Assessing OPEC’s Performance in Global Energy
This article examines OPEC’s performance in regulating output and prices in the global oil market during its 50 years of existence. In addition, it discusses key trends that are likely to determine OPEC’s effectiveness in the years ahead, particularly climate change policies. We find that OPEC’s ability to control the oil market singlehandedly has historically been limited, as a result of both internal collective action problems and external factors such as the rise of new producers. Furthermore, we find that climate change policies may negatively impact long-term planning security for investment and hence OPEC’s ability to target price bands and smooth the oil market. We argue that OPEC will need to become more proactive in low-carbon policies to remain part of the decision making on future energy demand patterns that affects its main export product. We also submit that OPEC has a great role to play in fighting price volatility, a key concern for both producers and consumers, and that the best platform for enhanced efforts in this regard would probably be the International Energy Forum.
- Much of the debate on OPEC is one-sided: the organization is mostly characterized as a cartel extracting monopoly rents. Instead, emphasis should be put on OPEC’s potential to help in managing oil market risks.
- From the perspective of global energy governance, a strong OPEC may be a very desirable partner for oil consumers in order to combat price volatility, a key concern for both oil exporters and importers.
- Coordination between producers and consumers would also stimulate the energy transition towards a low-carbon future. The International Energy Forum may be the most appropriate for this.
- OPEC needs to seriously join the world’s efforts towards a low-carbon energy transition in order to hedge its interests effectively and voice claims legitimately for burden sharing in the inevitable adjustment process that OPEC members will undergo.