July 17, 2014
just not that into OPEC anymore.
reports that in 2015, the cartel expects “the third consecutive annual drop
in demand for OPEC crude.” To America’s
professional energy alarmists, left and right, the petro-powerhouse’s sagging
dominance isn’t a salutary phenomenon. But to investors, consumers, and skeptics
of ideology- and media-driven hysteria, it’s a godsend.
Founded in Baghdad in 1960, OPEC has been
the bête noire of developed nations’ politicians,
pundits, and Deep Thinkers since the 1970s. That decade, events -- some engineered by OPEC,
several imposed by
members acting alone, many driven by external
affairs -- sent the price of oil to levels once thought impossible. Unemployment,
gas lines, and political chaos followed.
To this day,
few in the U.S., Europe, and
understand the role their governments’ monetary blundering, regulatory
stupidity, and foreign-policy
lunacy played in creating the double-dip “energy crisis.” Since then,
overnight price spikes have not reappeared. But OPEC still takes much of the rap
for the unpleasantness of the ‘70s, and elites’ hand-wringing over “dependence”
on “foreign oil” lingers. “Biofuels,” gallons-per-mile mandates for automobiles,
and the International
Energy Agency owe their existences to the “oil weapon” OPEC supposedly wields.
As late as 2008, even clear-eyed energy researchers thought the cartel couldn’t
be toppled. That year, in Gusher
of Lies, author Robert Bryce wrote that OPEC “will have effective
control over the bulk of the world’s most important transportation fuel for the
foreseeable future, and there’s nothing that the U.S. or any other country can
do that will alter that fact.”
A number of developments
converged to prove Bryce wrong. Between 2003 and 2013, OPEC’s share of Earth’s
oil production dropped from 35.4 percent to 33.4 percent. There are two reasons
to believe that the trend will continue -- and accelerate.
isn’t keeping up with demand. The West’s thirst for oil may be plateauing.
But India’s petroleum consumption
is up more than 50 percent in the last decade, and China’s has doubled. In the same period, while
global crude demand rose by 13.2 percent, OPEC’s output increased by 6.9
percent. With ginormous reserves, can’t members add more spigots?
Theoretically, yes, but doing so is costly. Angola,
Kuwait, Venezuela, etc. need their existing
fountains of revenue for tools to forestall -- and occasionally, suppress -- political
dissent, rioting, and juntas.
Besides, the state-owned
enterprises tasked with tapping OPEC’s petroleum reservoirs are not known
for innovative thinking and can-do attitudes.
on the open market are prowling for customers. Since hitting its post-Soviet nadir
in 1996, Russia’s
river of black gold has widened by 75.1 percent. Its improving economy can’t fully
compensate for its stagnant population, and thus, the Motherland has oil to
sell. (Importing countries aren’t letting the misdeeds of Russia’s bad-boy president keep
them from placing orders.) Growth is greater in nearby Kazakhstan, where production is up
by a factor of four since 1993. Brazil, blessed by what U.S. energy bureaucrats call the “world’s
largest oil discoveries in recent years,” could soon join the non-OPEC export
Mexico made the asinine decision to nationalize oil companies in 1938. Recognizing its mistake, albeit rather belatedly, the
country is ending its monopoly and inviting foreigners back. Add a Mexican
boost to Canada’s
oil-sands boom and the
fracking revolution in the U.S., and it’s likely that before 2020, the
NAFTA triumvirate will be self-sufficient in petroleum. Then it’s on to exports
-- possibly in huge numbers.
Last month, in
a piece for The Washington Post, American University’s Jeff Colgan wrote, “With
the price of oil set by market forces almost entirely outside of its control, OPEC
is along for the ride like everyone else.” Scariest of all for the cartel:
alternative-fuel vehicles. If electricity and natural gas grab bigger portions
of transportation-fuels consumption, OPEC’s member governments face existential
challenges. (Saudi Arabia
doesn’t have much of an agricultural sector, Nigeria
isn’t a hub for film and television studios, and not many manufacturing
conglomerates are based in Ecuador.)
In 1982, as the
Land of the Free was reeling from a prolonged case of intolerably expensive gasoline,
diesel, and heating oil, The New York
Times observed that OPEC was an “ungainly sort of club” whose members
occasionally go “to war against one another” and regularly cheat “on official
prices to raise sales while publicly accusing their fellows of exactly the same
the start, and never as mighty as its enemies believed it to be, OPEC is well along
the path to irrelevancy. So much for “resource nationalism.”
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
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