Kemp: News Of OPEC's Demise Has Been Much Exaggerated

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Analyst John Kemp asks, "if OPEC cannot act to defend the prices and revenues of its member countries, does the organization still serve any purpose?"


John Kemp is a Reuters market analyst. The views expressed are his own

LONDON, Dec 3 (Reuters) - The Organization of the Petroleum Exporting Countries (OPEC) last week made no change to its production target despite a 40 percent slide in oil prices over just five months, causing some commentators to pronounce the cartel irrelevant.

If OPEC cannot act to defend the prices and revenues of its member countries, does the organisation still serve any purpose?

There is an assumption among some commentators that OPEC is only relevant and working if ministers can reach a production agreement in response to shifts in prices, and that strong disagreement is a sign of dysfunction.

But the record suggests that ambitious production-cutting agreements are rare, rather than the norm, and that a robust exchange of views is typical.

There is nothing new about predicting the end of OPEC. Following one particularly acrimonious meeting in 1981, the Kuwaiti oil minister told waiting journalists: "News of OPEC's death has been much exaggerated". A third of a century later, the organisation is still going.

OPEC has always had fierce foes eager to forecast its demise, especially in the United States, where there are still memories about the Arab oil embargo, gasoline lines and soaring fuel prices in the 1970s.


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Philippe | Dec. 4, 2014
Outstanding article on the history of OPEC. OPEC was formed to counter weight the forces of colonialism. Going way back, Britton had a lock on the Iran oil. Britton had control of the Venezuelan oil by not refining it in Venezuela but next door in Trinidad than an English protectorate. The US had a lock on the Saudi oil and France on the Algerian oil and what England and the US did not want: Syria and Iraq. The Russians large producer used the Soviet Union as a closed market to get paid in hard currency primarily. OPEC ended these foreign control oil producers and intended to control their oil price. The majors were no longer in charge and became under the control of the members of OPEC. The world politics has changed. The world is an O&G free market, exploration has increased world O&G reserve by several folds. OPEC own politic among its members has changes as well. Therefore OPEC power is not what it was. The fragmentation of OPEC members is along religious belief, and along the memberís level of population. Saudi several million, Iran 50 million, Nigeria 100 million represent very different social politic. We are living the first wave of and economic war that is causing the oil to spill overboard. The Saudis are in a strong position economically as long as the Middle East is a nuclear free zone. There is the underlying reason of the present situation.


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