The Haves And The Have Nots
12 Feb 2016: During their meeting on 27 November 2014, the members of the Organization of the Petroleum Exporting Countries (“OPEC”) decided not to cut production to arrest a slide in global oil prices. The next day Brent oil fell more than $6 to $71.25, a price decline described at the time as “sending benchmark crude plunging to a fresh four-year low”. Ah, the good ol’ days … Yesterday, the price for Brent crude fell as low as $29.92 per barrel and some analysts think it can go much lower. In the early years of the oil industry, John D. Rockefeller’s Standard Oil would sometimes flood the market with crude, pushing the price of oil down to put pressure on his competitors. This strategy was sometimes referred to as a “good sweating”. It has been speculated that OPEC is implementing its version of this strategy in an attempt to squeeze out some of the higher cost non-OPEC production like U.S. shale and Canadian oil sands. Whether it is a deliberate strategy or not, it is important to point out that the 13 OPEC member countries are very different based on their capacity to increase production and their ability to withstand low oil prices. For this discussion I would like to split OPEC into two groups: the ‘Haves’ and the ‘Have-nots’.
Download here
