OPEC’s stunning admission of major dissent within its ranks has left it reeling and its status as the world’s oil power-broker tarnished, perhaps beyond repair. But is a weakened cartel good or bad for consumers?
The major question is what will happen to oil prices in the long term as a newly strengthened Iran takes on traditional OPEC heavyweight Saudi Arabia in what some see as a proxy attack on the United States, the Saudis’ ally and Iran’s longtime foe.
The Organization of the Petroleum Exporting Countries, which sells more than a third of the world’s crude, has commonly been seen as a price regulator, pumping more or less as it deemed fit and leading to complaints of price fixing from major consumers.
But market realities show a different picture – of an OPEC that has less impact on US and other consumers than in previous decades. Even before Wednesday’s abortive OPEC session on whether to raise output, its members were breaking their quotas, putting an additional 1.5 million barrels of oil a day on the market.
“There was a time when rumours of the break-up of OPEC would have sent the oil price plummeting,” said a Monument Securities research note. “But the realities of global supply and demand have been such … that OPEC has lost control over the crude oil market.” Read more: http://www.smh.com.au/business/world-business/iran-flexes-muscle-as-opec-falls-into-disarray-
Iranian Oil Minister Massoud Mir- Kazemi, the current president of OPEC, said at a news conference in Damascus on Tuesday that “prices of USD 100 and above are not worrisome for producers.”