That said, the price of oil is still set by a dizzying array of influences. It’s still complicated. If anything, the diminished influence of OPEC may make it more difficult to predict than ever.
