OPEC and oil prices

Leaky barrels

Higher production elsewhere is undermining the cartel

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It's always interesting when the Economist, which in 1999 suggested that we would see $5 oil prices, talks once again about oil prices falling.

In any case, a data base I compiled from EIA data show that Global Net Exports of oil (GNE*) have been below the 2005 rate of seven straight years, through 2012 (2013 data not available yet). Furthermore, developing countries, led by China, have been consuming an increasing share of a post-2005 declining volume of GNE. For more information, you can search for: Export Capacity Index.

For information directly on topic, you can search for: Why isn't Saudi Arabia a threat to fracking?

*GNE = Combined net exports from top 33 net exporters in 2005, total petroleum liquids + other liquids, EIA


Even the IEA, whose prognoses are notoriously over-optimistic, predicts that US unconventional oil finds will decline after 2016. Conventional sources the world over are probably in decline already. One can't be sure because OPEC is a black box. Maybe they'll go fracking in Siberia. Maybe Venezuela will fall apart the way Egypt did, after its oil finds peaked and its exports dropped to zero. Maybe Iran, or Iraq... Who knows? But Brent prices, in contrast to WTI, have not been falling; they've landed on a bumpy plateau. How come, if fracking is the game-changer it's said to be? Steven Kopits argues that the oil market is supply-constrained. His recent presentation on global oil market forecasting is worth a look: https://www.youtube.com/watch?v=dLCsMRr7hAg The clarity of his numbers shocked me. Since he's an economist, his numbers are mainly about dollars. Maybe that type of argument is easier to digest for economists than the sort of argument a geologist or climatologist would use. Science and economics are The Two Cultures of today. Kopits is a great translator.



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