It’s not a secret: OPEC has painted itself into a corner by relying exclusively on supply control to be able to manipulate international oil prices in a way that is favorable for its members. Right now, prices are depressed and that has nothing to do with supply. Could OPEC’s grip on oil prices be slipping irreparably?
When OPEC first announced that its members had agreed to put a cap on their production to reverse a steep drop in prices, it worked. Prices had been pushed to lows last seen more than a decade ago by the U.S. shale boom and OPEC’s own attempt to halt it by turning the taps on to maximum flow. When OPEC said it would reduce this flow, prices rebounded, providing much-needed relief to oil-reliant economies in the Gulf—it also provided relief to oil producers around the world, including the U.S. shale patch.