Only a few months ago OPEC and Russia were on top of world with oil revenues breaking records day after day and their prestige and influence expanding. Now with OPEC oil selling for somewhere in the low $30’s and faced with the possibility that it will go still lower, even the richest members of the cartel, those with relatively small populations, are now in trouble. With oil sales their only source of income and populations that have become used to state subsidies for many consumer goods, several OPEC governments may be facing political crises.

Iran’s and Venezuela’s oil revenues are now only one half to one third that required to maintain government operations, to sustain domestic subsidies, and to bankroll foreign and domestic economic and political programs. Both these countries have announced retrenchments.  Some believe they will face political instability as a result.

Even the wealthy Gulf oil states face problems due to a combination of oil low prices, falling real estate prices, and illiquid financial markets. The prospects for ambitious diversification projects are looking poorer all the time.

The key to oil prices and OPEC’s future over the next year is whether they can collectively cut oil sales, thereby foregoing substantial short term revenue, to the point that they can force oil prices back up again. Some in OPEC are sensitive to the possibility that oil supplies can be cut so much that in addition to increasing prices, the cartel will trigger even more global economic troubles and cut the demand for oil to unimagined levels.