How Canada And USA Can Run OPEC Out Dodge.

[petros]

The capacity and the will are there but there is a US legal roadblock. I found the loophole to make it possible but more on that later. I'll point it out in the following article.

Firstly

OPEC vs. the US: Who Controls Oil Prices?​

OPEC vs. the US: Who Controls Oil Prices?
By Rakesh Sharma Updated July 30, 2024
Reviewed by Julius Mansa
Fact checked by Vikki Velasquez


Crude oil is the most valuable commodity by trading turnover and one of the most widely used. In a world with many consumers and producers, a single country or organization can no longer "control" crude oil prices set in highly liquid global markets.

But that wasn't always the case. The Organization of the Petroleum Exporting Countries (OPEC) was created in 1960 to protect the interests of Mideast crude exporters in a market dominated--and fixed--by the U.S., at the time the world's largest consumer and producer.

Arab members of OPEC would demonstrate oil exporters' growing power in 1973 with a damaging oil embargo targeting the U.S. and other supporters of Israel in the West.

The episode marked the peak of OPEC's leverage over the oil markets amid rapidly declining U.S. production.

The fortunes of OPEC and the U.S. have continued to fluctuate in the years since with oil booms and busts, and the resurgence of domestic U.S. output based on advances in hydraulic fracturing. The development of new energy production in the North Sea, Canadian oil sands and off the coasts of Africa, Australia and the Americas has limited the global sway of OPEC and U.S. producers alike, amid rapid consumption growth in China, India and other developing countries.

In this article, we explore the historical rivalry between OPEC and the U.S. and its evolution.

Key Takeaways

OPEC and OPEC+ are groupings of oil exporting countries that use supply quotas in an effort to secure the highest long-term prices for their members

Both groups set their supply targets by consensus, though Saudi Arabia plays an outsized role as the top exporter with most spare capacity.

OPEC was formed to counter U.S. dominance of oil markets in the 1950s, and the 1973-1974 Arab oil embargo cemented its reputation as a U.S. rival.

Global oil markets increasingly connecting Asian consumers with a broad group of OPEC and non-OPEC producers are too large and diverse to be dominated by a single country or group.

United States
The U.S. was the world's leading producer of crude oil in 1960, the year OPEC was formed.
While U.S. crude imports already totaled a million barrels per day, it was at prices set by the country's internationally dominant oil companies and backed by import quotas.

The U.S. adopted quotas limiting imports to 9% of domestic consumption in 1959. Five years earlier, a consortium of U.S. oil companies gained control of Iran's crude production after a Western-backed coup.

Strong U.S. consumption growth during the 1960s, coupled with decline in domestic crude output throughout the 1970s, increased the market power of oil exporters including OPEC. Images of long lines at gas stations in the U.S. during the 1973-1974 oil embargo cemented a view of OPEC as an adversary among Americans.

The energy conservation measures and exploration efforts prompted by high oil prices in the 1970s laid the seeds for an energy dip that followed in the 1980s and 1990s.

As U.S. domestic output rebounded amid rapid development of shale resources starting in 2011, the rivalry with OPEC revived as a competition between producers. When Saudi Arabia raised output starting in 2014, depressing crude oil prices, it did so with the stated aim of reversing big recent gains in U.S. shale production.

A steady supply of legislative proposals in the U.S. Congress starting in 2000 sought to make OPEC subject to U.S. antitrust laws as a cartel.

None have been enacted. (KEEP THAT IN MIND)

Continues next page.
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[petros]

OPEC
The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960 by developing country exporters to assert control over their domestic production and global supply. The five founding members were Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Following subsequent additions and a few departures, OPEC currently has these 12 members:8

• Algeria
• Congo
• Equatorial Guinea
• Gabon
• Iran
• Iraq
• Kuwait
• Libya
• Nigeria
• Saudi Arabia
• United Arab Emirates
• Venezuela

Each member of the organization has one vote and all OPEC decisions on oil production require unanimous consent. (New members may be admitted with approval from three-quarters of the membership, including all founding countries.)

In practice, Saudia Arabia has historically enjoyed an outsized role in OPEC decision-making because it is by far the organization's top producer and exporter, with an even larger share of aggregate spare production capacity within the group.6 In 2023, Saudi Arabia accounted for 35% of OPEC's crude oil output, more than twice as much as Iraq, the second-largest producer in the organization. OPEC crude oil accounted for 27% of global petroleum liquids production for 2023.

All OPEC members benefit from higher prices as a result of the supply quotas adopted by the organization, but each member also has an incentive to supply crude above its quota to maximize oil revenue. The scale of Saudi Arabia's production relative to that of other OPEC members gives those countries an additional incentive to supply as much crude as OPEC's dominant producer will tolerate.11 As a result, accusations of cheating on quotas have surfaced throughout the organization's history, challenging critics' claims it is an effective cartel.

How OPEC Works​

By charter, each member country has one vote and oil supply agreements among members require unanimous consent. In practice, Saudi Arabia plays a dominant role by virtue of its status as OPEC's biggest producer and the country with most unused production capacity. Member states frequently supply more oil than their quotas specify.

In late 2016, OPEC agreed to coordinate crude oil supply with non-OPEC countries under the OPEC+ umbrella. The non-OPEC members joining OPEC+ were Russia, Kazakhstan, Azerbaijan, Malaysia, Mexico, Bahrain, Brunei, Oman, Sudan, and South Sudan.OPEC+ supply agreements, like OPEC's, require consensus among members.

While Russia's crude oil production rivals Saudi Arabia's, it has much less spare production capacity.Following Russia's invasion of Ukraine in February 2022, Saudi Crown Prince Mohammed bin Salman reiterated Saudi Arabia's commitment to OPEC+.

Next page...

 

[petros]

OPEC vs. the United States—The Future
Every time gas prices rise, millions of U.S. motorists take notice. No other consumer product has prices so prominently displayed or frequently discussed.

Since the 1970s, U.S. politicians have frequently blamed OPEC for energy price increases.

As a group of national producers often described as a cartel and concentrated in the Middle East, a region long perceived as hostile to U.S. interests, OPEC has been an easy target. In recent years, the group has sought to improve its image in the U.S., with limited results.

In the short term, OPEC and U.S. shale producers continue to compete for global market share. Unlike OPEC, U.S. companies are subject to antitrust provisions barring them from coordinating supply plans (CANADA ISN'T) Shale drilling incurs higher production costs than do the traditional vertical wells in Saudi oil fields.

Shale resources also have steeper decline curves, meaning production from shale wells declines faster than from conventional ones.

The U.S. Energy Information Administration expects U.S. crude oil production to peak in 2030, while OPEC production is expected to continue rising through 2050.

Much of the growth in energy consumption is expected to take place in developing Asian countries, where petroleum liquids demand is expected to grow 1.7% annually through 2050, three times as fast as in the U.S.

As OPEC ships more of its crude to Asia while U.S. production and consumption growth slow over time, the historic rivalry between the U.S. and OPEC could diminish. But it could flare anew subject to geopolitical risks including climate change and the future of the recently weakened U.S.-Saudi relationship.

See loophole in red.

 

[petros]

OPEC to Trump: We Set the Price, Not You

By Irina Slav - Feb 06, 2025, 10:00 AM CST

One of President Trump’s first orders of business following the initial burst of executive orders was to declare he would ask OPEC to ramp up its oil production to bring down prices. Trump pledged cheap energy to Americans, and he vowed to put a quick end to the Ukraine war, which, to him, would accomplish lower oil prices. Only OPEC had to agree—and it didn’t. It could be Trump’s very first reality check this term.

Trump was speaking at the World Economic Forum in Davos when he said he was surprised that OPEC producers hadn’t taken care of oil prices before the U.S. election in November. “You gotta bring down the oil price,” he said. “That will end that war. You could end that war.”

While plausible on the face of it, this argument is as questionable as the argument that sanctions are working and the Russian economy is in tatters—as evidenced by a 2024 World Bank update on major economies, in which it ranked Russia among high-income countries, and on a per-capita basis, at that, for the first time since 2015.

Yet there are bigger problems with Trump’s idea of having OPEC open up the taps to help him fulfill his campaign promise of cheap energy. For starters, the Saudi Crown Prince may be Trump’s buddy, but he’s got his own priorities, and funding his Vision 2030 is number one on the list—for which he needs higher—not lower—oil prices and continued partnership with Russia.

Then there is the domestic problem: low oil prices are not what U.S. drillers want to hear or see. In fact, U.S. drillers like prices where they are and would not mind seeing them go higher. In other words, Trump’s goals of cheaper energy and more U.S. oil and gas production are at direct and quite sharp odds with OPEC’s priorities. Friendship with Crown Prince Mohammed won’t help—because OPEC doesn’t care about politics. OPEC cares about the oil market.

Amena Bakr, head of Middle East Energy and OPEC research at Kpler, recently detailed the situation with Trump and OPEC in an analysis for Semafor, where she pointed out that OPEC did not respond to Trump’s calls for more production and is unlikely to ever consider responding favorably because “at its core, it remains focused on market management, not political posturing. That includes keeping Russia firmly inside the alliance to maintain maximum clout over global supply.”

This is certainly not something that the U.S. president would be happy to hear, but there is more than one reason for OPEC’s behavior. According to Bakr, in addition to Russia’s importance for the extended group’s clout over global oil markets, there is the matter of maintaining internal cohesion and unity. As she puts it, “member states are wary of any move that could be interpreted as bowing to Trump, particularly if it risks internal fractures or threatens the alliance’s independence and loss of members.”

In other words, OPEC has a very different agenda than Trump and is not going to do what he wants just because he asks nicely. Of course, this most likely means he’ll stop asking nicely at some point, but that is unlikely to change OPEC’s tack. Especially now that it seems Trump has finally found the time to craft his policy towards Iran, which quite unsurprisingly is a return to maximum pressure, aiming to squeeze Iran’s oil exports to zero with the stated aim of preventing the country from developing a nuclear weapon.

According to the International Energy Agency, the rest of OPEC has plenty of spare capacity to cover the potential loss of Iranian barrels. Yet, as usual, the International Energy Agency is quite selective in its observations. OPEC indeed has the spare capacity to offset the loss of Iranian crude supply. What it does not appear to have is the willingness. OPEC has repeatedly demonstrated that it would not follow anyone else’s agenda but its own. This means that the cartel would only start increasing production if it is satisfied with the trajectory of international prices. It really is as simple as that.

There is also an additional challenge, as represented by OPEC’s decision to drop the U.S. Energy Information Administration from its secondary source lists—the outlets it uses to count its oil production. OPEC also dropped Rystad Energy—a formerly pure-play energy consultancy that has, over time, acquired a pro-transition bias not dissimilar to the IEA’s. As for the EIA, the significance of OPEC’s move to drop it as a secondary source of production information does not spell anything good about Trump’s relationship with the cartel.

“Opec probably now sees the EIA as a [direct] US government agency,” one former OPEC official told the Financial Times. “Its numbers were not particularly different from the other monitors, perhaps a little bit higher on the UAE’s production,” the official added, noting that “No one really believes the monthly Opec outlook [production numbers] at this point, though.” Yet they probably would believe energy data analysts such as Kpler, OilX, and ESAI, which OPEC is taking on as secondary sources.

Trump’s relationship with OPEC, then, is going to be rather complicated during his second term. The sooner the new U.S. administration acknowledges the realities of the situation, the easier it will be to cultivate a new relationship on a more equal footing.

By Irina Slav for Oilprice.com



We need out from under the OPEC thumb, pronto.

 

[Taxslave2]

I heard a rumour that Canada may have some oil. Perhaps we could interest someone in looking for it?

 

[Ron in Regina]

I heard a rumour that Canada may have some oil. Perhaps we could interest someone in looking for it?

Or perhaps we can figure out how to get more that 3% of it to our coasts (plural) so we can spread it out towards other customers…or interesting someone to look for it might be a moot point.