Wednesday, June 15, 2011

OPEC Divided on Production Quotas; Should We Care?

The group of well-off nations (by GDP per capita) led by Saudi Arabia, including Kuwait, Qatar, and the UAE, wants to increase OPEC production levels to moderate oil prices at ~$80 per barrel.  The top oil producer fears that the sustained high oil prices may make the recovery steeper, if not stifle it.

Whereas, the group of relatively less well-off nations led by Iran, including Venezuela, Ecuador, Algeria, Angola, and Libya, prefers to maintain the currents production level.  It believes that the market is in balance and the current high prices are merely a reflection of speculation.

Should we be worried about this bi-partisan view?  Not really...

Source:  Production quotas from OPEC; Actual production from BP Statistical Review 2011.

OPEC nations have never really kept their promise.  The countries have always decided their volumes individually.  The dialogue between Saudi Arabia and Iran is purely triggered by political motives. (dot)

1 comment:

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