OPEC is non-existent at this point...

Organization of the petroleum exporting countries OPEC after many years surprisingly agreed on reducing the production. The production of countries should be ranging in the interval of 32.5 to 33.0 million barrels a day. The price of oil immediately skyrocketed. The barrel of oil was 3 dollars pricier within a minute.

The price of oil is checking the situation and waiting what will happen next. In my opinion, it’s all mockery. I think that OPEC is non-existent at this point. It is only a logo and empty shell.

 

Economic theory explains why every cartel is fragile. If I simplify it to one sentence, the thing is that when the conditions on the market get worse, everybody wants to deceive one another. That is a rational, economic behaviour and that will be the OPEC’s case as well. It is not 1985 anymore so the cartel can function. The production outside of OPEC is so high that the amount OPEC reduces will make somebody else start to produce more. Only that they will push the OPEC from its position.

 

Only chance OPEC has is that the competition is producing so much already that it can’t increase the production fast enough. The USA, Canada, and Russia are producing more than ever. That means that OPEC can influence the price only short-term.

On top of that electric motors are being used more and more. Soon they will be everywhere. Oil motors will be so expensive in ten years because of the emission regulations, that they almost won’t get installed in new cars anymore. Gasoline engines will outgrow the oil ones only for a couple of years. We have a solution for oil-free engines for personal cars and trucks already.

 

Global oil consumption in developed countries won’t grow anymore. Developing countries will hop on this train soon as well. That’s why the America will keep producing as much as it can. The importance of oil will be significantly lower in twenty years than it is now. Other countries understand this too. Is it better to produce cheaper and more today or to produce costly and let the oil stay in the soil forever because it won’t be useful anymore?