OPEC in coma!

Hussein Shobokshi HAS OPEC (Organization of the Petroleum Exporting Countries) entered into a state of coma and clinical death? This traumatic question seems to crop up between interactions within the members of the organization as the influential group fails to decide the price of the commodity in the global market as it was the case in the past too. It is clear that the impact of “politics” is far more profound than the impact of “economy” within the organization. The regional conflict between Saudi Arabia and Iran has led to a complete breakdown of coordination between the member states, heading to a situation where no agreement on price control and output could be reached. The disagreement has also led to frauds and irregularities among member states, hurting the oil prices in the process. Of course, one cannot overlook the “brutality” of Russia. Russia has huge reserves of oil and it capitalized on its ability to export oil to get hard currency in order to support its passive economy affected by sanctions after its occupation of the Crimean Peninsula in the Ukrainian state. It is, therefore, a very significant factor and this is affecting the ability of OPEC members to influence the world oil market. Having said that the buck does not necessarily stop at the ambitions of the Russian Bear only as the United States also entered the oil market very strongly. Today, the US has shifted its role from being a consumer to of a producer. It has sufficient energy reserves to cover its own domestic needs and export the product. Today, shale gas produced with American technology and operated by American companies, has become less expensive, more effective and environmental friendly, causing least possible damage to the underground water; as earlier there were doubts that the technology would cause pollution and destruction to the environment. It is no secret that huge volumes of shale gas exist in Central America, as announced by the Central American states and the scenario of doubling the quantities for export from America will be a key factor in calculations of the petroleum market. Thus, the strongest producer will survive, irrespective of being it from any association or organization. Now every oil exporter is generous in “dumping” oil to major oil consuming states like China, Japan, South Korea and India. These are the states that consume most of the oil today and everyone wrestles to appease and satisfy the wishes of these countries in supplying the commodity. It is imperative that no longer any interviews, statements and conferences will delay the fate of the organization. It is also apparent that the meetings between the member states will have no impact on the market and its actions. The scene continues. It is to bring a new reality in which the word “some” major countries are capable of influencing this commodity politically and economically and this equation is not available in most of the member states. OPEC had the upper hand for many years in controlling the most important economic commodity but when politics overshadowed the economic decisions and varied special interests of the member states, it was easy to get a break from non-member parties and gradually begin to weaken the organization without forgetting the new global economic reality in which there is a clear divergence of supply and demand, recession and financial crisis cannot be denied nor ignored at all. Now the fact is that we are entering “post-OPEC” situation, which is similar to the “League of Nations” that existed before the creation of the United Nations. It is simply to say that for each entity there is an expiry date and this is exactly what is happening with the OPEC.