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2016 | OriginalPaper | Chapter

3. The Past, Present, and Future Role of OPEC

Authors : Bassam Fattouh, Anupama Sen

Published in: The Palgrave Handbook of the International Political Economy of Energy

Publisher: Palgrave Macmillan UK

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Abstract

This chapter reviews the general history of Organization of the Petroleum Exporting Countries (OPEC) and evolution of models explaining its role in the world’s oil market in the context of key events. OPEC’s varying conduct over time implies that no single model fits its behaviour. OPEC’s behaviour and pricing power cannot be generalized—it is dynamic and context-specific and is influenced by market conditions, the internal dynamics within OPEC, its interactions with non-OPEC producers, and the strategic objectives of its key member, Saudi Arabia. It concludes that although OPEC believes that oil will continue to play a role in the world’s energy mix, there is a clear recognition that in the face of climate change policies, economic diversification remains the only viable long-term response.

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In 2015, Goldman Sachs published a report titled ‘The New Oil Order: Making Sense of an Industry’s Transformation’, where it sees the oil market ‘moving into an environment that reinforces commodity prices to be lower not higher’. Available at: http://www.goldmansachs.com/our-thinking/outlook/the-new-oil-order/#overview.

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While OPEC should be preparing for a future where the share of oil in energy mix will continue to fall, the risk of secular decline in demand due to climate change policies does not seem imminent from OPEC’s point of view. For instance, OPEC’s 2014 World Oil Outlook suggests that globally, oil demand will increase by just over 21 mb/d from 2013 to 2040 driven by non-OECD. The BP Energy Outlook to 2035 forecasts that shale oil production will level off in the share of world oil production post-2020, which will be replaced by growth in OPEC output. In such a world, the challenge facing OPEC would be how to increase production to meet the expected increase in oil demand.

Or ‘stranded assets’, from the point of view of the owners of fossil fuel reserves.

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Title: The Past, Present, and Future Role of OPEC
Authors: Bassam Fattouh
Anupama Sen
Publisher: Palgrave Macmillan UK
Book: The Palgrave Handbook of the International Political Economy of Energy
Print ISBN: 978-1-137-55630-1

Electronic ISBN: 978-1-137-55631-8

Copyright Year: 2016
DOI: https://doi.org/10.1057/978-1-137-55631-8_3

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