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(Project Syndicate) The Organization of the Petroleum Exporting Countries is dead. Saudi Arabia killed it. Now, OPEC is just a toothless zombie, attracting attention, but without having any impact on the living.
Few have noticed OPEC’s demise for a simple reason: it never really had the impact that it was widely perceived to have. It was never actually a cartel, possessing monopolistic market power. Anyone who thought otherwise was mistakenly attributing to it Saudi Arabia’s market power. Anders Åslund breaks down the views of Joseph Nye, Adam Michnik, Yuliya Tymoshenko, and other Project Syndicate commentators on the nature and future of Russia’s autocratic regime.
And Saudi Arabia’s power is expansive. It remains the dominant producer in world oil markets, and its political and economic decisions shape global energy economics. This impact will be intensified if the Kingdom resurrects Arab Light as the global benchmark crude.
Of course, new players in the energy-production game could conceivably deal a blow to Saudi Arabia. But, so far, the Kingdom has managed to avoid serious injury.
The shale-energy revolution in the United States, for example, has had a far-reaching international impact – far greater than expected. The Atlantic Basin ran an oil surplus – producing more than it consumed – for the first time in a half-century, while the Pacific Basin became the only dumping ground for crude. The surge in domestically produced shale oil caused OPEC members Algeria, Angola, and Nigeria to lose significant market share in the US.
Yet that revolution has had little impact on Saudi Arabia, Iraq, or Kuwait, owing to crude quality. Algeria, Angola, and Nigeria were exporting to the US a kind of light sweet crude that is comparable to shale oil. Yet many US refineries are still geared toward the heavier and more sour types of crude that the country imports from the Middle East. As a result, Saudi Arabia’s market share in the US seems relatively secure.
This is not to suggest that Saudi Arabia is invincible. On the contrary, it has lost market share among the largest oil importers in Asia, which have increased their purchases of […]